The Association of International Life Offices (AILO) have issued new business figures for the offshore market recently. They make impressive reading.
They show the total single premiums worldwide totalled almost £9.3bn, and the regular premium figures totalled over £368,000. So, using the single premium + ten times the annual premium basis, this means the grand total was almost £13bn. This is a 20% increase over the previous year.
For the single premium, the category which attracted most business was the “pooled- personalised bond” which is often called an open architecture bond.
At over £6bn, this constitutes around 2/3rds of all the business written. The dominance of this product type is, no doubt, a reflection of the attraction it has in the UK market. Looking at the ABI figures, single premium business in the UK was about £5bn. and open architecture products, in turn, dominate the UK market - being around 80% of business written.
The rise of open architecture is, in part, a result of the demise of with-profits (WP). Advisers in the UK have developed their own asset allocation solutions, which may involve using managed/multi-managed funds or asset allocation perhaps with aids such as risk profiler tools or delegating to specialist investment managers.
And the growth of Sipps has also helped to develop an appetite for wide choice, although most Sipp “supermarkets” will only have a small percentage of funds compared to the open architecture offerings. We have details of over 10,000 collectives on our website, most of which will be acceptable assets to an offshore bond, while Sipps, through fund supermarkets, often have a choice of just 1-2,000 investments.
Part of the non-UK story is seen in the AILO figures with £1bn invested in “highly-personalised bonds”. These are the bonds which offer choice beyond collective investments, such as direct equity, but these are taxed very heavily when held by someone in the UK.
For the simpler investment bonds (including WP), the AILO figures show the worldwide figures at nearly £2bn while the UK accounts for about half of that, so what does this all mean?
- Sales of bonds into the UK dominate offshore
- Open architecture bonds – with a vast choice of investments dominates the UK market
- The amount being invested in regular premium is still quite low at present, even though there are opportunities to use such contracts alongside pensions in retirement planning.
There is no doubt the UK shines as the major market for offshore product. It is the providers’ and commentators’ duty to channel the light to advisers to show how they can also sit in the sunlight.
Steve Whalley is head of marketing at Aegon Scottish Equitable.
The views expressed are those of the author and not those of the company he represents.IFAonline
Went into administration April 2018
Threat of legal action looms over Woodford IM
View from the front row
Retirement Planner Forum 2019