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Tata Mutual Fund launches Tata Retirement Savings Fund. But will it help the retired?

There is a huge gulf between the oversimplified option of this product from Tata Mutual Fund—and the inertia of savers

Asset management firm Tata Mutual Fund on Tuesday launched an open-ended scheme that aims to provide a financial-planning tool for long-term financial security based on retirement-planning goals.

The strategy of the fund will be mainly a mix of large- and mid-cap firms—the focus will mainly be on big caps.

This retirement-specific mutual fund scheme has an "Auto-Switch" facility. The fund is designed to meet the investment needs of investors in different age brackets. It offers three options to investors—'Progressive Plan', 'Moderate Plan' and 'Conservative Plan'—with varied percentage of equity and debt assets.

The fund is specifically designed keeping in mind the young and middle-aged working generation. With increasing life expectancy, Tata Mutual Fund is assuming a post-retirement life of 30 years after 30 earning years. In the second period of 30 years, the challenge is to maintain the same lifestyle post-retirement.

The "Auto-Switch" feature is supposed to do away with the hassles of adjusting the equity-debt proportion of the portfolio with increasing age. The fund is assuming that the investor depends on his "advisor" for switching assets between equity and debt with increasing age. The facility of "auto-switch" does the necessary asset allocation automatically—as the investor crosses into a different age bracket.

Another feature of the fund is the "Auto-Systematic Withdrawal" facility. This is designed with the objective of providing investors with regular cash flows after they turn 60. The "Auto-Systematic Withdrawal" facility comes with two options of 'Monthly'—1% of market value of investment as on date of completion of 60 years of age or 'Quarterly'—3% of market value of investment as on date of completion of 60 years of age.

Will the scheme work? The whole concept to us is too simplistic to work. Retirement planning is a complex idea and many people simply don't even invest regularly in the right products. There is a huge gulf between the oversimplified option of this product and inertia of savers.

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