Retirement / Pension based instruments

Pre-retirement options

Government Bonds & RBI Taxable Bonds - These are good long term bets where there is sovereign guarantee on the capital investment coupled with fixed returns. The tenure of these bonds are very long. Though the returns are subject to the prevalent interest rates, these are good options one must consider in the portfolio towards retirement. Other bonds - Infrastructure bonds, REC bonds, NABARD bonds, etc. are other options for a safe and reliable return. However, all these are very risk averse options and hence returns are limited.

Gold - Gold in India is considered as the most auspicious asset. But it also has a significant history from returns perspective. Though gold doesnt gurantee high or fixed returns, it warrants for a steady appreciation in the capital over a long er tenure. Today, there are various options one can look at to invest in gold such as gold ETFs, gold mutual funds, Sovereign Gold Bonds (SGBs), physical gold, etc.

Real estate - Investment into realty sector also pays off in long run. Though, in most parts of India, real estate is expensive, it can be a good diversified option to consider from a retirement asset creation perspective. There are many realty specific funds today that offer an opportunity to invest in this sector.

Direct equity - Nothing beats the returns of equity asset class in longer horizon. So having an equity portfolio is a must.

Equity mutual funds including retirement and pension benefits funds - These are very good options to invest in a diversified portfolio. The fund manager manages the corpus and helps in long term capital appreciation.

EPF & VPF - Both company's provident fund as well as voluntary provident fund are good mechanisms to invest regulary into retirement corpus. The sum generated is huge over a period of time and can be a good source to meet all the financial goals post retirement.

PPF - The Public Provident Fund is a very popular option as it is backed by sovereign guarantee. It comes with a long tenure of 15 years lock-in period. However, the impact of compounding of tax-free interest is huge. The interest rate on PPF in reviewed every quarter by the government.

National Pension Scheme (NPS) - It is a retirement specific option managed by the Pension Fund Regulatory and Development Authority (PFRDA). Another safe option which provides an option of additional INR 50,000/- tax exemption under the Section 80C of the Income Tax Act. It includes a mix of equity, fixed deposits, corporate bonds, liquid funds and government funds, thereby offering a very good diversified retirement investment option.

National Savings Certificate (NSC) - Another option where there is a 5 year lock-in period with a fixed return rate and a sovereign guarantee. There is upper limit on the amount of investment.

LIC policies and ULIPs - These are other diversified options one can look at from a retirement perspective to create a diversified asset allocation.