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LIC Jeevan Shanti, NPS or mutual funds: Where should I invest to build a retirement corpus?

Back in ’80, the job was few and entrepreneurial opportunities scarce. For a young man who wanted additional income to support a growing family, it meant working harder and being enterprising. Pradip Nalawade jumped into the insurance business and started NIC as a source of additional income but soon realized he had a flair for it and it certainly appealed to his heart. He realized he could actually help many people in their difficult times and offer succor

In NPS, one needs to stay invested till age 60, there are restrictions on withdrawals at maturity, and it’s mandatory to buy an annuity. I am 31 years old and have Rs 15 lakh in liquid funds. I want to retire by 55, should I invest this sum in LIC Jeevan Shanti, NPS, or some other instrument to build a retirement corpus?

Expert replies:

With 24 years to retire, equity funds will be ideal. Here’s a quick comparison of the three options. NPS is a good choice since it offers exposure to equity, however, it requires a contribution at least once every financial year, not just one-time investment. Also, you need to stay invested till you are 60, there are restrictions on withdrawals at maturity, and it’s mandatory to buy an annuity with at least 40% of the maturity corpus. If you exit before 60 years, then 80% of the corpus will be locked in an annuity scheme.

LIC Jeevan Shanti allows you to invest one-time for a deferred period of up to 20 years. If you invest Rs 15 lakh, after 20 years, you can earn a pension of approximately Rs 26,000 a month for life. Jeevan Shanti also provides a life cover.

The last option is that you invest the money in two mutual funds. Assuming a conservative 12% return for the next 24 years, you could generate Rs 2.56 crore. After that, if you park this money in a conservative product earning about 6% return, you will be able to earn a monthly pension of Rs 1.28 lakh. If you choose the third option, gradually start moving your funds from equity back to a liquid or short-term debt fund as you near your goal.

I want to invest Rs 5 lakh in the name of my grandson. The aim is to create a higher education corpus for him over the next 17-18 years. Please advise where to invest.

Expert replies: You may equally distribute the sum across a large-cap, a multi-cap and a mid-cap fund. ICICI Pru Bluechip, Reliance Large Cap and Axis Bluechip are good large-cap options. For multi-cap investment, you may choose from among HDFC Capital Builder Value, SBI Magnum Multicap and Motilal Oswal Multicap 35. Franklin India PrimaFree Reprint Articles, HDFC Mid Cap Opportunities and Kotak Emerging Equity are some of the good mid-cap options. Take the systematic transfer plan route to invest in the funds over six months.

Article Tags: Jeevan Shanti, Mutual Funds

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