India’s largest mutual fund by assets - HDFC Mutual Fund has filed an offer document with SEBI to launch a tax saving cum pension fund.
However, the fund house will have to first get a green signal from Central Board of Direct Taxes (CBDT) to get a pension fund status. So far, two fund houses have approached SEBI to launch similar schemes but are yet to get an approval from CBDT.
Last year, Reliance had filed offer document with SEBI for its Reliance Retirement Fund. Very recently, Pramerica had sought SEBI approval to launch its Pramerica Retirement & Pension Fund.
HDFC’s Retirement Savings Fund comes with four plans – equity, hybrid-equity, hybrid-debt, and income plan. 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-Equity Plan will allocate a minimum of 60% in equity and maximum of 40% in debt. The Hybrid-Debt Plan will invest a minimum of 70% in debt and a maximum of 30% in equity while the Income Plan will invest the entire corpus in debt and money market instruments.
After attaining 58 years of age (subject to completion of the lock-in period), investors can redeem the entire corpus lump sum or switch the accumulated corpus within the three other plans of the scheme or in any other open-ended schemes of HDFC Mutual Fund.
Those who opt for the dividend payout option will receive dividends only after they attain the age of 58. The scheme comes with a three-year lock in period. An exit load of 2% will be applicable if units are redeemed within five years and 1% after five years. There will be no exit load if units are redeemed or switched out after an investor attains the age of 58 years.
“AMFI had approached CDBT last year but there is no headway yet. The ministry allowed RGESS to be routed through mutual funds so the industry’s focus shifted to RGESS. Even we were planning to launch a pension fund but it didn’t materialize. The tax incentive for pension fund would not be as great because it comes under 80 C of the Income Tax Act. ELSS and many other investment products already enjoy tax benefit under 80 C,” said Hormuz Bulsara, Chief Financial Officer, Tata Mutual Fund.
Only two fund houses - Franklin Templeton (Templeton India Pension) and UTI (UTI Retirement Benefit Pension) have pension schemes which were approved long ago. Templeton India Pension Plan manages a corpus of Rs. 235 crore while UTI Retirement Benefit Pension manages Rs 999 crore. These schemes were launched before PFRDA was set up.
“SEBI is also trying to convince the finance ministry to allow mutual funds to launch retirement funds. If CBDT gives tax concessions it will be for the entire industry and not just for one fund house. We have to wait till DTC is implemented,” said the official from a fund house which has approached SEBI to launch a retirement fund.
