Turn your lump-sum retirement money into an inflation-beating, tax-efficient monthly pension using open-ended mutual funds.
A Systematic Withdrawal Plan (SWP - योजनाबद्ध निकासी योजना) is the reverse of an SIP. Instead of depositing money monthly, you invest a lump sum into an open-ended mutual fund scheme and instruct the fund manager to redeem a fixed rupee amount on a specific date each month and transfer the cash directly into your bank account.
Retirees in Nepal traditionally lock their lump-sum gratuity or retirement bonus into bank Fixed Deposits (FDs). But bank FD interest has three major flaws: (1) When interest rates collapse from 11% to 5.5%, your monthly living income gets halved; (2) The 5% TDS is charged on every single rupee of interest; and (3) Your original principal never grows, meaning inflation quietly erodes your purchasing power over 15 years. A mutual fund SWP solves all three problems by combining monthly cash liquidity with compound capital growth.
Deploy your retirement corpus across top-performing open-ended mutual funds registered with SEBON.
Submit an SWP application through the fund manager's online portal specifying the monthly payout date (e.g. 5th of every month) and amount.
Each month, the fund manager redeems the exact number of units needed to generate your payout at that day's Net Asset Value (NAV).
The proceeds are transferred directly into your commercial bank savings account, providing a seamless "monthly pension salary"!
| Financial Parameter | Traditional Bank Fixed Deposit (FD) | Open-Ended Mutual Fund SWP | Why SWP Wins for Retirees |
|---|---|---|---|
| Monthly Cash Flow Stability | Fluctuates wildly when interest rates reset (5%-12%) | Fixed predictable rupee amount chosen by you | Budgeting peace of mind |
| Inflation Protection of Corpus | ZERO: Principal remains completely flat and loses purchasing power | YES: Remaining units compound with NEPSE growth | Protects purchasing power over 20+ years |
| Tax Efficiency (TDS) | 5% flat tax on 100% of all interest earned | 5% CGT applies ONLY to the profit portion of redeemed units | Significantly lower effective tax paid |
| Liquidity & Flexibility | Breaking FD early triggers interest penalties | Can pause, increase, decrease, or stop SWP anytime | Zero lock-in friction after standard holding |
| Estate / Inheritance Value | Depleted by inflation when passed to heirs | Appreciated unit value creates lasting generational wealth | Higher terminal legacy corpus |
In Nepal, SEBON Mutual Fund Regulations 2067 govern open-ended schemes. Unlike close-ended schemes which have a fixed 7-to-10 year maturity and trade on NEPSE TMS, open-ended schemes operate continuously with direct transactions between investor and fund manager at daily published NAV. Capital Gains Tax on mutual fund redemptions for individual Nepali residents is a final withholding of 5% (for units held over 365 days) under Section 92 of the Income Tax Act. When units are redeemed under an SWP, the return of your original cost basis is completely tax-free; tax is calculated exclusively on the gain fraction.
Hari Narayan received NPR 60 Lakh from his pension gratuity. He needs NPR 35,000 per month (NPR 4.2 Lakh/year) to cover all household bills. He considered putting it all in a bank FD at 7%, which would yield NPR 35,000 before tax, but worried that his principal would never grow.
Hari Narayan invests the NPR 60 Lakh into an open-ended mutual fund and sets up an automated SWP of NPR 35,000 per month (a 7.0% annual withdrawal rate). Over the next 10 years, assuming the mutual fund achieves an average 11% annualized total return: Hari Narayan receives his NPR 35,000 every single month like clockwork (collecting NPR 42,00,000 in total pension cash over 10 years). Meanwhile, because the fund earned 11% while he withdrew 7%, his remaining invested corpus GREW from NPR 60 Lakh to over NPR 88 Lakh! His pension paid his bills AND his wealth increased!
Goal & Dilemma: Managing an NPR 50,00,000 retirement gratuity to fund a 25-year comfortable living in Pokhara.
Number of mutual fund units sold this month to fund the payout
Fixed rupee payout instructed in your SWP mandate
Prevailing net asset value per unit published by the fund manager
Target monthly pension: NPR 35,000. Current fund NAV: NPR 14.20 per unit. Units redeemed this month = 35,000 ÷ 14.20 = 2,464.79 units. The remaining units stay invested and continue earning dividends and market appreciation!
Setting an unrealistically high SWP withdrawal rate (e.g. 12%-15% per year).
Limit your annual SWP withdrawal rate to 6%-7% of your initial corpus.
Panicking and canceling your SWP when NEPSE experiences a temporary drop.
Let the automated SWP continue running; unit redemptions naturally balance out over market cycles.
Investing in close-ended mutual funds expecting SWP functionality.
SWP is available ONLY in open-ended mutual funds (खुलामुखी म्युचुअल फन्ड).
Leading fund managers like NIBL Ace Capital (NIBL Sahabhagita Fund), Siddhartha Capital (Siddhartha Systematic Investment Scheme), and Sanima Capital provide online SWP mandate registration.
The fund manager automatically calculates the Capital Gains Tax (5% for holdings > 365 days) on the gain portion and deducts it at source, crediting the net amount to your bank.
Yes. You can submit an online amendment request to increase or decrease your monthly withdrawal amount at any time without penalties.
A conservative withdrawal rate of 4.0% to 5.0% of your initial corpus per year is widely considered sustainable over a 25-30 year retirement horizon in Nepal.
Yes. By registering your spouse as the primary nominee, the mutual fund units transfer directly to their Demat account under CDSC regulations, allowing uninterrupted continuation of monthly SWP payouts.