Turn your accumulated mutual fund corpus into a guaranteed, tax-efficient monthly paycheck while the remaining capital keeps growing.
A Systematic Withdrawal Plan (SWP) is an automated redemption facility in open-ended mutual funds that redeems a fixed monetary sum (e.g., NPR 30,000 per month) from your accumulated corpus on a chosen date and deposits it directly into your bank account, while leaving the remaining balance invested to generate market returns.
Retirees in Nepal traditionally dump their entire gratuity, provident fund (EPF), and life insurance payouts into bank fixed deposits (FDs). When interest rates crash from 11% to 6% (as happened in 2023-2024), their monthly income collapses by nearly half while inflation drives grocery bills up. SWP solves this by pairing steady cash flow with market-linked asset growth, protecting retirees from both interest rate volatility and inflation.
Build an open-ended mutual fund corpus through 15-20 years of SIP or deposit a lump-sum retirement payout (e.g., NPR 50 Lakh to 1 Crore).
Adopt a conservative 6%-7% annual withdrawal rate. On an NPR 60 Lakh corpus, withdrawing 6% equals NPR 30,000 per month (NPR 3,60,000/year).
Submit an SWP mandate on the capital manager's portal: specify the monthly withdrawal amount, bank account details, and execution date (e.g., 1st of every month).
Each month, the AMC redeems the exact number of units needed to generate NPR 30,000 at prevailing NAV. If the portfolio earns 10%-12% and you withdraw 6%, your corpus continues growing!
| Retirement Milestone | Monthly Cash Received | Cumulative Cash Received | Remaining Corpus Balance |
|---|---|---|---|
| Year 1 | NPR 25,000 / month | NPR 3,00,000 | NPR 51,80,000 (Corpus grew!) |
| Year 5 | NPR 25,000 / month | NPR 15,00,000 | NPR 60,40,000 |
| Year 10 | NPR 25,000 / month | NPR 30,00,000 | NPR 76,80,000 |
| Year 15 | NPR 25,000 / month | NPR 45,00,000 | NPR 1,03,50,000 (Doubled!) |
| Year 20 | NPR 25,000 / month | NPR 60,00,000 Total Cash | NPR 1,46,00,000 Left for Heirs |
In Nepal, government employees receive state-backed pensions, but private-sector professionals, business owners, and gig economy workers have no guaranteed lifelong income after retirement. While the Social Security Fund (SSF) provides an annuity model, open-ended mutual fund SWPs provide total liquidity control: unlike annuities where the principal is forfeited upon death, an SWP preserves the entire underlying corpus for your children and legal heirs.
Kul Prasad was about to place all NPR 70 Lakh into commercial bank fixed deposits at 7% interest (giving NPR 40,800/month before tax). He worried that if bank FD rates dropped to 5.5%, his household expenses would outstrip his interest.
He kept NPR 15 Lakh in bank FDs for short-term liquidity and invested NPR 55 Lakh in an open-ended mutual fund with an SWP mandate of NPR 30,000/month (6.5% annual withdrawal). Over the next 4 years, he received NPR 30,000 like clockwork every single month, while his remaining mutual fund corpus grew to NPR 63 Lakh.
Goal & Dilemma: Generating a dependable monthly income of NPR 25,000 from an accumulated corpus of NPR 40,00,000.
Accumulated balance in open-ended mutual fund.
Recommended 5% to 7% per year to preserve capital forever.
Corpus = NPR 60,00,000. Safe SWR = 6.0% (0.06). Annual Withdrawal = 60,00,000 × 0.06 = NPR 3,60,000. Monthly Pension = 3,60,000 / 12 = NPR 30,00,000 / 100 = NPR 30,000 per month. If the fund earns 10% CAGR, your net growth is 4% (NPR 2.4 Lakh added each year)!
Withdrawing an aggressive rate like 12% to 15% annually during early retirement.
Cap withdrawal rate at 6%-7% to withstand prolonged NEPSE bear markets.
Relying 100% on bank fixed deposits and suffering severe interest rate cuts.
Blend bank FDs for 2 years of immediate cash needs with an SWP mutual fund for long-term growth.
Ignoring Capital Gains Tax holding periods on redeemed units.
Ensure units redeemed have been held for more than 365 days to pay the lower 5% CGT rather than 7.5%.
Yes. You retain 100% control over your funds. You can log into the capital portal to change the monthly amount, pause withdrawals if you receive other income, or withdraw a larger emergency lump sum anytime.
The entire remaining corpus passes seamlessly to your designated nominee (इच्छापत्र / हकवाला) registered in your Demat account, unlike insurance annuities where principal is often lost.
Bank FD interest is taxed at 5% on the entire interest amount every quarter. In SWP, only the net capital gain portion of the redeemed units is taxed at 5% (long-term), making SWP significantly more tax-efficient.
An SIP (Systematic Investment Plan) is for wealth accumulation-investing a fixed amount monthly. An SWP (Systematic Withdrawal Plan) is for wealth distribution-withdrawing a fixed amount monthly into your bank account.
When units are redeemed for your monthly SWP, only the capital gain portion (sale price minus WACC cost price) is subject to 5% long-term CGT. The principal return portion is 100% tax-free.