The investment objective of the scheme is to provide a retirement saving solution through long term diversified investments in major asset classes.
The investment made in the plan does not qualify for any tax benefit under Section 80CCC.
SBI Retirement Benefit Fund New Fund Offer (NFO) is closing today on February 3, 2021. It is an open-ended, retirement solution-oriented scheme giving an investor varying exposure in equities and debt assets. Anyone investing in this scheme needs to be clear that it is not meant for medium-term goals but suits long term goal such as retirement. Similar to any other mutual fund scheme, there is no assurance of the returns and will depend on the performance of the underlying securities like shares and bonds.
The investment objective of the scheme is to provide a comprehensive retirement saving solution that serves the variable needs of the investors through long term diversified investments in major asset classes.
The investor’s money will be primarily invested in equity and equity-related instruments. However, this plan also provides for flexibility of investment in debt and money market securities. Generally, for long term goals such as retirement, it is suggested to take a higher exposure in equities. And, as one age, the exposure can be trimmed and shifted into less volatile debt funds.
There is a lock in a period of 5 years or until retirement (i.e. completion of 65 years), whichever is earlier. The lock-in period is at the scheme level which means as an investor can switch among the different plans available in the scheme (switch from Aggressive Plan to Conservative Plan or vice versa) during the lock-in period. No investor above the age of 65 years will be allowed to subscribe to the scheme.
Investment plan options
The Scheme offers four investment plans – aggressive (equity-oriented with minimum 80 per cent in equities), aggressive hybrid (equity-oriented with minimum 65 per cent in equities ), conservative hybrid (debt oriented with minimum 60 per cent in debt) and conservative (debt oriented with minimum 80 per cent in debt).
Every plan can take up to 20% exposure to Gold ETFs and up to 10% exposure to REITs/InVITs. The plans can also invest in foreign securities including overseas ETF to the tune of up to 35% in Aggressive Plan, up to 15% in Aggressive Hybrid Plan and Conservative Hybrid Plan and up to 10% in Conservative Plan.
The minimum initial investment amount that one can make in the scheme is Rs 5,000 and in multiples of Re. 1 thereafter, while the minimum additional purchase amount is Rs 1,000 & in multiples of Re. 1 thereafter. The minimum redemption that can be done is of Rs 500 or 1 Unit, whichever is lower. In case of SIP during the NFO process, the minimum monthly investment amount is Rs. 1000. The investment made in the plan does not qualify for any tax benefit under Section 80CCC ( within Section 80C)
How to decide the investment option
There are two options to choose your investment allocation – Auto Transfer and My Choice. The suitability will be a function of one’s age, investment horizon and risk appetite.
Auto transfer: Under the ‘Auto Transfer’ facility, the investment plan is chosen based on the investor’s age at the time of the investment. Each investment plan corresponds to a certain age group. In this facility, the investor does not choose a plan but is allotted one based on their age at the time of investment. As the investor advances in age, the invested assets get automatically transferred to the next low-risk investment plan corresponding to the investor’s age. No exit load is applicable in case of this switching of assets between plans. However, the tax will be applicable as per prevailing taxation laws.
My Choice: Under the ‘My Choice’ facility, the initial investment plan chosen by the investor will continue even as the investor advances in age and crosses over to the next age low-risk age bracket. The incremental investment made will also be added to the initial investment plan. If the investor does not opt for auto transfer, then existing and incremental investments will continue in the plan chosen at the time of initial investment. Further, any number of switches are allowed between the four plans of the scheme. For example, an investor can move from Aggressive Plan to Conservative Plan or vice versa.
What to do
The potential of equities in generating high return compared to other assets is better over the long term. The performance of such schemes may not be in-line with other actively managed open-ended schemes in the long term. Any retirement-focused mutual fund scheme suits those who do not have the necessary time and know-how to track the performance of their schemes. The lock-in period and the long term nature of such schemes make one avoid the temptation to redeem or exit investments mid-way before reaching the goal. Some portion of your funds earmarked towards retirement may still be allocated in such schemes keeping risk profile and objective in context.