MS Dhoni, a fine cricketer and the Indian cricket team’s best captain in the white-ball format announced his retirement from international cricket a little over a week ago. Around a decade and a half of international cricket along with the likelihood of continuing earnings from the IPL and endorsement deals ought to have ensured that his financial future is more than secure.
But, what about his legions of fans in this country? Is their life, post-retirement likely to be financially secure?
It is worth noting that over the last six decades, the life expectancy of Indians has risen to around to 69 years from just 41years, as per World Bank data tabled in 2017. Unless this trend reverses, chances are, present-day Indians will have an even longer life expectancy.
The insurance industry in India was off the blocks with their pension plans and the mutual fund industry in India too discerned this trend and there is now, no dearth of retirement fund schemes on offer from various Asset Management Companies (AMCs). Besides these, there is of course the Government-backed National Pension Scheme (NPS).
The early retirement funds that were launched by the mutual fund industry offered a mix of debt and equity and required investors to be locked in till a predetermined retirement rate and imposed heavy exit loads on those seeking to bail out early. To buttress the deal, an investment in these schemes made one eligible for a tax deduction under Section 80C of the Income Tax Act.
SEBI then categorized these funds and standardized the lock-in period to five years or till a pre-specified retirement age, whichever is earlier. While categorization was fine in principle, the carte blanche offered to the AMCs ensured that any comparative analysis of the funds offered in this category was rendered redundant.
Each AMC followed its own dynamics and made multiple sub-categories of offerings with very different asset allocation plans, ostensibly to cater to different age and income groups.
But then, isn’t that true of every category of funds, where only one offering per category is permitted? If the investor had the wherewithal to select between the sub-categories based on asset allocation patterns, then wouldn’t it be easier for that investor to select the appropriate mix of equity and debt mutual funds?
Notably, the latter category has a much longer track record and being open-ended offers ample opportunity for nimble-footed re-balancing where required. Some of the AMCs offering retirement funds include Axis, Tata, UTI, ICICI, HDFC, Nippon India and Franklin India. There are select funds within this category that have performed satisfactorily but in the absence of uniformity, it requires expertise to discern which one has performed best, in line with an investor’s objectives. To summarize, if one is selecting retirement funds from AMCs as their retirement vehicle, they would do well to seek expert advise to navigate through its maze.
Ashok Kumar heads LKW-India. He can be reached at ceolotus@hotmail.com