Facing a financial crunch? Here's how to pause your SIP payments

Step allows mutual fund subscribers to keep their funds invested and likely benefit from market recoveries during the pause period

Mutual fund investors may find systematic investment plan (SIP) commitments challenging when their finances are thin. They must know that most fund houses offer a 'SIP pause' facility that allows investors to halt investments without canceling them entirely.

 

What is an SIP Pause?

 

An SIP pause, or SIP break, typically ranges for a few months to a year, depending on the mutual fund company's policies. During this time, investors are not required to make any further contributions to their SIPs.

 

Benefits of pausing over cancelling

 

Maintain investment growth: Investors retain their funds and likely benefit from potential market recoveries during the pause period. During market downturns, cycles of decline are often followed by recovery. By pausing investments instead of canceling them, investors retain their existing market positions. This means when the market begins to recover, their investments are already positioned to capture the upswing in value.

 

Avoid restarting: Cancelling a SIP means starting a new one later – a step that can disrupt long-term financial goals and negate the benefits of compounding returns.

 

Flexibility: The pause feature allows investors to reassess their financial situation without losing their investment momentum.

 

When should you consider pausing?

 

Financial experts recommend considering a SIP pause in the following situations:

 

During job loss or significant income reduction.

 

Medical emergencies that require substantial funds.

 

Major planned expenses like home renovation or children's education.

 

How to pause SIP

 

Reach out to your fund house: Contact your mutual fund house. Most fund houses provide an online option to pause SIPs through their official website or mobile app, ensuring quick and easy access.

 

Complete the pause request form: In some cases, you may need to fill out a form to initiate the pause. This form is typically available online, but some fund houses may also accept in-person submissions.

 

Specify the pause duration: Choose the time frame for pausing your SIP. The duration generally ranges between 3 to 6 months, depending on the fund house’s policy.

 

Receive confirmation: After your request is processed, the fund house will send you a confirmation. Keep this for your records to avoid any future discrepancies.

 

How to restart paused SIP?

 

If you have specified a pause duration, the SIP automatically resumes after the period ends. No additional documentation is typically required. However if you have not selected an auto resume you can do it online on a fund house website or app.