Planning for retirement is crucial to ensure a financially secure future after stopping work. Retirement mutual funds are a popular investment option for building a pension corpus due to their long-term nature and tax benefits. In this article, we analyze the top 5 retirement funds that have generated wealth for investors in the last 5 years.
Retirement funds have a mandatory lock-in period of 5 years or till retirement age, whichever is earlier. This forces disciplined long-term investing and rules out panic withdrawals during market corrections. They are also eligible for tax deductions up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.
To evaluate the best performers, we took the top retirement funds from major fund houses and analyzed their 5-year returns generated as of April 2022. We also calculated the ending value of a hypothetical Rs. 3 lakh lumpsum investment made at the start of this period to demonstrate real wealth growth.
Heading the list was ICICI Prudential Retirement Fund – Pure Equity Plan with a 5-year return of 23.98%. Benchmarked to Nifty 500 Total Return Index, it has consistently outperformed the broader market. The fund size is a healthy Rs. 729 crore with an NAV of Rs. 30.47 currently.
The Rs. 3 lakh investment would have grown to Rs. 5,78,778 over 5 years, delivering impressive long-term gains. ICICI Prudential is known for its strong equity expertise, and this retirement option has capitalized on that advantage.
In second place was HDFC Retirement Savings Fund – Equity Plan, returning 23.31% over 5 years. Its benchmark is also Nifty 500 TRI. With an AUM of Rs. 5,045 crore and NAV of Rs. 50.75, it proves scale doesn’t hamper performance.
The same Rs. 3 lakh lumpsum would have grown to Rs. 5,55,289, underlining the fund’s ability to deliver steady returns through different market cycles. HDFC is known for its conservative yet effective approach, making this retirement option a good balancer.
Not all investors may want pure equity exposure in retirement funds given the risk profile. That’s where hybrid options come in handy. The ICICI Prudential Retirement Fund – Hybrid Aggressive Plan secured the third spot with 19% returns.
It beats its own benchmark CRISIL Hybrid 35+65 Aggressive Index which returned 14.46%. The Rs. 3 lakh would have grown to Rs. 4,15,906, showcasing how prudent hybrid debt allocation can boost returns while providing downside protection.
The HDFC Retirement Savings Fund – Hybrid Equity Plan secured the fourth position with 17.31% returns compared to its benchmark Nifty 50 Hybrid Composite Debt 65:35 Index which returned 13.13%.
The same Rs. 3 lakh investment would have grown to Rs. 6,66,494, underlining the power of balanced funds to generate long-term wealth in a risk-controlled manner. It proves a hybrid strategy is suitable for retirement plans too.
At number five was the Tata Retirement Savings Progressive Fund with 16.65% returns, outdoing its Nifty 500 TRI benchmark. The Rs. 3 lakh would have grown to Rs. 3,47,955 over 5 years, showcasing the fund house’s capabilities despite being a relatively newer player in this segment.
Tata Mutual Fund has been sharpening its skills across categories, and this retirement option delivers on that promise. Its large AUM of Rs. 1,835 crore inspires confidence for continued future performance.
In conclusion, the above analysis of the top 5 retirement funds by performance underscores key principles for building a strong pension kitty – adopt a diversified approach, stay invested for the long haul, and rely on proven fund management expertise to compound wealth over decades. Disciplined investments in the best performers can truly help retire rich.
