During the retirement period, employees opt for pension and get their monthly pension cheques.Returns of 8.5% in an environment where inflation is 10%+ is not generating any REAL returns. Investors should always look for returns which beat inflation atleast by a 7-8%.
Mutual funds also provide pension plans.These funds come as a debt oriented hybrid funds.The characteristics of these funds are
1. Lock in period of 3 years.
2. Exit load of 3% if withdrawn before the age of 58. This brings in discipline among investors to not to keep meddling with amount dedicated for pension.
3. These qualify for section 80(c) tax benefits. Investment made into pension funds upto 1 lac is tax exempted.For people who don have home loans and are figuring out what to do to fill up 1 lac in 80(c), this can be a very good option where both tax benefits and investment need is also satisfied.
4. UTI and Franklintempleton are the two funds which currently offers pension plans in mutual funds.
5. Past track record of the two funds.Annualized returns since inception as on 13/08/08 for
1. Templeton India Pension Plan(1997 - 2008) - 14.62
2. UTI Retirement Benefit Pension Plan(1994-2008) - 11.18
TIPP is a better choice than UTI's scheme.
So start exploring the pension options in mutual funds and get inflation beating returns from them.