This fund is the oldest and largest of the two pension funds. Launched in December 1994, UTI Retirement Benefit Plan has delivered a total annualised return of 10.73 per cent, as on March 16, 2004. This can be considered a decent performance withstanding the ups and downs that both debt and equity markets have gone through in the past nine years. Investments of up to Rs 70,000 in the fund is liable for tax benefit under Section 88 of the Income Tax Act, 1961.
In recent years, the fund manger has maintained a cautious investment approach. He has relied heavily on the fixed income side - debt holdings account for an average 75 per cent of the portfolio. Moreover, to reap greater benefit, the fund manager had maintained a higher exposure in below AAA rated bonds (average 25 per cent). Gilts, on the other hand, have accounted for an average 6 per cent of the portfolio. The fund's average maturity has also been in the range of 3.2-4.64 years, thus consistently benefiting from the declining interest rate.
Historically, the fund hasn't been as conservative as it is today. During the tech boom, the fund's equity exposure went as high as 73 per cent of the portfolio. But as the fund has always maintained a well-diversified portfolio, the loss was not too heartening. Generally, UTI Retirement Benefit Plan's equity portfolio has been spread over 40-60 stocks with no concentration in any select sector. Even at the peak of 2000 rally, it had investments in 34 stocks spread over various sectors. Thus, it ended the year 2000 with a marginal loss of 3.64 per cent.
But since then, the fund has never gone heavy on equities. Even in 2003, when equity markets were on a roll, the fund had an average 25 per cent exposure in equities. And as 2003 was not so good for the debt market, UTI Retirement Benefit Plan just managed to gain 29 per cent.
After learning from the past mistakes, the current portfolio of UTI Retirement Benefit Plan looks well-balanced (60-40 debt-equity exposure). Thus, this fund could be considered as a good retirement planning fund, which also entails tax-benefit to the investor.
For investing in UTI Retirement Benefit Plan, a minimum investment of Rs 10,000 or instalments of at least Rs 500 till the age of 52 years is required. Investors above the age of 52 and up to 60 years will have to invest a minimum of Rs.10,000 as a single investment. There is no upper limit on investment in a pension fund. But then you will not be entitled for any tax incentive.
Just like tax-planning equity funds, UTI Retirement Benefit Plan also has a lock-in of three years. However, after expiry of three years, you can redeem your investment by paying an exit load of 1 per cent (if redeemed before attaining the age of 58 years). Once an investor turns 58, he or she can opt for one of the three choices: regular income till he or she is alive, partial withdrawal with income on balance units and full withdrawal.