Corporate SIP: For most employees, financial security begins and ends with the Employee Provident Fund (EPF)—a fixed amount deducted from the salary every month, to which the company also contributes. This quietly creates a secure fund for retirement. But beyond EPF, there is another powerful, yet less recognised investment option: the Corporate Systematic Investment Plan (Corporate SIP).
While EPF is a safe haven for guaranteed income, Corporate SIP offers the opportunity to create long-term wealth through mutual funds — and surprisingly, most employees are not aware of it. Many companies are now adopting this option to provide better benefits to their employees. Corporate SIP is now slowly becoming a means that provides job stability as well as financial freedom.
How does Corporate SIP work?
Corporate SIP is a type of investment facility. In this, the company invests in mutual funds by deducting a fixed amount every month from the salary of its employees.
Vaibhav Shah, Head – Products, Business Strategy and International Business, Mirae Asset Investment Managers (India), explains that usually the company enters into an agreement with mutual fund houses under which it offers a select number of schemes to the employees. Once this arrangement is established, the employee can choose the scheme of his choice, decide the amount and duration of the SIP, and allow the company to deduct a fixed amount from his monthly salary.
After this, the employer (company) deducts a fixed amount from the salary every month and sends it to the mutual fund company on behalf of the employee. All investments are made in the name of the employee and the mutual fund units are transferred directly to the employee’s folio or demat account. In this entire process, the company only plays the role of a medium and has no ownership or control over the investments.
Big benefit in low cost for AMC
Corporate SIPs are not only convenient for employees, but can also prove beneficial for asset management companies (AMCs) at many levels. For example…
Stable and long term fund flow: Through corporate SIPs, AMCs receive stable investments at regular intervals, thereby adding stability to their assets under management (AUM).
Large investor base: Through a corporate tie-up, AMCs can access hundreds or thousands of investors simultaneously, thereby expanding their investor base exponentially.
Increase in customer retention: Since the investment is deducted directly from the salary and is for a longer period, investors remain associated with the mutual fund schemes for a longer period of time.
Reduced distribution costs: In corporate SIPs, the company itself becomes the medium, so AMCs do not have to spend much on marketing or distribution to reach individual investors.
Corporate SIP is an easy, disciplined and long term investment method for employees. It can give them many benefits. For example…
Convenient investment process: Investment amount is directly deducted from salary every month, eliminating the need for manual payments and ensuring timely investments.
Disciplined savings habit: Automatic deductions every month inculcate a habit of regular investing, which helps in building a large corpus in the long run.
Start investing at an early age: Corporate SIPs allow employees to start investing early in their careers, thereby gaining greater benefits of compounding.
Helpful for long term goals: This investment helps in meeting long term financial goals like retirement planning, children’s education or buying a home.
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