In today’s world, a retirement plan is a necessary part of a person’s career trajectory. In other words, it is something that individuals have to prepare for financially and psychologically. A recent article in The Hindu noted that today’s 60 and 70-somethings don’t have the same support networks to fall back on that they would have had even 20 years ago. As a result of the slow erosion of the joint family system, and the growing prevalence of the nuclear family model, ageing adults can no longer count on their children or extended families to care for them. Increasingly it is the private sector, in the form of retirement communities and old age homes, that’s stepping in to fill these gaps.

When the market replaces the family, that’s when money becomes paramount. This is why, in order to live in some comfort as a senior citizen in today’s world, savings are so important. One way to save up is by investing in a pension fund. There are different types of pension funds, from the PPF (Public Provident Fund) to the Modi government’s Atal Pension Yojana or the National Pension Scheme. Individuals can invest money over the course of their careers in these funds and withdraw them once they mature.

However, with inflation driving the cost of living up every year, the amount that an individual sets aside would have to increase proportionally. This is why pension funds by themselves can’t quite cut it. These days, banks like HDFC offer individuals unit-linked funds, also referred to as Unit Linked Insurance Policies or ULIPs. HDFC’s Life Click 2 Retire is one such fund.

What are ULIPs?

ULIPs such as HDFC Life Click 2 Retire allow individuals to invest their savings in the financial markets and thus capitalise on them. In other words, the money they save doesn’t just sit in a bank account and accrue interest: it actually earns money because the bank invests that money in the stock market. The amount invested could therefore grow by as much as 17 per cent for example, in the course of a period of investment.

Investing in the stock market, we all know, consists of a level of risk. However, HDFC allows you to choose the level of risk you wish to take, whether it’s high, moderate, or low. Essentially, your money is distributed across three types of instruments: money market instruments, government bonds and securities, and finally equity.

Just as filter coffee lovers enjoy different coffee to chicory ratios, investors too can decide how much of their money goes into each of the three investment categories: money market instruments (Category 1); government bonds and securities (Category 2); equity (Category 3).

  • The Pension Equity Plus Fund channels your funds as follows: 0-20% in Category 1; 0-20% in Category 2 and 80-100% in Category 3. This is a high risk-high yield fund.
  • The Pension Income Fund puts your eggs in two out of three major investment baskets. So that would be 0-20% in Category 1 and 80-100% in Category 2.
  • Finally, the Pension Conservative Fund would put 0-60% of your money into Category 1 and 40-100% in Category 2.

This fund offers other benefits including the ability to extend your vestment or maturation date. A nominee will also receive Death Benefits upon your untimely death (i.e. prior to the end of the policy period.) This policy can also be monitored and managed online.

So go ahead and start planning for your post-career future. It turns out that you can live multiple lives in just one lifetime. Why not live each one to the fullest?

By Kar

Dr. Kar works in the interface of digital transformation and data science. Professionally a professor in one of the top B-Schools of Asia and an alumni of XLRI, he has extensive experience in teaching, training, consultancy and research in reputed institutes. He is a regular contributor of Business Fundas and a frequent author in research platforms. He is widely cited as a researcher. Note: The articles authored in this blog are his personal views and does not reflect that of his affiliations.

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