Retirement fund“Would you rather struggle as a senior, or retire with dignity? Stop making excuses and start taking action.” ICICI Prudential Mutual Fund makes this emotional pitch as it comes out with a new fund offer – ICICI Prudential Retirement Fund. This fund launch would take the number of retirement fund schemes to double digits. HDFC MF, UTI MF, Tata MF, Principal MF, and Reliance MF already have such schemes.

ICICI Prudential Retirement Fund comes with four different investment plans. The open-ended retirement solution oriented scheme has a lock-in of five years, or a retirement age of 60 years (whichever is earlier). RupeeIQ decodes the fund and helps you make an informed decision. Read on.

Retirement solution

Short-term goals get the financial resources and focus. Long-term goals like retirement often suffer from lack of attention. It is the harsh truth of our lives. But simple solutions, along with enough time, can make even things like retirement goal easy to achieve. The mutual fund route allows you to invest lump sum amount or do a systematic investment plan (SIP), and thus chase retirement goals. We will not dwell upon why you need to save for retirement. One look around us will show how the financially challenged or dependent old people silently suffer. With no state-sponsored pension scheme for middle-class private sector employees, retirement schemes are our best chance to get a self-funded pension.

Of course, there are competing retirement plans from small-savings space, insurance, NPS and so on. Retirement mutual funds are a good alternative. Why? Mutual fund retirement products have low lock-in period (five years), asset allocation feature, active fund management, no regular commitment contribution and no compulsory purchase of products like annuity on maturity.

Look at a look below at how retirement mutual funds stack up against conventional and traditional products.

Retirement map

Basic details of fund

NFO Period – Feb 07, 2019 to Feb 21, 2019

MICR Cheques – Till the end of business hours on Feb 21, 2019

RTGS and transfer cheques – Till the end of business hours on Feb 21, 2019

Switches – Switches from equity schemes and other schemes – Feb 21, 2019; Till cut off time (specified for switch outs in the source scheme)

Plans/Option – ICICI Prudential Retirement Fund – Growth & Dividend

Load – No entry or exit load at present

Minimum Application Amount – Rs 5,000/- (in multiples of Re 1 thereafter)

Fund Manager – Equity portion – Mrinal Singh & Ashwin Jain; Debt portion- Manish Banthia & Anuj Tagra

SIP – Available during NFO and the ongoing offer period

SWP/ STP – Available during the ongoing offer period

Why ICICI Retirement Fund

Investors should always ask why they should consider buying a product. Does the product offer something unique? The fact is retirement solution oriented schemes in the MF mart already exist.

The ICICI Prudential Retirement Fund has five interesting features. Let us check them out one by one.

1. Four investment plans – The fund gives you four different investment plans/options. The nature of these plans differ as per your targeted asset allocation. There is a pure equity plan (equity – 80 to 100%, debt 0 to 20%), hybrid aggressive plan (equity – 65 to 100%, debt 0 to 35%, gold/REITs/InvITs – 0 to 35%), hybrid conservative plan (debt & money market – 70 to 95%, equity – 5 to 30%), and pure debt plan (debt & money market – 100%).

2. Lock-in – Even the best investment solutions can throw up sub-optimal outcomes if the investment is not held for some time. For example, there are tax-saving funds with a 10-year lock-in. Children funds have five-year lock-in. Similarly, retirement funds have five-year lock in. This means the investor cannot redeem investments before five years. The ICICI Prudential Retirement Fund has a lock-in of five years or 60 years of age (whichever comes earlier), which will restrict impulsive withdrawals and allow the fund manager to perform over cycles. Example: An investor investing at the age of 35 in pure equity plan will have lock-in of 5 years, thus investor can have lock-in free units of the plan at the age of 40.

Do remember within lock-in, there are unlimited switches between plans without exit loads. Active/autoswitch facility is also available. Active switch facility is an optional facility available for investors holding units in physical form, wherein investor can switch investment under the same folio to any other investment plan of ICICI Prudential Retirement Fund on any given business day by providing the relevant details in the transaction slip. No lock-in will be applicable in the event of switch between the various investment plans of the scheme.

Auto Switch Facility is an optional facility available for investors holding units in physical form, wherein the investors’ investment as specified by the investor will be automatically switched to any other specified investment plan of ICICI Prudential Retirement Fund under the same folio on a future date specified by the investor in the application form. No lock-in will be applicable in the event of switch between the various investment plans of the scheme.

3. Withdrawal plan – ICICI Prudential Retirement Fund offers you a Systematic Withdrawal Plan (SWP) facility to meet regular cash flow needs, post-retirement. You may not need all the money at one go post-retirement. So, you can use the SWP to withdraw funds as per your wish.

4. Fund gyan – Once you invest in ICICI Prudential Retirement Fund, every redemption will remind that you have compromised your golden age years for current spending. This is a good facility. It is highly unlikely that your retirement will happen in five years. Such a reminder facility can be a potent tool for investors to avoid withdrawing money just because they can.

5. SIP plus feature – ICICI Prudential Retirement Fund also comes with SIP Plus feature. This is basically free insurance. In the unfortunate case that you expire, the term insurance will act as a shield for your family. SIP Plus provides a unique systematic investment solution which aims to create wealth and provide insurance benefit. In the first year, the insurance cover is 10 times your monthly SIP. In the second year, the cover is 50 times. From third year onwards, the cover is 100 times. In the event of untimely death, your nominee gets the insurance cover money.

Take a look at the chart below to see how retirement funds of other AMCs have performed.

Fund Category Launch Expense Ratio (%) 1-Year Return (%) 3-Year Return (%) Net Assets (Rs Cr)
UTI Retirement Benefit Pension Fund Hybrid – balanced Dec 26, 1994 2.12 -2.41 8.88 2691.76
Tata Retirement Savings Fund – Moderate Plan Hybrid – aggressive Nov 01, 2011 2.45 -3.13 13.73 967.26
Reliance Retirement Fund – Income Generation Scheme Hybrid – conservative Feb 11, 2015 2.37 3.52 7.07 228.32
HDFC Retirement Savings Fund – Hybrid Equity Plan Hybrid – aggressive Feb 25, 2016 2.84 0.68 226.83
Tata Retirement Savings Fund – Conservative Plan Hybrid – conservative Nov 01, 2011 2.49 1.59 8.97 128.84
HDFC Retirement Savings Fund – Hybrid Debt Plan Hybrid-conservative Feb 25, 2016 2.54 1.68 60.61
Principal Retirement Savings Fund Conservative Plan Hybrid – conservative Dec 14, 2015 2.06 1.34 6.78 2.13
Principal Retirement Savings Fund Progressive Plan Hybrid – aggressive Dec 14, 2015 2.61 -2.65 10.93 1.66
Principal Retirement Savings Fund Moderate Plan Hybrid – balanced Dec 14, 2015 1.91 -0.37 7.86 0.77

RupeeIQ take – Retirement funds are essentially hybrid funds. They also offer a lock-in. Beyond these two features and returns, there is not much to differentiate. The expense ratio of such simple funds is quite high at 1.9% to 2.8%. We have to wait and watch how the expense ratio thing plays out for ICICI Prudential Retirement Fund. We are enthused by the fact that the fund-house’s deputy CIO Mrinal Singh will be looking after the equity portion of the fund.

We are happy that this retirement fund plan does not have at present any exit load (Tata Retirement Savings Fund charges an exit load). However, the ICICI Prudential Retirement Fund does not appear to be offering Section 80C tax investment benefits (while others like HDFC Retirement Savings Fund and Reliance Retirement Fund offer section 80C benefits).

Investors should consider the SIP route of investing when it comes to retirement funds. If you want to use the hybrid way to achieve this goal and want some lock-in, retirement mutual funds could be a good alternative. If you are conservative, go for safer investment plans (pure debt or hybrid conservative). Use the switch function at an appropriate time when you gain confidence.

Disclaimer – Please note that investors are requested to consult their financial, tax and other advisors before taking any investment decision.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on