Retirement and Children's Funds

SEBI classifies retirement and children's funds as solution-oriented schemes. Both carry a lock-in of five years, or until retirement or the child reaching majority, whichever comes earlier.

The lock-in is the product

Mechanically these are equity, debt or hybrid funds. What they add is enforced discipline: you cannot redeem during a market panic, which removes the single most damaging behaviour in long-horizon investing.

The trade-off

• You lose flexibility — the money is genuinely inaccessible, including in emergencies.
• If the fund underperforms, you cannot switch away until the lock-in ends.
• An ordinary flexi cap or hybrid fund can achieve the same allocation with full liquidity.

How to decide

If you have historically sold during downturns, the lock-in is genuinely valuable. If you can hold through volatility on your own, a comparable open-ended fund gives the same exposure without surrendering access. Note these funds have no special tax status — normal equity or debt rules apply based on portfolio composition.