Looking for Non-Traditional Ways to Secure Retirement? SBI Retirement Benefit Fund Provides an Option


The State Bank of India’s Retirement Benefit Fund (SRBF) is a new addition to the list of funds that may help provide financial security post retirement apart from traditional avenues like PPF, EPF and NPS.

What is SRBF?

The SRBF is an open-ended scheme. Your investments will be locked for five years or until retirement (i.e., completion of 65 years of age), whichever is earlier. The fund offers four plans for investors with various risk-profiles, by allocating to equity and debt.

Aggressive: 80-100 percent in equities; Aggressive hybrid: 65-80 percent in equity; Conservative hybrid: 10-40 percent in equity; and conservative up to 20 percent in equity are the four options. Each plan also has a provision to invest in Gold ETFs and foreign securities.

The aggressive and the aggressive hybrid plans will invest only in AAA-rated PSU and sovereign bonds, while conservative hybrid and conservative options will have exposure to non-AAA rated bonds. Investments will be made in instruments in such a way that a Macaulay duration of 4-7 years (just as in the case of ‘Medium to Long Duration debt funds’) is maintained.

What Works

The scheme has been devised keeping your age in mind. The presence of four plans with varying allocations to equity and debt means that you can select a retirement plan, depending on your age and the number of years to retirement. For instance, young investors or/and those with high risk appetite can consider the aggressive plan. The conservative plan may be suitable for retirees or investors nearing retirement, as investments are mostly in debt instruments.

What’s more, the ‘Auto Transfer Plan’ facility allows switching of funds to more conservative options as you grow older. This ensures that the asset allocation moves with your age. As you grow older, you can shift to options where equity portfolio is lesser.

The fund can invest in multiple asset classes: equity, debt, REITs, gold and foreign securities.

What Doesn’t

SRBF does not offer 80C tax benefit currently. Until 2011, the Indian mutual fund fraternity has had only two designated retirement schemes – UTI Retirement Benefit Pension Fund and Franklin India Pension Fund. Later, mutual funds selectively rolled out schemes focussed on retirement as a financial goal. Some of these schemes, especially the previously launched ones, offered tax deduction benefits under Section 80C.

You can invest in SRBF through a systematic investment plan. But remember, each instalment gets locked in for five years. And the lock-in begins from the time you put in your instalment.

The ‘Auto-switch’ option, though convenient, comes with a small caveat. Any switch is treated as a sale and attracts capital gains tax. Each of the four options in SRBF is a stand-alone scheme with a unique portfolio and asset allocation pattern.



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