I am 36 years married with a daughter and residing in Davangere. I have a 3 year old daughter. I want to take a ULIP child plan to finance her higher education. My friend has suggested a Sukanya Samridhi Scheme as a better saving scheme instead of Unit Linked Insurance Plan (ULIP) child plan. Is this true? Please advise
Sukanya Samriddhi Yojana (SSY) is a small deposit scheme for the girl child currently fetching an interest rate of 8.3% for FY 2018-19 and provides Section 80C income tax benefit up to INR 1.5 Lakhs a year. A Sukanya Samriddhi Account can be opened any time after the birth of a girl child till she turns 10, with a minimum deposit of INR 1,000. To meet the requirement of your daughter's higher education expenses, partial withdrawal of 50% of the balance is allowed after she turns 18.
Sukanya Samriddhi Yojana is essentially a debt investment. But, in the case of ULIPs, you have the option to invest in equity, debt or a combination of both. In case you want to keep 100% exposure to debt, Ulips (debt) may offer a slightly lower return as Government of India subsidizes the Sukanya scheme with a slightly higher interest rate. If you are willing to take an exposure to equity after understanding the risks, then you must consider Ulips (equity) instead of Sukanya Samriddhi Yojana.
The Sukanya Samriddhi scheme matures on completion of 21 years from the date of opening or whenever the girl child gets married, whichever is earlier, subject to the child being not below 18 years old. Premature withdrawals are allowed in select situations with strict conditions. Whereas in the case of a ULIP, the policy allows for surrender after 5 years with 100% fund value. So, in terms of liquidity, ULIPs may fare better.