The fund offers four plans for investors with various risk-profiles, by allocating to equity and debt

January 27, 2021 / 04:41 PM IST

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Traditional investment avenues for your retirement include the Public Provident Fund (PPF) , Employees’ Provident Fund (EPF) and National Pension Scheme (NPS). There are some mutual fund schemes that focus on retirement savings, too. SBI Retirement Benefit Fund (SRBF) is a new addition to the list.

What is it about?

SRBF is an open-ended scheme. Your investments will be locked for five years or until retirement (i.e., completion of 65 years of age), whichever is earlier. The fund offers four plans for investors with various risk-profiles, by allocating to equity and debt.

Aggressive: 80-100 percent in equities; Aggressive hybrid: 65-80 percent in equity; Conservative hybrid: 10-40 percent in equity; and conservative up to 20 percent in equity are the four options. Each plan also has a provision to invest in Gold ETFs and foreign securities.

Fund managers Gaurav Mehta will manage the equity portion and Dinesh Ahuja will manage the fixed income part. Mehta also manages SBI Multi Asset Allocation Fund. Ahuja manages a host of debt schemes at the fund house. Fund manager Mohit Jain will manage the schemes international investments (if the scheme chooses to invest in overseas securities). Jain oversees foreign investments in all the schemes at the fund house that have a mandate to invest overseas.

“Up to 50 percent of the equity portfolio of each plan will have a core portfolio, which will be invested in growth stocks with a ‘buy and hold’ strategy. The balance will be invested in companies based on business cycles, macroeconomic factors and company valuations, for alpha-generation,” says Mehta.

The aggressive and the aggressive hybrid plans will invest only in AAA-rated PSU and sovereign bonds, while conservative hybrid and conservative options will have exposure to non-AAA rated bonds. Investments will be made in instruments in such a way that a Macaulay duration of 4-7 years (just as in the case of ‘Medium to Long Duration debt funds’) is maintained.

What works

The scheme has been devised keeping your age in mind. The presence of four plans with varying allocations to equity and debt means that you can select a retirement plan, depending on your age and the number of years to retirement. For instance, young investors or/and those with high risk appetite can consider the aggressive plan. The conservative plan may be suitable for retirees or investors nearing retirement, as investments are mostly in debt instruments.

Experts say that the lock-in of five years helps. “Most youngsters do not plan for retirement when they are still employed. Whatever goal they save for, they think long-term investing is just up to 3-5 years. Hence, the lock-in helps,” V Vijayakumar, MD & CEO, ZEBU Share and Wealth Management.

What’s more, the ‘Auto Transfer Plan’ facility allows switching of funds to more conservative options as you grow older. This ensures that the asset allocation moves with your age. As you grow older, you can shift to options where equity portfolio is lesser.

The fund can invest in multiple asset classes: equity, debt, REITs, gold and foreign securities.

What doesn’t

SRBF does not offer 80C tax benefit currently. Until 2011, the Indian mutual fund fraternity has had only two designated retirement schemes – UTI Retirement Benefit Pension Fund and Franklin India Pension Fund. Later, mutual funds selectively rolled out schemes focussed on retirement as a financial goal. Some of these schemes, especially the previously launched ones, offered tax deduction benefits under Section 80C.

You can invest in SRBF through a systematic investment plan. But remember, each instalment gets locked in for five years. And the lock-in begins from the time you put in your instalment.

The ‘Auto-switch’ option, though convenient, comes with a small caveat. Any switch is treated as a sale and attracts capital gains tax. Each of the four options in SRBF is a stand-alone scheme with a unique portfolio and asset allocation pattern.

Should you invest in SBI Retirement Benefit Fund?

Currently, eight AMCs offer a total of 22 plans under the ‘Retirement-Solution oriented fund’ category, as per SEBI guidelines of 2018. Only a few plans have a track record of five years or more. The performance of the funds in the category has been a mixed bag. Among those with long-term records, the plans offered by Tata have managed to deliver outperformance across time periods in the respective sub-categories.

Moneycontrol recommends investing in regular open-ended mutual funds to plan for goals such as retirement. SIPs in existing open-ended diversified equity funds are good enough to plan for retirement. If you still have a surplus after exhausting all these options, you may consider retirement funds. SRBF’s new fund offer closes on February 3, 2021.

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