Unlike other mutual fund schemes, retirement plans from mutual funds need a go-ahead from CBDT and are cleared on case-by-case basis. "We have approached CBDT to incorporate some changes in its laws so that we can directly approach SEBI for launch of this scheme," said the head of a private sector mutual fund.

Under this plan, an investor is required to put some amount every year in the fund till he reaches the age of 58. The minimum investment under plans of UTI and Kothari Pioneer is Rs 500. Once an investor reaches the age of 58, he has four options - withdraw the entire amount; earn a fixed return every month based on his discretion; withdraw partiallyor let the money grow with the AMC.

"The plan is better than LIC's Jeevan Suraksha which offers only 25 per cent of investment on redemption against our full amount," said a fund manager.

The AMC has the option to invest a part of the corpus in equities. For instance, Kothari mentions in its prospectus that its pension plan can invest upto 40 per cent of the corpus in equities after 2001, i.e., once the fund completes three years. The fund currently has no exposure to equities.

"In fact, the proposal of Tata and Birla mutual funds has been hanging fire for quite some time now with CBDT because they wanted to take an immediate exposure to equities," says a market source. According to the head of one of the funds that plans to launch a retirement benefit plan, the pension plan planned a 30 per cent exposure to equities.

"Equities are the best vehicle for long-term growth and especially a plan like this where investments run over 30-40 years. And unlike equity-linked savings plan, this is relatively safewith a balanced character loaded in favour of debt," he added.

The retirement plans offer tax benefit under section 88 with a maximum limit of Rs 12,000. "We want CBDT to set aside Rs 10,000 exclusively for investors in this scheme under section 88 over and above their normal limit and so far, CBDT's response has been encouraging," said a fund manager, involved with the launch of IRP.

Analysts expect a number of retirement benefit plans to hit the market in the near future. "These funds are likely to replace ELSS to give tax breaks to investors since ELSS gives nothing to investors," said an analyst.

"However, the success of a pension plan depends on significant tax plans and at the same time, heavy penalties on premature withdrawal," he added.

Although the time period of pension plans is much longer than 10 years in ELSS, both the funds offer premature withdrawal. While Kothari's plan allows exit after 3 years, it is five years in case of UTI's retirement benefit plan. On the other hand, ELSS haverepurchase facility after three years.

The UTI retirement benefit plan currently has 20,000 subscriptions and has mobilised over Rs 30 crore.