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Reliance Retirement Fund-Is it a best pension plan with 80C benefit?

February 5, 2015by Basavaraj Tonagatti

Recently Reliance Mutual Fund came up with NFO called Reliance Retirement Fund. This pension fund offers you the feature of investing in equity and tax benefit under Sec.80 C as well as. So whether is it a good pension plan with a tax benefit? Let us see.

Reliance Retirement Fund

First, let us see the feature of this fund.

  • This is an open-ended fund. Therefore, you can invest in this fund anytime.
  • This is the first such notified equity, pension mutual fund. The earlier two funds are debt oriented balanced funds. They are already discussed in my earlier post as “Two Mutual Funds-Tax Efficient (Sec. 80C) and Pension Plans in India !!!“.
  • This fund offers you two type schemes.
  1. Reliance Retirement Fund-Wealth Creation Scheme-This is equity oriented balanced scheme. Where Equity exposure may go from 65% to 100% and Debt exposure may go from 0% to 35%. This scheme is suitable for those who have a lengthier accumulation phase of their retirement. It means suppose you are currently 30 years of age and your retirement age is 60 years. Then to accumulate your retirement corpus you can use this scheme where equity exposure at higher levels.
  2. Reliance Retirement Fund-Income Generation Scheme-This is the Debt type of fund. Where Equity exposure may go from 5% to 30% and Debt exposure may go from 70% to 95%. This scheme is suitable for those who are nearer to retirement age. Suppose your retirement age is less than 5-7 years, and then you can opt this scheme. Reason is, in this scheme, equity exposure is not at the higher level. Hence, protection to your invested principal.
  • Switching between these schemes is at free of cost.
  • There is a lock-in of 5 years for this scheme. This lock-in is not applicable to within fund switches like wealth creation scheme to income generation scheme or vice versa.
  • There is an exit load of 1% if you try to withdraw within 60 years of your age. Again, this exit load will not apply to intra-fund switches.
  • Indian residents and NRIs are also allowed to invest in this scheme.
  • This fund offers “Auto Transfer Facility.” Under this, your accumulated corpus will be moved automatically from wealth creation scheme to income generation scheme once you reach the age of 50 years or the on the date specified by the investor.
  • This fund offers, “Step up facility.” Under this, you can set the increase your SIP instalment by a fixed amount at a pre-defined interval. This means that, suppose this year you have a monthly SIP of Rs.10, 000 and you can set Rs.5, 000 increases in your monthly SIP from next year. So for this year your SIP will be Rs.10, 000 and from next year the SIP will be Rs.15, 000 monthly.
  • Once you attain your retirement age (on or after 60 years of age) then you can opt for SWP Option (Systematic Withdrawal Plan). You can opt for monthly/quarterly/annual SWP option.
  • Whatever you invest in this scheme will qualify for tax exemption under Sec.80 C limit up to Rs.1, 50,000 (including other investment options available under Sec.80 C limit).
  • If your employers more generous and cares you more about your retirement, then they can join this scheme by deducting monthly SIP from your salary.

Whether you consider this for your pension?

Many negatives with few positives 🙂

1) A positive point is, this plan launched with the aim of investing your retirement corpus accumulation through equity. This is good view. Because many of us not understand the power of equity over long run and simply try to invest in products like typical endowment plans or some Bank FDs.

2) The second positive point is, apart from the ELSS mutual funds, this is a single equity product, which offers you a tax benefit under Sec.80 C (but with lock-in about 5 years). However, your investment must be tax efficient, but it does not mean you lose control over your investments. Therefore, the tax benefit is a good point. However, this must not be a sole criterion to invest in this fund.

3) This fund offers Wealth Creation Scheme. This is nothing but a typical equity oriented balanced mutual fund. So why to invest in NFO when you have plenty of well performing balanced funds are already present? I do not think it is wise to consider this fund over the existing consisting performing balanced funds like HDFC Balanced Fund or ICICI Balanced Fund.

4) This fund offers Income Generation Scheme. This is Debt Fund. This is not required when your accumulation period is more than 10 years or so. Because longer the duration higher the risk in debt funds. In addition, return on such debt funds may even fail to beat inflation.

5) One more major glitch of this fund, which many failed to notice, is the “Auto Transfer Facility.” In case you opted this transfer along with forgot to mention the date of transfer, then your entire corpus will be moved to Income Generation Scheme after 50 years of age. What if later on you postponed your retirement to 65 years? Your accumulated corpus will be in debt fund from 50 years of age, no matter how long your retirement age will be.

6) Liquidity is a big drawback of this fund. They charge you 1% exit load if you withdraw before 60 years of age. Will you be ready if your invested amount shows negative return and paying 1% exit load?

7) You have no control over the investment option. If you chose any diversified funds then you have control to exit at any point of time (if the fund is not performing well or you have an emergency). However, in this fund, you have no option but to continue or to pay 1% exit load and come out.

8) Re-balancing your corpus in this fund is pre-defined. You have no choice to switch.

9) I know it makes headlines with tags like Retirement, Pension, or Tax Benefit. However, think twice how the fund manager will perform. In addition, what are the risks in investing the NFOs. Why take risk in packaged product, which not have any historical data to validate. Instead, simply invest in funds, which are in the market since long with consistent performance. Tax benefit under Sec.80 C is not a big thing to complete with so many options already available.

10) This plan is better than NPS. However, as of now only a few volunteers invested in NPS. Rest of NPS contributors are from Govt Employees.

Therefore, the conclusion is “STAY AWAY” from this plan. The BEST PENSION PLAN not yet available in India. Hence, the answer is to accumulate your retirement corpus on your own. Never buy a product, which meant for retirement and offers you few tax benefits.

Category: Investment Planning, Tax PlanningTag: Best Pension Plan, Reliance Retirement Fund, Sec.80 C benefit

About Basavaraj Tonagatti

Basavaraj Tonagatti is the man behind this blog. He is SEBI Registered Investment Adviser who is practicing Fee-Only Financial Planning Process and also an Independent Certified Financial Planner (CFP), engaged in blogging since 7 years. BasuNivesh blog is ranked as one among India's Top 10 Personal Finance Blog. He is not associated with any Financial product/service provider. The purpose of this blog is to "Spread personal finance awareness and make them to take informed financial decisions." Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. These should not be construed as investment advice or legal opinion."

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Reader Interactions

Comments

  1. Yalla

    January 15, 2016 at 12:31 PM

    I am government employee, I can eligible for this pension fund.

    Reply
    • Basavaraj Tonagatti

      January 15, 2016 at 1:05 PM

      Yalla-YES.

      Reply
  2. BISWAJIT

    October 2, 2015 at 7:41 PM

    Hello Sir/Madam
    Now my age is 29. I think i will retire at age of 55.
    I want to plan my retirement and tax saving.
    What to do and in which fund i should invest.
    Please mail me at : biswa002@gmail.com

    Reply
    • Basavaraj Tonagatti

      October 3, 2015 at 9:18 PM

      Biswajit-Create your own retirement corpus than depending on a retirement products.

      Reply
      • BISWAJIT

        October 3, 2015 at 10:33 PM

        Hello Sir / Madam
        How to make it ? What is the best way ? Can you please suggest.

        Reply
        • Basavaraj Tonagatti

          October 4, 2015 at 12:36 PM

          Biswajit-Start investing in equity oriented mutual funds and before that LEARN about how equity benefits you.

          Reply
          • BISWAJIT

            October 7, 2015 at 11:18 PM

            Thanks Boss.
            Can you please help me a little with my Financial Planing.

            Reply
            • Basavaraj Tonagatti

              October 8, 2015 at 10:20 AM

              Biswajit-It requires a lot of work and it costs you also. Are you ready for that? If so, then mail me details at tonhokrani@gmail.com.

              Reply
  3. DIPANSHU

    May 27, 2015 at 3:27 PM

    is investing in ICDs safe in todays’ scenerio. plz email me at dipanshuchattwal@gmail.com

    Reply
    • DIPANSHU

      May 27, 2015 at 3:31 PM

      because i got a call from ronnie finance and they are giving assured return of 18% pa…

      Reply
    • Basavaraj Tonagatti

      May 28, 2015 at 9:55 AM

      Dipanshu-ICD means? 18% of guaranteed returns? I can only say GOLD BLESS TO THOSE INVESTORS WHO WILL INVEST IN SUCH 18% GUARANTEED SCHEMES.

      Reply
  4. rajesh tanwar

    March 12, 2015 at 11:32 PM

    sir …hats off to u….before investing i always go through you website…thaking you sir

    Reply
    • Basavaraj Tonagatti

      March 13, 2015 at 10:02 AM

      Rajesh-Pleasure 🙂

      Reply
  5. Mohan

    February 12, 2015 at 4:22 PM

    Nicely explained! Thank you!!

    Reply
    • Basavaraj Tonagatti

      February 12, 2015 at 11:00 PM

      Mohan-Pleasure 🙂

      Reply
  6. Sudheer

    February 7, 2015 at 10:00 AM

    Hi basu good morning.
    Really I appreciate this. Its good article. AtLast my doubts on pension plan were cleared. Thank you.

    Reply
    • Basavaraj Tonagatti

      February 7, 2015 at 12:24 PM

      Sudheer-Pleasure to know this.

      Reply
  7. Neil G

    February 6, 2015 at 8:02 PM

    Hi Sir,

    I have a surplus of 3 lacs lumpsum in my a/c which I am planning to invest in MF for 10- 12 years tenure towards my child education. Pls advise.

    I am investing 10000/- monthly in ppf.

    Thanks
    Neil G

    Reply
    • Basavaraj Tonagatti

      February 6, 2015 at 8:50 PM

      Niel-Select one large cap fund like Franklin India Bluechip Fund (G) and one small and mid cap fund like HDFC Midcap Opp Fund (G).

      Reply
      • Neil G

        February 7, 2015 at 8:13 AM

        Hi Sir,

        Pls can you advise on the distribution percentage allocation of funds for the suggested plans.

        Thanks
        Neil G

        Reply
        • Basavaraj Tonagatti

          February 7, 2015 at 9:45 AM

          Neil-You mean to say the % of allocation to each sector or stocks?

          Reply
          • Neil G

            February 7, 2015 at 2:10 PM

            Hi Sir,

            I mean the %of allocation of my investment to each sector. Pls advise.

            Thanks
            Neil G

            Reply
            • Basavaraj Tonagatti

              February 7, 2015 at 5:55 PM

              Neil-Wait for fact sheet.

              Reply
              • Giri

                March 14, 2015 at 10:44 PM

                I also wish to invest in equity mutual funds for retirement / children education corpus. I am already 40 & though it may be late , I can invest with higher SIP.

                Pls advise suitable plans

                Reply
                • Basavaraj Tonagatti

                  March 15, 2015 at 8:19 AM

                  Giri-You can refer my earlier post “Top 10 Best Mutual Funds to invest in India for 2015“.

                  Reply
  8. chinni

    February 6, 2015 at 3:42 PM

    good article

    Reply
  9. t janakiraman

    February 6, 2015 at 9:34 AM

    thanks for your advice

    Reply
  10. Sekhar

    February 6, 2015 at 9:28 AM

    Hi Basu,

    Does the returns from HDFC Balanced Fund- Growth are taxable? Thank you.

    Reply
  11. debashis

    February 5, 2015 at 8:28 PM

    Good information sir. Can you suggest whether to go for SBI smart income protect. Actually i had already enrolled for this plan in the year 2013.

    Reply
  12. Ravi Bansal

    February 5, 2015 at 4:02 PM

    Wonderfully explained article. I hope people pay attention before falling for words like ‘RETIREMENT’ or ‘PENSION’ etc.

    Reply
    • Basavaraj Tonagatti

      February 5, 2015 at 8:23 PM

      Ravi-Yes and hope you share this with your known.

      Reply
      • Ravi Bansal

        February 6, 2015 at 5:55 PM

        I have. In fact, coincidentally, I had a discussion with a friend of mine as she was looking into start investing in this scheme only. I tried to logic her out of it but she didn’t really agree. Yesterday, I shared this article with her and then she really understood the nuances. 🙂

        Reply
        • Basavaraj Tonagatti

          February 6, 2015 at 8:46 PM

          Ravi-Great to know about this initiative 🙂

          Reply
  13. ketan

    February 5, 2015 at 3:52 PM

    sir, what is your view on Aditya birla myuniverse site for finance monitoring… is it worth to enroll

    Reply
    • Basavaraj Tonagatti

      February 5, 2015 at 8:23 PM

      Ketan-I have not tried any such sites. I manage myself on simple excel sheet.

      Reply
    • Ravi Bansal

      February 6, 2015 at 6:02 PM

      Hi Ketan,

      I would strongly advise against enrolling for any kind of Financial Management apps/sites. I can’t imagine sharing such sensitive details with anyone whom I don’t even know anything about. There is no benefit which will trump the RISK of sharing such details with a 3rd party.

      These apps/sites so not offer any advantage/feature which you can’t manage by yourself.

      Reply
      • Basavaraj Tonagatti

        February 6, 2015 at 8:47 PM

        Ravi-Fully agree with your concerns.

        Reply

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