ICICI Prudential Mutual Fund has filed a draft offer document with SEBI to launch its ICICI Prudential Retirement Fund.
However, the fund house has decided not to seek status of pension fund from Central Board of Direct Taxes (CBDT). Simply put, unlike retirement linked savings schemes, investors in this fund can not avail tax benefit under Section 80C of the Income Tax Act.
Currently, only four fund houses HDFC, Reliance, UTI and Franklin Templeton have pension products. Many fund houses like Axis, DSP BlackRock, LIC, Pramerica and SBI have also filed draft offer documents with SEBI to launch their retirement linked mutual funds and are awaiting approval from CBDT for years now.
Chintan Haria, Fund Manager and Head Strategy and Product, ICICI Prudential Fund told Cafemutual that they believe that there is no need to seek approval for the tax benefits as the 80C space is already crowded. “There are many schemes falling under 80C such as EFP, PPF, ELSS, ULIPs, NPS and so on. Many people usually exhaust Rs.1.50 lakh limit on such schemes. However, we feel there is a need for goal based fund like retirement plan. We are confident that we can help people achieve their retirement goals through this fund.”
ICIC Prudential Retirement Fund is an open ended scheme with four investment options: pure equity plan, hybrid-aggressive plan, hybrid-conservative plan and pure debt plan. According to the draft offer document, the equity plan will invest a minimum of 80% of the scheme corpus in equity and a maximum of 20% in debt while the hybrid-aggressive plan will allocate a minimum of 65% in equity and maximum of 35% in debt and gold, gold ETFs, INVITs and REITs. The hybrid-conservative plan will invest a minimum of 70% in debt and a maximum of 30% in equity while the debt plan will invest the entire corpus in debt and money market instruments.
Haria said that investors could change plans depending on their age and risk appetite. “If a person is nearing retirement, he can switch from pure equity plan or hybrid aggressive to hybrid conservative and pure debt plan depending on his risk appetite without any exit loads. Also, the taxation would depend on the plan and be applicable from the date of allotment of unit at the time of investment and switching.”
While pure equity and hybrid aggressive plans will have equity taxation, hybrid conservative pure debt plans are debt funds for taxation purposes.
In addition, the scheme will also benefit retired individuals. “Investors who are retired can also consider doing SWP in this fund.”
The scheme will have 5-year lockin period or till retirement age whichever is earlier.
S Naren and Priyanka Khandelwal will co-manage this fund.
