Other fund houses are also expecting to get Central Board of Direct Taxes (CBDT) approval shortly.
Reliance Mutual Fund has received pension fund status for its tax saving cum pension scheme called Reliance Retirement Fund from Central Board of Direct Taxes (CBDT) under section 80 C of the Income Tax Act 1961.
Reliance is looking to launch this fund in mid-January.
“We have received the approval and our aim is to get new investors in this scheme. This is a new concept and we have to educate investors about it,” said Sundeep Sikka, CEO, Reliance Mutual Fund told Cafemutual.
Himanhsu Vyapak, Deputy CEO, Reliance Mutual Fund said they are aiming to get 5 lakh investors in this fund. “It is country’s first equity oriented pension fund,” said Himanshu.
The fund comes with two options - Wealth Creation Plan and Income Generation Plan. Benchmarked against BSE 100, Wealth Creation Plan will invest a minimum of 65% of its assets in equities and a maximum of 35% in debt and money market securities.
The Income Generation Plan, benchmarked against Crisil MIP Blended Index, will invest a minimum of 5% and a maximum of 30% in equities and a minimum of 70% and a maximum of 95% in debt and money market securities. The fund will carry an exit load of 1% if redeemed/switched out before attainment of 60 years of age. Transfer from Wealth Creation Plan to Income Generation Plan will not attract any exit load. The scheme comes with a lock-in period of five years.
Axis, SBI, HDFC and Pramerica had also filed offer documents with SEBI to launch pension funds. These fund houses too are expecting to get an approval soon. “We are expecting to get the approval in due course of time. This is a very big category in US. This will be a large category for the Indian MF industry too. All of us want to save for our retirement which is a long term commitment,” said Chandresh Nigam, Managing Director & Chief Executive Officer, Axis Mutual Fund.
However, some believe that CBDT is likely to approve these funds under section 80 C which is already crowded. “We are also expecting to get approval in the next week. I don’t think only getting approval under 80 C would be of any substantial help. The industry should get approval under 80 CCD which is over and above Rs. 1.50 lakh provided by 80 C of the Income Tax Act,” said D P Singh, CMO – Domestic Business, SBI Mutual Fund.
Government’s National Pension Scheme (NPS) qualifies for tax deduction under 80 CCD of the Income Tax Act 1961.
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. 315 crore while UTI Retirement Benefit Pension manages Rs 1,257 crore. These schemes were launched before PFRDA was set up.
Both FT and UTI’s pension funds invest up to 40% of assets into equities whereas the new category of pension funds which will soon be launched by AMCs have flexibility to invest up to 65% in equity.
Could mutual fund retirement funds be a game changer for the industry? Let us know your views.