With India’s elderly population projected to reach 21 per cent by 2050, there is growing urgency for a robust retirement savings framework. UN data from 2023 shows that while 43 per cent of Indians were under 25, only 11 per cent were above 60, hinting at the demographic shift ahead. To address this challenge, the Association of Mutual Funds in India (AMFI) has proposed the Mutual Fund–Voluntary Retirement Account (MF-VRA), modelled on the American 401(k) plan. The product, unveiled in a whitepaper prepared with Crisil Intelligence, would be a voluntary, employer-linked retirement account managed by mutual funds.
Key features
The proposed scheme is designed to offer voluntary participation, employer sponsorship, mutual fund management, tax incentives, portability and flexibility. AMFI said the MF-VRA aligns with SEBI’s long-term policy goals and could help deepen financial inclusion by tapping India’s rapidly growing mutual fund sector, which reached Rs 75 lakh crore in assets by July 2025. According to the whitepaper, quoted by Economic Times, the initiative would expand pension coverage, support economic growth and reduce the government’s burden on social security. By directing household savings into financial markets, it would also improve efficiency and stability in the mutual fund industry. For the scheme to succeed, stakeholders must collaborate to define product structure, introduce tax deductions, establish portability, create retirement lifecycle funds, and design simple onboarding and goal-tracking tools.
Role of regulators and stakeholders
AMFI has sought support from SEBI, the Central Board of Direct Taxes (CBDT), and the Ministries of Finance and Labour. SEBI would be tasked with setting product structures and reporting standards, CBDT with framing tax benefits, while the ministries would coordinate with EPFO and NPS to ensure portability. “By working together and fulfilling their respective roles, stakeholders can ensure the success of the MF-VRA scheme, promoting a culture of retirement saving and providing individuals with a secure and sustainable financial future,” the whitepaper noted.
Drawing lessons from the US 401(k)
The MF-VRA draws inspiration from the American 401(k) model, an employer-sponsored plan that allows pre-tax contributions with possible employer matching. Funds are typically invested in mutual funds, index funds, or target-date funds. Withdrawals before age 59½ incur penalties, unless separated from service or disabled. For 2025, the maximum employee contribution is $23,500, with a $7,500 catch-up for those 50+. Total employee and employer contributions cannot exceed $70,000. Portability is allowed to a new employer plan or IRA.
AMFI leadership backs the idea
AMFI chairman Navneet Munot said India’s mutual fund industry, with its transparent and regulated framework, offers the “Sahi choice” for building long-term retirement wealth. “In doing so, these investments safeguard personal independence while channelling savings into productive capital, which fuels India’s growth,” he said, as quoted by ET. AMFI chief executive Venkat Nageswar Chalasani added that retirement planning is not only a personal imperative but also a national one. “When individuals invest with a long-term horizon, especially through mutual funds, their savings contribute to capital formation and economic development. These investments help fund infrastructure, businesses and innovation, driving growth and stability,” he said.
