Beating SCSS, retirement mutual fund turns Rs 15 lakh into Rs 30 lakh in 5 years – 5 points

Senior Citizen Savings Scheme (SCSS) is popular among senior citizens because of guaranteed income, tax deduction benefit under Section 80C and a healthy interest rate of around 8%. But when it comes to just returns, SCSS has failed to beat some retirement-oriented mutual fund schemes. There is one retirement savings fund that has stood out in its category with more than 15% annualised returns in the last 5 years while the SCSS interest has remained between 7.4% to 8.7% in this period.

Data on the website of the Association of Mutual Funds in India (AMFI) at the time of writing (May 15, 2023) shows that HDFC Retirement Savings Fund – Equity Plan has given an annualised return of 15.36% under the direct plan in 5 years. Calculation shows that if a person had invested Rs 15 lakh in the direct plan of this scheme 5 years back, it would have grown to around Rs 30.6 lakh. Under the regular plan, the scheme has given a return of 13.36% in 5 years, which could have turned a lump sum investment of Rs 15 lakh into around Rs 28 lakh in this period.

In comparison, an investment of Rs 15 lakh in the SCSS scheme 5 years back by a senior citizen would have grown to around Rs 21.5 lakh at the 8.7% interest rate available between 01-10-2018 and 31-12-2018 (Rs 15 lakh principal+Rs 6.5 lakh interest).

For investments done at the 8.3% interest rate available between 01-01-2018 and 30-09-2018, the total corpus would have grown to Rs 21.2 lakh (Rs 15 lakh principal + Rs 6.2 lakh interest). It is important to note here that SCSS interest is payable on a quarterly basis. This means Rs 21.5 lakh or Rs 21.2 lakh corpus would have been possible if the investor had saved the interest income in a savings account or elsewhere.

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However, both SCSS and Retirement Mutual Funds serve different purposes. SCSS is for guaranteed income to support post-retirement life and only senior citizens can invest in this scheme. Retirement Funds, on the other hand, come with market risks and are aimed at helping investors accumulate a corpus for retirement planning. That said, here is a look at 5 key points about the HDFC Retirement Savings Fund – Equity Plan that you should know:

1. This is an open-ended retirement solution-oriented scheme with a lock-in period of 5 years or till retirement age (whichever is earlier).
2. It is also a notified Tax Savings Cum Pension Scheme which invests a minimum of 80% of the portfolio in Equity and Equity related instruments.
3. The scheme was launched on February 25, 2016, and the AUM value of the scheme as on April 30, 2023, was Rs 2964.34 crore, as per information on the fund’s website.
4. This scheme tracks the NIFTY 500 Total Returns Index and its investment objective is to provide long-term capital appreciation/income by investing in a mix of equity and debt instruments to help investors meet their retirement goals. But there is no assurance that the investment objective of the scheme will be realized.
5. Any individual who is a resident of India and aged above 18 years can invest in this scheme. Non-resident Indians (NRIs) and Persons of Indian Origin (PIO)/ Overseas Citizens of India (OCI) can also invest in this scheme on a repatriation basis or on a non-repatriation basis.

Also Read: You may get only 5% post-tax return from a Bank Fixed Deposit offering 7% interest

(Disclaimer: The above content is for information purposes only. It is not an investment advice. Mutual Fund investments are subject to market risks with no assurance that a scheme will meet its objectives or repeat past performance in future. Please consult your financial advisor before investing)