Birla Sun Life Recurring Savings Plan – Review

Birla Sun Life Mutual Fund has put big front page advertisement in all leading dailies about its Recurring Savings Plan (RSP). On checking out the details of the RSP, you would realize it’s the same old Systematic Investment Plan (SIP) coupled with free group life insurance with a new name of Recurring Savings Plan (RSP).

Birla Sun Life already has a similar offering with the name of Century SIP which offers free group Life insurance with long term SIP in certain mutual Funds. The only difference between the new RSP and old Century SIP seems to the family of funds you can invest in.

As you can see here, Century SIP had funds mostly from equity side while in RSP you can invest only in two debt funds:

1. Birla Sun Life Medium Term Plan – This is an open ended income fund, which is a debt fund and would invest in debt securities and money market instruments.
2. Birla Sun Life Monthly Income – This too is an open ended income fund which is slightly more risky than the above fund as this can invest a maximum of 15% in equity markets.

Other than the above I could not find any difference between Century SIP and RSP.

Below are the details for Recurring Savings Plan (RSP):

Investment Amount:

• 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.

Eligibility:

• Minimum Age at entry: 18 Years
• Maximum Age at entry: 46 Years

In case of joint unit holders in the scheme, only the first unit holder would be eligible for the insurance cover.

Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) are eligible to invest in Birla Sun Life RSP subject to fulfillment of certain additional criteria.

Tenure of RSP:

Maximum Tenure: 55 Years less the current completed age of the investor

e.g. For an investor at the age of 40 yrs 5 months, tenure of RSP shall be a period of 14 years and 7 months i.e. period remaining for the attainment of 55 yrs of age.

Load Structure:

Entry Load: Nil

Exit Load: 2% if units redeemed within 1 Year; 1% if units redeemed within 1 – 3years; Nil after 3 Years

In the unfortunate event of death of the investor, there is no exit load.

Life Insurance Details:

Amount of Life Insurance Cover:

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

All the above mentioned limits are subject to maximum cover of Rs. 20 lacs per investor across all schemes/plans/folios.

Commencement of Insurance Cover:

The Insurance cover will start from the commencement of Century SIP. 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:

1. At the end of the tenure. i.e., upon completion of 55 years of age.
2. Discontinuation of RSP installments within 3 years from the commencement of the same
3. Redemption / switch-out (fully or partly) of units purchased under RSP before the completion of the RSP tenure

Exclusions for Insurance Cover:

No insurance cover shall be admissible in respect of death of the unit holder (the insured investor) on account of –

1. Death due to suicide within first year of commencement of Century SIP
2. Death within 45 days from the commencement of Century SIP installments except for death due to accident
3. Death due to pre-existing illness, disease(s) or accident which has occurred prior to commencement of Century SIP

Schemes Available for RSP:

There are 2 schemes available for investment:

1. Birla Sun Life Medium Term Plan
2. Birla Sun Life Monthly Income

To invest or not?

Both the funds available for RSP are good funds in their respective categories. But I don’t think it’s a good option to do long term SIP in debt funds. Historically Income funds have given a pre-tax return of 5% – 10% while MIPs have a return in the range of 5% – 12%. You can also get this kind of returns by investing in Bank Fixed Deposits, NCDs or Company Fixed or Recurring Deposit Schemes and with certainty of returns.

Income Funds are meant to be parking money for short term or as a risk free deposit for a goal which is near. In the RSP case you also have to pay exit load if you withdraw your investment before 3 years which is another drawback. The exit load of 1% – 2% is on the higher side if you consider the average returns might be in the range of 7%.

I would suggest staying away from the RSP (its anyway old wine in new bottle) and looking for Century SIP from the same fund house, if you want to avail the benefit of free group life insurance with your mutual fund investment.

You can download Birla Sunlife RSP at their website here.