The Hindu Business Line : UTI Retirement Benefit Pension Plan: Invest

Investors looking to build a retirement portfolio can consider investment in UTI Retirement Benefit Pension Plan. UTI Retirement is an open-end debt-oriented balanced fund with a maximum allocation of 40 per cent of its assets to equity.

The fund, over three- and five-year periods, generated annualised return of 9.2 per cent and 14.4 per cent respectively and outpaced the category average by 4-7 per cent. In its equity segment, the fund predominantly invests in large-cap stocks; its returns are similar to that of BSE Sensex over three and five years.

Suitability: The fund’s mandate is to build a retirement corpus with a mix of equity and debt, depending on the market conditions. Hence, the fund is ideally suited for investors looking at building a long-term portfolio for retirement.

The fund’s tendency to invest at least 60 per cent of the assets in debt can provide a comfort level for conservative investors.

Scheme Features: The objective of the scheme is to provide pension to investors, particularly those not covered by any social security.

After they reach the age of 58, investors can opt to receive the accumulated investment in the form of annuity by repurchasing the units over a period of time in the form of periodical cash-flow, based on the repurchase value of their holding then, through a systematic withdrawal plan.

Withdrawal can be monthly, quarterly, half-yearly and annual. The fund charges an exit load of 5 per cent for repurchase within a year and 1 per cent for exits between 3-5 years.

Investment in this fund is eligible for tax benefit under Section 80C. A point worth noting here is that if the current direct tax code recommendation is implemented this investment will cease to enjoy tax benefits.

Performance: The fund has outperformed the hybrid debt category average over a one-year period by seven percentage points. Thanks to the presence of debt, it has contained losses during the market meltdown; even after the strong equity rally, its one-year return is as good as the BSE Sensex.

The equity portion is passively managed and is being invested in large-cap stocks. Investors can only expect moderate returns from this segment.

Of the debt investment close to 75 per cent of the assets are invested in AAA-rated and AA-rated securities which may provide moderate returns for relatively low risk. Its limited investment in securities below investment grade provide a high-risk, high-return flavour.

Portfolio Overview: In its August portfolio the fund held 56 per cent in debt and 39 per cent in equity.

While in the early part of this year the exposure to equity was around 20 per cent it stepped up allocation well into the start of this ongoing rally, thereby failing to derive maximum advantage from it.

Financial services, energy and capital goods are the top holdings in equity, while non-convertible debentures accounted for major chunk of debt portion.

The fund is jointly managed by Mr Amandeep S. Chopra and Mr Deb Bhattacharya.

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