Birla Sun Life Mutual Fund has recently launched new RSP. You will find advertisement in all leading newspaper and TV channel about this recurring saving plan. They are trying to attract investor by showing old famous story of “The Crow & The Pitcher”.
While checking actual plan detail you will come to know that it is same old Systematic Investment Plan concept coupled with free insurance and renamed as “Recurring Saving Plan”.
Birla Sun Life Recurring Saving Plan Details:-
Under this scheme you can invest systematically in following debt funds:-
Birla Sun Life Medium Term Plan:-
This is an open ended income fund primary investment objective of the Scheme is to generate regular income through investments in debt & money market instruments.
Return in this fund since inception is 8.06%.
Birla Sun Life Monthly Income:-
This is also income fund with primary investment objective to generate regular income and long-term capital growth through fixed income securities with a small exposure to equities.
5 Year Return in this fund is 8.03%
Based on above we can simply assume that return under Recurring Saving Plan will be around 8%.
Investment Amount in RSP:-
- Minimum: Rs. 1000 per month
- Maximum: No upper limit
Investors should note that once RSP is availed, RSP amount cannot be changed through the tenure.
Features of RSP with Life Insurance Cover:-
- Only Individuals (Including NRIs & PIOs – subject to additional criterions)
- Age between 18 years and 46 years, at the time of the first investment
- Investor has to Sign “Good Heath Declaration” and
- In case of joint unit-holders, only the first unit holder would be eligible.
- In cases where investor is not eligible or not complied with the requirements, RSP will be registered without the cover.
Amount of Life Insurance Cover:
- Year 1: 10 times the monthly RSP SIP installment
- Year 2: 50 times the monthly RSP SIP installment
- Year 3 onwards: 100 times the monthly RSP SIP installment
All the above mentioned limits are subject to maximum cover of Rs. 20 lacs per investor across all schemes/plans/folios.
Insurance Starts with the commencement of RSP. However, only accidental deaths will be covered for the first 45 days.
Cessation of Insurance Cover:-
The insurance cover shall cease upon occurrence of any of the following:
- At the end of the tenure. i.e. upon completion of 55 years of age.
- Discontinuation of RSP installments within 3 years from the commencement of the same.
- Redemption / switch-out (fully or partly) of units purchased under RSP before the completion of the RSP tenure.
There shall be no provision for revival of insurance cover, once the insurance cover ceases as stated above.
Exclusions for Insurance Cover
No insurance cover shall be admissible in respect of death of the unit holder or on account of –
- Death due to suicide within first year of commencement of RSP.
- Death within 45 days from the commencement of RSP installments except for death due to accident.
- Death due to pre-existing illness, disease(s) or accident which has occurred prior to commencement of RSP
Tenure of RSP:
55 Years minus current completed age of the investor.
E.g. For an investor at the age of 40 yrs 5 months, the tenure shall be a period of 14 years and 7 months
Entry Load: Nil
Exit Load: 2% if units redeemed within 1 Year; 1% if units redeemed within 1 – 3years; Nil after 3 Years (With Insurance)
Exit Load: As applicable to respective schemes. (Without Insurance)
In the unfortunate event of death of the investor, there is no exit load.
(1) Rate of return in case of RSP is variable compare to recurring deposit.
(2) Free Life cover is available for consistent investors of Birla recurring saving plan.
(3) If you are insured sufficiently then this plan is nothing but pure SIP in debt fund.
(4) The exit load of 1% – 2% is on the higher side.
(5) If you consider the average returns might be in the range of 6-7%, If we consider post tax return of FD it will be same.
Should I Invest or not?
Both fund offered under this scheme is good & providing approximate 8% returns, but looking at current situation investment in debt fund for longer period is not advisable.
Another point is that FD, NCD or RD can provide you secure and safe returns compare to RSP. In case of RSP you have to pay exit load if you want your money back within 3 years.
Only advantage in RSP is free insurance cover so at certain age where you can’t find low cost term plan you can think of this product to fulfill your partial insurance need, but that is also up to tenure of the plan.
In short “Recurring Saving Plan” is nothing but old wine in new bottle or one alternative to recurring deposit. If possible stay away from this plan.