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LIC MF and UTI MF have discontinue their MF schemes offering insurance coverage with effect from July 1, 2022.
In its addendum, UTI MF said, “The Trustees of UTI Mutual Fund have approved the temporary discontinuation of fresh subscription under UTI Unit Linked Insurance Plan till further notice w.e.f. July 1, 2022.”
Currently, the MF industry has two solution-oriented schemes which offer insurance coverage – LIC MF Unit Linked Insurance and UTI Unit Linked Insurance Plan. Both the schemes offer mortality benefits i.e. nominees get sum assured on death of unit holders.
While LIC MF Unit Linked Insurance has AUM of Rs.400 crore, UTI Unit Linked Insurance managed AUM of Rs.5,100 crore as on May 2022.
Also, there were couple of more schemes which offered insurance benefits free of cost to investors. But there will no impact on them in terms of restriction on inflows.
Let us look at some FAQs on discontinued schemes:
Will these schemes reopen for fresh subscription in future?
The current discontinuation is temporary. Both the fund houses have sought clarity from SEBI. According to one school of thought, since both the schemes were approved by the government of India, there is a possibility that these two schemes may get specific exemption.
What would happen to SIPs?
Discontinuation simply means that the fund houses cannot issue fresh units. Hence, they cannot honour SIP or STP transactions from July 1, 2022 onwards.
What about redemptions?
Redemptions and switching will be allowed subject to exit load if any.
What about premium part?
UTI MF said, “Unitholder can pay renewal contributions in advance in multiples of the instalment amount, to the extent of chosen target amount as on June 30, 2022 i.e., to the extent of chosen target amount less the contributions already made under 10/ 15 years plans.” Simply put, unitholders can pay renewal premium in advance.
Can the existing investor increase his/her target amount to the extent of Rs.15 lakhs? (Specific to UTI MF)
UTI MF said, “Existing investors may continue with their contributions to the extent of target amount which already chosen by the investor as on June 30, 2022 but cannot increase or decrease their existing target amount.”
Will there be any change to TER of the scheme?
There will be no change to TER of both the schemes.
