The Securities and Exchange Board of India (SEBI) has stated that Mutual Funds may continue offering retirement and children’s schemes under its March 20 master circular.
The clarification follows concerns raised after the February 26 circular on categorisation and rationalisation of schemes, which had indicated discontinuation of solution-oriented funds.
The latest update allows these schemes to remain, while placing conditions on the introduction of new life cycle funds.
SEBI has linked the continuation of existing schemes with restrictions on certain life cycle fund tenures.
Asset management companies (AMCs) that continue a children’s fund will not be permitted to launch a 20-year life cycle fund. Similarly, those retaining a retirement fund cannot introduce a 30-year variant.
If both retirement and children’s schemes are retained, AMCs will be limited to offering life cycle funds with maturities of 5, 10, 15 and 25 years. In contrast, AMCs choosing to discontinue both categories may launch all 6 tenures, including 20-year and 30-year funds.
Where discontinuation is opted, fresh subscriptions to such schemes must be stopped and existing schemes merged into other funds with board approval.
The Association of Mutual Funds in India (AMFI) had raised concerns regarding the proposed changes. In March 2026, AMFI indicated that it would submit its representation to SEBI on the matter.
SEBI Chairperson Tuhin Kanta Pandey had stated that the regulator was examining feedback received from the industry before finalising the framework.
Life cycle funds have been defined as open-ended schemes with fixed maturity periods of 5, 10, 15, 20, 25 and 30 years. These funds will invest across equity, debt, gold and silver exchange-traded funds, InvITs and exchange-traded commodity derivatives.
The structure requires a gradual reduction in equity exposure as maturity approaches. For instance, in a 30-year fund, equity allocation may range between 65% and 95% in the initial years, declining in stages to 5%-20% in the final year.
Debt allocation increases correspondingly, while exposure to other assets remains capped at 10%.
Debt investments are restricted to instruments rated AA and above, aligned with the scheme’s maturity profile. Commodity derivative exposure is limited to gold and silver.
For schemes with less than 10 years remaining, equity arbitrage exposure of up to 50% is allowed within prescribed limits.
SEBI has introduced exit loads of 3% within 1 year, 2% within 2 years, and 1% within 3 years. Schemes are required to follow multi-asset benchmarks and include the maturity year in their names.
Read More: SEBI Proposes Mutual Fund Gift Cards: Prepaid Investment Instruments Under Review!
The revised framework permits continuity of existing schemes while setting conditions for the rollout of life cycle funds and their structure.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Mutual Fund Investments are subject to market risks, read all the related documents carefully before investing.
Published on: Mar 26, 2026, 11:09 AM IST
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