Product Review : Birla Sunlife Recurring Savings Plan

Birla Sun life Mutual Fund has launched a recurring savings/systematic investment plan which also offers an optional free life insurance cover to the investors, the amount of which is determined by their regular installment amount.

About the scheme:

An investment of a minimum of Rs 1000/- per month for a minimum period of 6 months with no upper limit for the amount or period.

The amount can be invested in either of the two schemes:

  1. Birla Sun Life Medium Term Plan (An Open ended Income Scheme)
  2. Birla Sun Life Monthly Income (An Open ended Income Scheme. Monthly Income is not assured and is subject to availability of distributable surplus)

All individuals including NRIs and PIOs between the ages 18-46 years are eligible to invest.

The default maturity of the plan would be 55 years and the period of investment- 55 years minus current age.

Requirement/conditions for the Insurance cover:

“Good health” declaration by the investor.

The amount of the insurance cover would be

  • Year 1 : 10 times the monthly  installment
  • Year 2 : 50 times the monthly installment
  • Year 3 onwards : 100 times the monthly installment

The maximum limit for the insurance cover is 20 lakhs and this cover would stop if the plan is discontinued within three years of investment.

All the charges for the insurance cover are borne by the Birla AMC, there is no entry load and an exit load of 2 % up to 1 year and 1% for 1-3 years. Given the tax efficiency of Mutual Fund Investments and the additional free insurance cover, this could be a better option than recurring deposits for investors who are not adequately insured and are desirous of investing a regular sum over a long term in non equity avenues. The drawback of the scheme is than the amount can only be invested in two of the schemes and not in the diversified equity schemes where the investor could have benefited from the rupee averaging concept similar to an equity SIP. Among the two investment options, the monthly income plan is preferable over the medium term plan which is a pure income scheme, and hence not ideal for long term capital appreciation.

DISCLAIMER: The views/opinions expressed in this review are solely those of the author and do not constitute any investment recommendation.


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