Pension Plans With Mutual Fund Investments.

Pension Plan helps the average investor to accumulate wealth over the period in order to meet his/her expenses after retirement. Usually it is the insurance companies that draw customers with the array of pension plans that they provide, but the lesser known fact is that Mutual Fund also manages pension products. Currently only one private sector mutual fund has a pension plan catering to the investor and there is more than one reason for you to look at this plan seriously. The Plan is none other than Templeton India Pension Plan (TPP), the countrys first and only central government approved private sector pension scheme under Section 88. In other words, investing in this pension plan will also provide you with tax saving benefits similar to tax saving Mutual Funds (ELSS) and other investing instruments such as National Saving Certificate (NSC) and Public Provident Fund (PPF). Though both tax saving mutual funds and pension plans are in the same investment genre as they offer tax-deduction benefits, both have varying rates. The investment amount on which tax benefits can be claimed by investing in tax-saving funds is restricted to a maximum permissible limit of Rs 10,000 (approximately). However, the maximum permissible investment limit under TPP is Rs 70,000(approximately).

Coming to the points as to why the average investor should consider this investment as a part of their investment portfolio. The main feature of a good pension plan is to be deterrent for early withdrawals. Templeton Indian Pension Plan (TIPP), generally allows you to withdraw your money after 58 years of age or after 3 years of investment. If you do want to withdraw your money after 3 years of investment, even if you arent 58 years old you can do so after paying a 3% exit load (administrative charges you pay when you sell your units or assets). The power of equities will provide you long term capital gains if your investment portfolio has a time period of a minimum of 10 years. Templeton Pension Plan offers better tax-saving options when compared to other investing instruments of the same genre. Returns from NSC or PPF will be hard to match the returns generated by TPP if one is willing to consider a comparison given that PPF and TPP are retirement-oriented investments.


Whenever you opt to invest in a Mutual Fund, two prime factors that needs to given due importance are Asset Allocation and Fund Manager. TIPP has increased its exposure to IT stocks in the latest quarter and reduced exposure to stocks in the metals space such as Hindalco. A well-diversified equity portfolio with limited exposure to mid-caps makes it a less risky portfolio. As far as performance goes the plan has delivered an impressive cumulative annual return of 18 per cent for the last five years. The fund has been able to beat its benchmark returns and has also recorded lower losses than its benchmark in the last quarter, when the market turned weak. So for investors who are looking for a good investment module to invest in other than the regular insurance product TIPP is an excellent option.

By: Ryan Crown

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Investment and Financial Planner for a leading Mutual Fund House in India. To read more about Pension Plan with Mutual Funds click here.