Axis Mutual Fund has announced the launch of its new fund offer (NFO), Axis Retirement Savings Fund, an open-ended retirement solution-oriented scheme having a lock-in of five years or till completion of 58 years (whichever is earlier). The new fund offer (NFO) opens for subscription on November 29, 2019 to December 13, 2019. RupeeIQ brings you more details.
Need for a retirement savings product
Retirement planning is becoming a critical issue for the working-age population – which wants to remain self-sufficient post-retirement. Axis Retirement Savings Fund is designed to help investors carry out long term retirement planning.
The open-ended fund comes with the flexibility of three different plans to cater to changing risk profiles depending on the investor’s age and changing circumstances.
Additionally, Iplus SIP Insurance offers complimentary life cover for long term SIP investors based on their pending SIP commitments.
Additional Read: 5 Risks You Need To Account For In Your Retirement Planning
Why mutual fund route
Retirement planning is not a new thing. Retirement has two phases: corpus building and corpus withdrawals.
Traditionally, we have been using EPF, PPF, bank FDs, insurance and other avenues for retirement planning. National Pension System (NPS) has also emerged as an option. Atal Pension Yojana (APY) offers a maximum of Rs 5,000 per month pension. There are also annuity plans, which give guaranteed income for life but do not give more than 5-7% annual return.
Mutual funds have tried to corner a portion of the retirement inflows through the special retirement fund schemes, who have a lock-in for at least five years or till retirement age whichever is earlier.
Retirement funds in the MF category offer a few benefits. One, the five-year lock in is one of the lowest. Two, many traditional retirement offerings are fully debt based and hence offer low returns. Retirement funds in MF space are not constrained by debt. Three, SIP in mutual fund offers a simple and regular way of saving for retirement.
The disadvantage of retirement mutual funds is that there is no guaranteed return. Also, you do not need to invest in a retirement mutual fund to get to your retirement goal. You can, in fact, choose any mutual fund and invest for the long-term to get to a retirement corpus.
Additional read: 7 Options To Build Risk-Free Income Stream After Retirement
Axis Retirement Savings Fund
The fund-house claims the product has been uniquely designed to help investors in this endeavour with features such as different investment plans offering flexible risk profiles, strong fund management capabilities across asset classes, tax efficiency, flexibility in using the fund for post-retirement income as well as one of the features offering life cover to long term SIP investors to encourage them to remain disciplined on their path.
Keeping in mind the diverse investor risk profiles, the fund offers three investment plans – An Aggressive Plan where equity exposure will range between 65-80%, A Dynamic Plan where equity exposure will be dynamically managed between 65-100% and a Conservative Plan where debt exposure will range between 40 – 80%.
We must remember that any retirement plan must be able to beat inflation. Rs 1 lakh saved today will be worth only Rs 61,391 after 10 years assuming 5% annual inflation. Similarly, what you can buy today for Rs 1 lakh will cost Rs 1.63 lakh 10 years later.
As per SEBI document filed by Axis MF, Axis Retirement Savings Fund – Aggressive Plan will be benchmarked against NIFTY 50 Hybrid Composite Debt 70:30 Index.
Axis Retirement Savings Fund – Dynamic Plan will be benchmarked NIFTY 50 Hybrid Composite Debt 50:50 Index.
Axis Retirement Savings Fund – Conservative Plan will be benchmarked against NIFTY 50 Hybrid Short Duration Debt 25:75 Index.
Having different options with different risk profiles is essential when offering a long term solution such as retirement fund. For example, as investors approach their retirement age, their ability to take risk comes down and consequently they need a low risk investment option. At the same time a younger investor that has a long way to go to retirement can afford to take high risk and needs to be more focused on an investment option that focuses on wealth generation.
There is no entry or exit load in this scheme.
The minimum application amount is Rs 5,000 and in multiples of Re. 1/- thereafter. The minimum additional purchase amount is Rs 1,000 and in multiples of Re 1/- thereafter.
The fund will be managed by Jinesh Gopani, and R Sivakumar.
What is Iplus SIP Insurance?
The Iplus SIP Insurance facility offers investors a complimentary life cover that is equal to the remaining commitment of their long term SIPs. This feature will allow investors peace of mind as they make long term investment plans keeping in mind their family and dependents. The insurance will be provided by HDFC Life Insurance Company Limited.
In an unfortunate event of the demise of the investor, the insurance cover will take care of unpaid installments of SIP committed by the investor.
SIP eligibility norms include resident individual investors aged above 18 years and not more than 51 years at the time of submission of SIP application. Minimum tenure of SIP is three years at a monthly frequency. Minimum SIP amount of Rs 1,000 per instalment.
Insurance will commence upon investment of 12 successful SIP installments. The insurance cover will be limited to the extent of the residual installments of the SIP up to the age of 55 years subject to a maximum of Rs 50 lakh.
You can compare AXIS MF’s Iplus SIP Insurance with offerings like Aditya Birla MF’s Century SIP, ICICI Prudential MF’s SIP Plus, and Nippon India MF’s SIP Insure.
Additional Read: Mutual Funds Offering Free Life Insurance With SIP. What Is It?
Fund house speak
Chandresh Kumar Nigam, MD & CEO, Axis AMC said, “Axis Retirement Savings Fund is our small step to help investors execute the most critical part of their financial plan. Further we have designed this product keeping in mind the need to offer each investor the flexibility to navigate this journey in the manner that works best for them. Given Axis AMC’s investment philosophy that focuses on sustainable long term returns, we are confident that we can help investors reach a happy retirement.”
Returns given by peer retirement MFs
Retirement mutual funds floated by other fund-houses are of mainly three types: equity driven, debt driven and hybrid (equity and debt). The debt plans of retirement MFs do not have one year track record. The other two categories viz. equity and hybrid have some schemes with more than one year track record.
Do note that hybrid plans of retirement MFs can be sub-grouped into three buckets: hybrid aggressive, hybrid balanced and hybrid conservative.
Take a look below at the returns provided by the retirement MFs with at least one year track record. This means returns of Aditya Birla Sun Life and ICICI Prudential retirement funds have not been captured in the table.
Performance of retirement funds
|Equity plans||1-year %||3-year CAGR %||5-year CAGR %|
|Nippon India Retirement Fund – Wealth Creation Scheme||5.82||10.26||–|
|Tata Retirement Savings Fund – Progressive Plan||14.41||16.05||12.25|
|HDFC Retirement Savings Fund Equity Plan||6.1||10.26||–|
|S&P BSE Sensex TRI||16.79||17.16||8.95|
|Hybrid plans||1-year %||3-year CAGR %||5-year CAGR %|
|Tata Retirement Savings Fund – Moderate Plan||11.09||13.25||11.04|
|Principal Retirement Savings Fund Progressive Plan||4.05||7.86||–|
|HDFC Retirement Savings Fund – Hybrid Equity Plan||8.35||10.55||–|
|Principal Retirement Savings Fund Moderate Plan||3.9||5.92||–|
|UTI Retirement Benefit Pension Fund||-0.09||4.3||5.76|
|Tata Retirement Savings Fund – Conservative Plan||9.66||7.28||8.2|
|HDFC Retirement Savings Fund – Hybrid Debt Plan||8.77||6.3||–|
|Principal Retirement Savings Fund Conservative Plan||3.22||4.39||–|
|Nippon India Retirement Fund – Income Generation Scheme||11.05||4.59||–|
|Hybrid aggressive average||9.08||9.01||7.76|
|Hybrid balanced average||8.14||7.03||–|
|Hybrid conservative average||7.48||5.93||7.16|
|Data up to Nov. 26, 2019 Shows only schemes with at least 1 year track record|
This is a new fund offering and so it will take time to build a track record. Retirement mutual funds offer market-linked returns and hence investment management becomes the most important factor.
Axis Mutual Fund has quite a few equity products in the top performer bracket at this moment. If this great run is maintained, then that will burnish its credibility as an investment manager. However, your decision to invest in the retirement fund should not be solely driven by Axis MF’s past performance. There is no guarantee that past performance will be repeated in the future.
Even though retirement planning is a long term thing for most investors, if you invest in a retirement mutual fund scheme please do not forget to review the fund performance once in 1-2 years and compare the returns with the benchmark as well as category average.
Disclaimer: Views expressed here in this article are for general information and reading purposes only. They do not constitute any guidelines or recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide/investment advice / intended to be an offer or solicitation for the purchase or sale of any mutual fund.