A retirement mutual fund scheme that rejigs debt and equity allocation with age

The new fund from Edelweiss adjusts equity and debt components to reduce risk with age. 

The retirement funds in the market are typically
 hybrid in nature, offering a 5-year lock-in 
period and Section 80C tax benefit. 

Dedicated retirement plans by mutual funds have not quite caught the imagination of Indian investors when it comes to saving for retirement. Abysmal awareness and lack of investing skills for achieving this crucial financial goal could be to blame: while 65% people don’t even know how much corpus they will need in retirement, 61% don’t realize the need for asset allocation for this goal, as per an internal survey by Edelweiss Asset Management. This is probably the reason that almost 52% of people still invest in traditional instruments, which may not even help beat inflation. 

The retirement funds currently in the market are typically hybrid in nature, offering a five-year lock-in period and Section 80C tax benefit, but most of them are not flexible when it comes to asset allocation. This means that they do not facilitate switching between equity and debt to ensure lower risk with age. With very few plans, such as the Tata Retirement Savings Fund providing the auto-switch option to reduce equity component with age, there is ample opportunity for new funds to fill in this space.

With this in mind, Edelweiss Asset Management has launched the Retirement Plan. “Investors do not understand the crucial role of asset allocation in retirement planning. This plan helps in age-based asset allocation,” says Radhika Gupta, CEO, Edelweiss Asset Management. The plan provides exposure to a diversified portfolio with an in-built asset allocation mechanism. This means that even as you continue with your SIPs, the plan gradually shifts the portfolio toward lower-risk investments based on age and life stage. 

The plan comes with two asset allocation options: ‘Auto’ and ‘My Custom’. While the former provides a predefined asset allocation at every age, the latter offers flexibility to customize equity and debt allocation as per the risk appetite and tenure of investment. This may be a good hands-off option to explore for investors planning to save for retirement. 

If you think of retirement planning, investing in a mutual fund is your option.

Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, estimating expenses, implementing a savings program, and managing assets and risk.

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