ICICI Prudential Freedom SIP Plan – Features and Hidden Factors
ICICI Prudential Freedom SIP Plan Details
ICICI Prudential Mutual Funds is offering a unique feature called freedom SIP which it says would help you in achieving investor financial goals. One can invest as low as Rs 500 per month and opt for this SIP Freedom feature from specified ICICI Pru Mutual Funds. What is ICICI Pru Freedom SIP and how does it work exactly? What are the features of ICICI Pru Feedom SIP Plan? Are there any hidden factors an investor should know before investing in such SIP plans? This article is based on the request on to suggest a topic to do a Freedom SIP Plan review.
Also Read: Top Index Mutual Funds to invest in 2020
What is ICICI Pru Freedom SIP and How does it work?
Freedom SIP is a unique feature offered by ICICI Pru Mutual Funds which would allow investors to achieve their financial goals. This feature would allow you to invest regularly through Systematic Investment Plan (SIP), however, benefit from regular cash flows with a Systematic Withdrawal Plan (SWP) after the completion of SIP period indicating it as financial freedom.
What is ICICI Pru Freedom SIP work exactly?
Here is how it would work:
1) Invest through SIP: You need to register for monthly SIP into an open ended equity, hybrid or fund of fund schemes specifically indicated for a specific period of either 8 years, 10 years, 12 years or 15 years. One should note that minimum SIP amount would depend on the individual scheme referred here.
2) Switch to targeted mutual fund schemes: Once you have completed your SIP tenure, the MF units accumulated through the Freedom SIP plan would be transferred to the selected target mutual fund scheme. The Switch of such mutual fund schemes would take place in 15 working days after completion of SIP tenure.
3) Withdraws from Systematic Withdrawal Plan option: Once the switch is done, Systematic Withdrawal Plan (SWP) is to be activated for an amount which is as per the pre-defined matrix indicated below or as indicated by an investor in the initial registration form.
Let me explain with an example. If the initial SIP registered for tenure of 12 years is Rs 10,000 per month, then SWP will be Rs 20,000 (2.0 X Rs. 10,000). The SWP amount would be less than or equal to respective slabs indicated above. In case the investor does not fill SWP amount at the time of registration, the default option shall as per the grid is applicable.
Features of Freedom SIP of ICICI Prudential Mutual Funds
Here are the ICICI Prudential Mutual Fund SIP Plan details.
1) Investors can invest in Freedom SIP from 13 mutual fund schemes categorized from equity, hybrid and fund of fund schemes.
2) Freedom SIP is offered only for monthly SIPs.
3) The tenure of Freedom SIP investment should be either for 8 years, 10 years, 12 years or 15 years.
4) Investors need to switch to any of the 4 targeted schemes post SIP tenure and from there the SWP based on T&Cs would be activated.
5) Freedom SIP is available only for the growth plan in mutual funds.
6) SWP date would be the same as SIP date.
7) This plan can be cancelled any time. Once it is cancelled, even underlying SWP plan also gets cancelled.
8) If investor defaults for 5 continuous SIPs, this plan + SWP plan would be ceased.
9) If an investor has not selected the SIP tenure in this plan, the default of 12 years would be considered.
10) If an investor has not selected targeted scheme, the default switch would be to ICICI Balanced Advantage Funds.
Which are the ICICI Pru Mutual Fund Schemes eligible for the Freedom SIP Plan?
Below are the eligible schemes where you can create Freedom SIPs.
1) ICICI Prudential Bluechip Fund
2) ICICI Prudential Multicap Fund
3) ICICI Prudential Large & Midcap Fund
4) ICICI Prudential India Opportunities Fund
5) ICICI Prudential Smallcap Fund
6) ICICI Prudential Midcap Fund
7) ICICI Prudential Dividend Yield Equity Fund
8) ICICI Prudential Focused Equity Fund
9) ICICI Prudential Value Discovery Fund
10) ICICI Prudential Asset Allocator Fund (FOF)
11) ICICI Prudential Balanced Advantage Fund
12) ICICI Prudential Equity & Debt Fund
13) ICICI Prudential Multi – Asset Fund
Which are the Target Schemes to be switched post SIP tenure?
Below are the target schemes where you can select for investment once your SIPs tenure is completed.
1) ICICI Prudential Asset Allocator Fund (FOF)
2) ICICI Prudential Balanced Advantage Fund
3) ICICI Prudential Equity & Debt Fund
4) ICICI Prudential Multi – Asset Fund
What are the hidden factors in ICICI Pru Freedom SIP?
Here are some of the hidden factors in this plan.
1) This plan is offered only for 13 specified mutual funds in ICICI Prudential.
2) The SWP is low in this plan. If an investor takes only 8 years plan, the SWP is same as SIP amount. E.g. if you take this plan for Rs 10,000 per month SIP for 8 years, you are eligible to withdraw a maximum of Rs 10,000 per month after 8 years.
3) There are only 4 targeted schemes which provide less scope to choose SWPs after your completion of SIP tenure.
4) Once registered in Freedom SIP, investors cannot change SIP tenure, SIP scheme, SIP amount and SWP/Targeted scheme or SWP amount. Means investors have zero flexibility to change any details after registration.
5) Investors cannot register minor for this plan.
6) In case of any reason, investors fail to invest in 5 consecutive SIPs, this Freedom SIP plan + underlying SWP plan would cancel.
7) If an investor misses to select the tenure, the default option is taken as 12 years which is longer time.
8) If an investor misses to select the target scheme, the default option is taken as ICICI Prudential Balanced Advantage Fund.
Also Read: Best Balanced Advantage Funds for 2020
Should you opt for ICICI Pru Freedom SIP Plan?
One needs to understand what this scheme does. Investors need to invest for 8-15 years in specific funds through SIP, switch to hybrid/balanced funds after SIP tenure and withdraw money through SWP from specific funds. Can’t investors do this on their own? If they opt on their own, Investors would have more flexibility to change the SIP amount, tenure and even the withdrawal plan itself (if such targeted plans are not performing well). You would even have option to withdraw whatever amount you want. You would loose this flexibility if you want for Freedom SIP.
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ICICI Prudential Freedom SIP Plan – Features and Hidden Factors