Mutual funds for senior citizens: income, nomination and paperwork

This page does not pick schemes for anyone, and there is no single right mix for every senior investor. What it does is explain the mechanics that matter most after retirement: how a regular income can be drawn, and the records that keep an investment working smoothly for you and, later, for your family.

Drawing a regular income: the SWP

A Systematic Withdrawal Plan (SWP) pays you a fixed amount on a fixed date, usually monthly, by redeeming just enough units each time. You choose the amount and the date, and the rest stays invested. It is a mechanism, not a pension: the amount is not guaranteed by anyone, each withdrawal is a redemption at that day’s NAV, and if the withdrawals are larger than what the investment earns, the capital runs down. A fall in markets early on, while you are also withdrawing, makes that faster. How an SWP works covers this in full, and the SWP calculator lets you try an amount and a period on figures you enter yourself.

An SWP is not the same as an IDCW payout. With IDCW the fund house decides whether to pay, how much and when; with an SWP you decide.

Nomination: the single most useful form

A nomination tells the fund house who receives your units if you die. With a nominee registered, the transmission to your family is a documented process; without one, they may need succession papers first, which takes far longer. It is worth checking that every folio has a nominee, that the nominee is still the person you intend, and that the shares are what you want. A marriage, a death in the family or a new grandchild are the usual moments to look again.

The mode of holding matters too. A folio held jointly as “anyone or survivor” lets either holder transact, and the survivor continues after a death; a folio held singly depends entirely on the nomination.

KYC: keeping your record current

Your KYC record is held centrally by a KYC registration agency, and every fund house relies on it. A record can be marked as needing attention, for example when the mobile number or email address on it could not be verified, and that can hold up a new investment or a change until it is fixed. Two things are easier done now than in a hurry later:

• Make sure the mobile number and email on the record are your own and still in use. Transaction alerts and one-time codes go there.
• If your address, bank or name has changed, update the KYC and the folio, so that payments and statements reach you.

Statements: what arrives and what to check

A consolidated account statement (CAS) lists every mutual fund holding under your PAN, across fund houses, in one document. Read it when it arrives, and check that every SWP payment and transaction is one you expected. For your tax return, the capital gains statement from the registrar sets out the gains on what you redeemed, SWP withdrawals included.

If you hold several folios with the same fund house, consolidating them means fewer statements and fewer records to keep current.

One folder for the family

Much of the difficulty families face comes from not knowing what exists. A single folder, paper or digital, that lists each fund house and folio number, the bank account linked to it, the nominees, and where the latest CAS is kept, saves a great deal of searching later. Tell one trusted person where it is.

Tax, in concept

For a resident, tax is not usually deducted when units are redeemed; gains, including those inside SWP withdrawals, are settled through your own return. IDCW payouts are different and can have tax deducted at source; a resident senior citizen who meets the conditions can give the fund house a Form 15H declaration. How each of these applies to you depends on your income and on rules that change, so confirm your position with a qualified tax adviser. TDS on mutual funds explains the mechanism.

A word on fraud

Older investors are often the target of calls asking for OTPs or offering returns that sound too good. No genuine distributor or fund house asks for an OTP or a password. Is this really H2? sets out what we will never ask for and where to report a fraud.

Help with the paperwork

Nominations, KYC updates, bank changes, setting up an SWP and finding old folios are the routine work of a distributor. H2 Investment is a mutual fund distributor, not an adviser, and if you would like that paperwork done with you, send an enquiry.