scorecardresearchAre you short on funds? Pause your SIP, don't stop it

Are you short on funds? Pause your SIP, don't stop it

Updated: 18 Apr 2022, 08:56 AM IST
When you face financial difficulties temporarily, you can halt your SIPs for the time being. We decode the process for you here.
Did you know if you skip one or two instalments, your SIP will not become inactive.

Did you know if you skip one or two instalments, your SIP will not become inactive.

A Systematic Investment Plan (SIP), often known as a SIP, is a mutual fund facility that allows participants to invest in a disciplined manner. The SIP function allows an investor to invest a set amount of money in a mutual fund scheme at predetermined periods.

The fixed amount can be as low as Rs. 500, with pre-determined SIP intervals of weekly, monthly, quarterly, semi-annually, or annually. By investing in a SIP, the investor invests in a time-bound manner without having to worry about market fluctuations and stands to benefit in the long run owing to average costs and compounding power.

Financial issues

People all around the country are experiencing difficulties as a result of the economic recession. Market conditions and constraints caused by the Covid 19 epidemic have had an impact on people’s lives. People may find themselves unable to pay their SIP Investments due to actual financial difficulties.

What happens if you miss an instalment?

If you skip one or two instalments, your SIP will not become inactive. For missing one or two instalments, the Asset Management Company (AMC) will not cancel or penalise you. When an investor fails to make SIP payments for three months in a row, the SIP stands to get cancelled. Banks can impose penalties on investors who fail to make auto-debit payments.

SIP pause facility

While SIP discontinuance terminates the mutual fund SIP altogether, the SIP pause provision allows mutual fund houses to temporarily halt SIPs for a set length of time, following which the SIP will automatically resume. As a result, after the designated term has expired, the investor does not need to repeat the full registration process. This allows investors to resume saving for their financial goals after a little hiatus.

You can also cancel your SIP by submitting them a SIP stop request at least 10 - 30 days ahead of time (depending on the AMC). Submit the request via an application form, available online as well as offline.

How to pause SIP Online?

Creating an Investor Account

The investor must create an investor account on the mutual fund house’s website. When an investor logs in, he or she has access to a number of tools for managing their investment account, including the ability to initiate a new transaction, switch investments from one mutual fund to another, and so on.

SIP Transactions

The investor must look through the SIP transactions, which list the details of existing active SIPs, such as the scheme name, investment date, investment frequency, next instalment date, SIP frequency, and so on. On the same page, there is an option to alter or cancel existing SIPs.

Choosing SIP Pause

The SIP can be paused by modifying the SIP details on the portal. The number of instalments for which the SIP is to be paused must be entered if the ‘Pause SIP’ option is selected.

A monthly SIP may be paused for a minimum of one month and a maximum of six months, while a quarterly SIP may be paused for a minimum of one quarter and a maximum of two quarters. The SIP Pause option is available twice during the life of a SIP mandate. When the SIP pause period expires, the SIP will automatically begin.

While SIP discontinuance may result in financial plans being derailed owing to a lack of additional savings, a SIP pause facility will only be perceived as a brief halt in the investing path.

While it is never wise to suspend SIPs in normal circumstances, in the current extraordinary circumstances, it may be a prudent idea to pause SIPs temporarily to cushion their finances. The delay, however, may not be permitted to last for long, and investors must plan to resume their SIP investments after a small gap.

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First Published: 14 Apr 2022, 11:26 AM IST