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Pension plans are a means of generating funds for the golden years of a person’s life. New age mutual fund pension plans offer a systematic way of saving up a sizeable retirement corpus. These plans now come with a hybrid option that you can choose during the retirement planning. Meaning, these pension plans cover both equity and debt investments.

How do Mutual Fund Pension Plans work?

These mutual funds work in quite a simple manner. They pool the funds of several investors and use it to invest in debt and equity markets. Equity exposure on pension plans varies close to around 40%, which is comparatively lower when you compare it to balanced funds.

It is essential to remember that withdrawing from your pension plan before you retire is not a good idea, given that inflation by then can make the decision a costly one. Most plans consider the standard retirement age to be around 58-60 for this purpose.

You may choose to either withdraw a lump sum or opt for regular income once the plan has matured. No matter when your choice, you can rest assured that the balance units, post withdrawals, shall continue to remain invested and continue to grow. Pension plans are a smart step towards retirement planning, and investing in one ensures that your nest egg post-retirement benefits from the compounding of returns that you make from it. The 40% exposure in equities ensures that your investment benefits from the highs of the stock market.

 To conclude

Retirement products offered by mutual fund houses are a good option to have on your portfolio when planning your retirement. They have a lock-in period of 5 years and a 1% exit charge on premature fund withdrawal. When you compare it to the lock-in period of 15 years in an NPS, mutual fund pension plans are not that long.

How Do Mutual Fund Pension Plans Work To Build Your Retirement Corpus?

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