Reinventing systematic withdrawal plans

With UTI Family, you can’t really invest in your parents’ name, but you can ensure that the money goes straight to them


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Taking care of our dependents is usually one of the big goals in our financial plan. But using a mutual fund for this can get a bit tedious, as according to the rules laid down by the capital market regulator, Securities and Exchange Board of India (Sebi), you cannot gift a mutual fund unit to anyone.

Keeping this in mind, UTI Asset Management Co. Ltd has launched a new facility called UTI Family (Father and Mother I Love You).

What is it?

This facility is meant for those who wish to support their parents financially. One way many of us can support our parents is by giving them a sum every month out of our own salary. But what if we want to make some investments in our parents’ name and ensure that they get some sort of regular income?

This method also ensures that the investments grow in the interim. With UTI Family, you can’t really invest in your parents’ name, but you can ensure that the money goes straight to them.

Usually, this is not possible as Sebi rules don’t allow third-party cheques in mutual fund investing. In simple words, when you invest your money in—or redeem from—mutual funds, the proceeds should flow from or into a bank account where your name is present: as the primary, second or third account holder.

The idea behind UTI Family scheme is that even if your parents don’t have a joint bank account with you, they should still be able to get the money from the mutual funds directly into their own separate bank account.

For this, UTI Asset Management Company (AMC) has earmarked two schemes; UTI MIS Advantage Plan (UMAP) and UTI Wealth Builder Fund (UWBF).

UMAP is a hybrid fund that invests up to 25% in equities and the rest in debt instruments. UWBF is an equity-oriented fund that aims to invest at least 65% in equities and the rest in debt and gold exchange-traded funds. The fund house chose these two schemes as, being hybrid in nature, their volatility is expected to be lesser than that of a typical equity fund.

And how will the fund ensure that your parents get regular income? This facility enrols you for a systematic withdrawal plan (SWP) facility. That’s the opposite of a systematic investment plan (SIP) where you invest a fixed sum of money every month. In an SWP, you withdraw a fixed sum of money every month (minimum amount is Rs1,000), and an equivalent number of units will get extinguished. For the record, you can have an on-going SIP in your fund at the same time that the Family SWP facility is on. However, do note that in certain circumstances SWPs can eat into the initial capital. So, while regular income may continue, the corpus may go down.

Should you take it?

If you must, then of the two, opt for UMAP as it is a well-managed hybrid scheme and resembles a typical debt-oriented hybrid scheme that aims to give regular returns and steady existence, though by law, fund house cannot guarantee any income.

UWBF has been volatile. However, we suggest that if this facility appeals to you, wait for some time. It’s only a matter of time till other fund houses launch the same facility in some of their schemes.

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