The Hindu Business Line : Social security funds

UTI's `micro pension' initiative attracts investments from self-employed women in the unorganised sector every month to UTI Retirement Benefit Pension Fund

In India, nearly 30 crore people have no social security, no pension. The vegetable vendor, the rag-picker, the daily worker and the one who does embroidery and stitching jobs are among the 30 crore...

By the time you finish reading that line - it is, incidentally, borrowed from Mr U.K. Sinha, CMD of UTI MF - you will be wondering why vegetable vendors and daily workers are being referred to at all in a column that so often deals with matters concerning high net worth individuals.

The reason is simple: Life is a toil for many of these people. They do work terribly hard for a living, often in ways that you and I can perhaps never imagine. And they do feel the absence of social security, a condition that the well-heeled in this great nation of one-billion-plus people will scarcely relate to.

Cut to UTI MF again, especially to its recent `micro pension' initiative in association with an Ahmedabad-based institution.

The tie-up basically involves investments of small amounts by self-employed women in the unorganised sector every month in UTI Retirement Benefit Pension Fund.

For the uninitiated, UTI RBPF is a balanced fund that can put in a maximum 40 per cent to equity. It aims at providing pension after an investor turns 58, in the form of cash flows up to the extent of repurchase value of their holding.

The fund, which had Rs 462 crore as on March 31, has provided 12.6 per cent since its inception in late 1994.

Please do not discount this as a dim effort to humour UTI, but clearly this action is commendable and mainstream media must make a special effort to draw attention to it. The country's top fund house has in a way tried to touch the lives of marginalised sections of our population. The model it has created in Ahmedabad needs to be cited for replication (and improvement, if possible) by other asset management companies. Surely, there is scope for working out similar programmes in partnership with NGOs, self-help groups and the like.

This actually brings us to a few major issues that are perhaps not wholly unrelated - a near-absence of retirement planning strategies among ordinary Indians, the merits of regular investments for the long term, the significance of diversifying one's portfolio over multiple asset classes and preventing inflation and taxes to eat into one's savings. In fact, whether we are investors or not, we should all take interest in such issues.

It does not take a financial genius to know that a diversified set of assets is relatively less risky than a concentrated one. If you are investing in MFs, it makes immense sense to distribute your surplus over several funds following multiple strategies, including ones that have unconventional investment styles. It also pays to know the risks involved in investing in such funds.

Further, there is need for proper financial planning in the strictest sense. A financially-literate individual who chooses a mere investment product pusher over a financial planner is certainly not doing himself a service.

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