This article shows the various investment options available to gig workers over and above the Central Government proposals for pension and other retirement benefits.

📚 Table of Contents

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• What is the news about the centre planning a pension scheme for gig workers?
• Is there a better alternative to this new proposed pension scheme for gig workers?
• Can gig workers invest via SIP at all?
• Which Insurance Plans Are a Must for Gig Workers
• Step 1: Complete KYC for investments
• Step 2: Create an emergency fund for sudden expenses
• Step 3: Create a sinking fund for recurring large expenses
• Step 4: Choose mutual funds based on goals
  • Mutual funds for retirement and far-away goals
  • Mutual funds for marriage and short-term goals
  • Mutual funds for children’s education and other medium-term goals
  • Mutual funds for wealth creation and anything not related to a fixed goal
• What are the investment options for gig workers looking for investment beyond government schemes?

What is the news about the centre planning a pension scheme for gig workers?

Gig workers should get a pension once they retire as per a new scheme.

India’s Ministry of Labour is creating a new pension scheme for self-employed workers. This scheme will require companies like Uber and Swiggy to contribute 1-2% of their annual earnings into the system.

The aim is to help one million self-employed workers. Each worker will be given a special identification number, so their pension payments will be tracked no matter which company they work for.

Companies will pay a small amount for each job a self-employed worker completes. The government is talking to state governments about this scheme before it is finalised. This new system connects to the e-Shram website, where more than 30 million workers are registered. That website also includes 12 other social security schemes.

A 2022 report estimated that there were 770,000 self-employed workers in 2020-21. Nearly half of these jobs require medium skills, about 22% need high skills, and about 31% need low skills.

A law passed in 2020 suggested that a group oversee the well-being of freelancers. Companies’ contributions will be limited to 5% of what they pay freelancers. The government also wants to give freelancers access to health insurance, like that of other workers, to make their finances more secure.

Is there a better alternative to this new proposed pension scheme for gig workers?

There are a few gaps in the proposed pension scheme that we need to address:

• pension schemes like the NPS are for the far future
• pensions are not linked to inflation and are taxable at slab
• there is no plan to address goals like upskilling, marriage, house purchase and children’s schooling and education

A mutual fund portfolio, created with proper guidance and most importantly without laughable pie-in-the-sky projections like “make 10 crores in 30 years” can plug in the gaps in the financial planning of gig workers.

Here are the steps to be followed to get started with a mutual fund journey whether you are a gig worker or simply anyone looking to get a handle on better financial planning.

Warning: Trading is not free money and is a sure-shot way of losing money for most people even if they devote a lot of time and energy to it. That time can be spent in the current profession and upskilling towards higher paying work.

Given that thousands of mutual funds are available, it is easier to create a cluttered portfolio with 10s of funds than to keep it simple and focused with a few funds only.

Can gig workers invest via SIP at all?

A common question here is: If there is no fixed income from salary how can someone invest via SIP?

A SIP investment mandate, which regularly deducts money from your bank account to invest in a mutual fund, can be problematic in cases where income varies from month to month.

In such cases, holding a balance of say 3-6 times the monthly SIP amount in the linked bank account before starting investment is a workable solution. Any income, after paying EMI, monthly expenses, sinking and emergency fund contributions can go into this account as and when money is available.

SIP can be paused in the investment app or website if the balance in this account drops below 1-2 months SIP amount and resumed later.

It is important to increase the monthly investment, by editing the SIP amount, as and when incomes increase.

Which Insurance Plans Are a Must for Gig Workers

Apart from the mandatory vehicle insurance that will be there in case of workers like delivery personnel, the following two plans are a must:

• health insurance: while the government wants to extend PMJAY benefits to this section, private or public stand-alone policies can also be an option for a family floater plan. Super-top plans can supplement the base-level plan on a case-by-case basis
• term insurance: this is the only life insurance product that should be purchased. Term insurance is important here since workers might have dependents in their hometowns and villages as well as spouses and children who are dependent on this source of income. Term plans can be purchased online via apps or insurance company sites and are affordable starting at few hundreds per month. There are options to pay the premiums of these plans monthly, but a better option is to save the annual premium in a sinking fund (described below) for better coverage and lower risk of lapsing.

As usual, investments via insurance plans, either as ULIP or endowment plans are to be avoided due to high costs and opaque product structure.

Step 1: Complete KYC for investments

Completing app-based online KYC, via Aadhaar, is now possible on all smartphones. This is the first step to getting started. A bank account is also needed for investments, and this will be the same account that companies like Ola, Uber etc. pay into.

The next steps are as simple as downloading one of the many apps like MFCentral, Groww, INDMoney, Zerodha and Kuvera to get started.

Step 2: Create an emergency fund for sudden expenses

This step is extremely important since a lot of things can go wrong that need sudden access to money since gig worker incomes are not stable:

• Bike breaking down or other related expenses
• Illness due to which you cannot work for a few days
• Unexpected trips to hometown or villages due to family or personal emergencies

A simple savings account with sweep FDs keeps the money immediately available for emergencies and pays out interest more than savings accounts.

Liquid and arbitrage mutual funds can be good options for keeping an emergency fund. We have discussed emergency funds in detail here: Emergency fund: what, why, how much to save and where?

Step 3: Create a sinking fund for recurring large expenses

There are always expenses that are known in advance but cannot usually be paid from the monthly income. Some good examples are insurance premiums for bikes, road tax, health and life insurance premiums, saving money for trips to hometown during festivals etc.

Monthly sinking fund instalment = Total annual spending / 12

A simple SIP in an arbitrage/money market mutual fund or a recurring deposit in a bank account for even ₹500/month can create this corpus from which these amounts can be paid.

Step 4: Choose mutual funds based on goals

Before getting started on investments, paying off high-interest loans, especially from money lenders is important. Creating the emergency and sinking funds will prevent the need to take more such loans in the future.

We will keep the mutual fund investing plan for gig workers very simple based on the time horizon. We will introduce funds with short lock-ins to avoid the tendency to withdraw for short-term needs unrelated to the goal.

Mutual funds for retirement and far-away goals

Normally, we would suggest a simple Nifty 50 index fund for retirement and other very long-term goals. But in this case for a gig worker, we want to build a corpus without prematurely breaking it.

Retirement mutual funds, which have a lock-in of 5 years, would be the right option to get started. These funds are just like any other mutual fund but unless you are already nearing retirement, keep the money locked in for 5 years. The more extreme example for such locked-in investments is NPS with a lock-in up to age 60.

SIP in such funds can be started for ₹500/month and can build the habit of long-term investing. ELSS funds can also be an alternative if a lower lock-in, of three years, is desirable.

Mutual funds for marriage and short-term goals

Equity savings and conservative hybrid funds, that offer just a bit more in returns vs. pure debt options like FDs and debt mutual funds, can be suitable for goals due in a few years.

These funds can fall somewhat during stress periods but not as much as pure equity funds.

Mutual funds for children’s education and other medium-term goals

Children’s school and college education costs can be saved from a mix of

• monthly income for school fees
• monthly investments for college admission and other related expenses

Both the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY, for girl children only) can be good options here: How Sukanya Samridhhi Yojana (SSY) and Public Provident Fund (PPF) can together take your daughter from college to PhD?

Apart from PPF and SSY, there are two more options:

• children’s solution funds that have a 5-year lock-in (again to build the investing habit)
• balanced hybrid funds that can be a good option for a one-fund portfolio

Related:
How much can you save for a college education goal with a 10000/month SIP

We have covered children’s education planning in detail in this post: Goal-based investing: How to save for children’s future

Mutual funds for wealth creation and anything not related to a fixed goal

Pure equity mutual funds, specifically passive index funds tracking large-cap indices like the Nifty 50, are simple one-stop solutions for wealth creation goals.

Another option to get started without experiencing a lot of volatility vs. pure equity funds is aggressive hybrid or multi-asset funds.

What are the investment options for gig workers looking for investment beyond government schemes?

Here is a summary table for each purpose and the possible investment that can be chosen for it.

Purpose	Investment Option 1	Investment Option 2
Emergency Fund	Arbitrage Fund	Recurring Deposit
Sinking fund	Money Market Fund	Arbitrage Fund
Retirement	Retirement Solution Fund	Equity Index Fund
Medium-term	Conservative Hybrid Fund	Equity Savings Fund
Children’s Education	Children’s Solution Fund	Balanced Hybrid Fund
Wealth Creation	Equity Index Fund	Hybrid Funds

Though this article is specifically written for gig-workers, the solutions described are generic and can be applied to anyone irrespective of their type of career.