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UTI to unveil Early Retirement Income Fund

Aabhas Pandya

Unit Trust of India (UTI) plans to unveil Early Retirement Income Fund (ERIF) in mid-July this year. The scheme is targeted at those investors, who plan to invest their terminal benefits after opting for voluntary retirement or plan to invest their savings for post-retirement financial support. An interval fund, UTI ERIF will open for initial subscription on July 17 and will close on August 14. The scheme will re-open for fresh subscriptions within 30 days of the closure of the IPO.

Since a number of corporates, including public sector companies, are offering voluntary retirement schemes (VRS) to their employees, UTI will have a large investor base to target for UTI ERIF. The process of offering VRS to employees is expected to gain momentum as companies cut manpower to reduce costs, become competitive and shore up bottom line. Technology has been the key harbinger of change here as it replaces human capital and adds to efficiency at lower costs.

The fund offers two plans - Monthly Payment Plan (MPP) and Deferred Payment Plan (DPP). Under the MPP, an investor will receive monthly income within six months from the date of investment. On the other hand, investments under DPP will continue till the investor plans to start receiving monthly payments under the Monthly Withdrawal Option (MWO).

Any investor under the deferred plan will be required to hold investments for a minimum period of three years before opting for MWO. The fund facilitates simultaneous investments in both the options. The minimum investment in either of the two options is Rs 25,000 with subsequent investments in multiples of Rs 5000. The net asset value (NAV) of the fund will be declared on a weekly basis.

Under the monthly payment plan, the fund manager will invest at least 80 per cent of the assets in debt instruments while the rest will be invested in equities. On the other hand, the deferred payment plan will invest at least 60 per cent in debt instruments while the remaining 40 per cent will be put in equities.

Source: Value Research

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