This month, our product crunchers reveal mixed views in their assessment of the merits of Elite, FPI's single-premium offshore life assurance policy
Elite, from Friends Provident International (FPI), is a single-premium offshore life assurance policy designed specifically for high net worth investors. It has an attractive range of features that allow access to international investment opportunities, making it ideal for planning for the future. The policy has no fixed term, but is designed for medium to long-term investment.
Investors can choose from a range of high-quality funds that provide access to some of the world's leading investment specialists, with consistent records of sound investment performance. There are over 180 specially selected funds available, from more than 40 different fund houses with different specialist expertise. These have been specially selected to help investors realise the potential of the world's fastest-growing economies.
This choice enables investors to construct a balanced investment portfolio according to their own personal risk profile. Investments can be switched in and out of funds at any time to take advantage of growth opportunities wherever they arise, to invest in more secure stocks whenever necessary and to switch funds as frequently as required. This facility is currently free of charge.
Charges are minimal. There is no set-up charge, although the funds bear an annual administration charge of 1.2%, which is reflected in the fund prices. Two especially attractive features of Elite are that single pricing is offered for every fund invested in, and the enhanced allocation of units.
Premiums are accepted in sterling, US dollars, Hong Kong dollars or euros, and there is a minimum premium of £50,000/US$100,000/HK$750,000 or EUR70,000. In addition, premiums over £250,000 (or currency equivalent) invested into Elite receive enhanced allocations of 101% as standard, significantly increasing the investment potential for capital. For premiums below £100,000, 99% is allocated to units at bid price.
Access to capital
Elite allows investors access to capital by taking regular withdrawals. They can opt for a regular income, which can be taken quarterly, half-yearly or annually, of up to 10% per annum of the initial premium (on a cumulative basis) on a penalty-free basis. Alternatively, they can opt to take a one-off partial surrender. Within the first five years, surrenders and withdrawals of more than 10% per annum (cumulative) will be subject to a discontinuance charge equal to 7.5% of the bid value of the plan in year one, reducing by 1.5% per annum to nil after year five.
Elite has a built-in death benefit, which will pay 101% of the surrender value of the plan, and is also available as a joint-life second-death plan.
An added advantage with Elite is that it is offered by FPI in a secure base in the Isle of Man - one of the world's premier financial centres, with a Standard & Poor's rating of AAA - which allows virtually tax-free accumulation of savings (some dividends may be received net of withholding tax deducted at source in the country of origin, but once inside the plan, they can accumulate free of tax).
- A choice of over 180 specially selected funds from more than 40 different fund houses
- Free switching facility offers flexibility to adapt a portfolio to changing opportunities at no cost, on a bid-to-bid basis
- Simple charging structure with no set-up charge; all funds bear an administration charge of 1.2% per annum
- Regular withdrawals and partial surrenders available as long as a minimum set plan value is maintained - currently £5,000, US$10,000, EUR7,000 or HK$75,000
- Up to 101% allocation for larger investments, offering increased investment potential for capital
- Investment flexibility: investors can select funds or appoint an investment adviser to act on their behalf
- Additional premiums can be invested at any time
- Funds are purchased at the bid price - no bid/offer spread is applied when accessing funds using Elite
The Product Crunchers
James Sutton, financial consultant at the Fry Group in Hong Kong
Approximately 180 funds available, covering various asset classes and regions. This is limited in some areas, such as hedge funds, but good in other areas, such as Far East and Pacific. The fund range would probably be too limited for larger investors. 7/10
Reasonably flexible with 10% annual withdrawals allowed on a cumulative basis. Over and above this, penalties apply on withdrawals and surrenders made within the first five years. Limited to holding 10 funds at any time, which again may be a limitation for bigger investors. No-cost fund switching allowed at any time. 8/10
The local office is very helpful, and easily accessible via the telephone or in person. Policy documents are sent out promptly, and switches dealt on a T+1 basis. 9/10
FPI have a wealth of experience within the team, and support is available from HK or Isle of Man. When we have required help, the technical team have been extremely knowledgeable, particularly with trusts and taxation. 9/10
Value for money
Very good value, with no entry fee on cases of £100K and above, and only 1% entry below this. Then there is simply a 1.2% annual fee. Again, well suited to cases under approx £150K, as over and above this amount there are more cost-effective plans available. 9/10
Martin Bamford, joint managing director, Informed Choice
Investors can access a decent range of funds in each major geographical sector. It is possible to access sterling, US dollar and euro-denominated funds. The range is good, but is not extensive. 6/10
The ability to switch funds free of charge is an attractive feature, and is essential when an adviser is recommending a regular rebalancing exercise. The minimum investment and additional investment levels are set at a reasonable level. Being able to segment the policy makes the potential for future tax planning easier. Clients can invest in sterling, US dollars, euros or Hong Kong dollars, offering a high degree of flexibility. 8/10
Friends Provident typically offers good service, although their recent strategic review in the UK market might discourage some advisers from recommending this product until the future for the company is a bit clearer. 6/10
Friends Provident usually offer good technical support, although this might change depending on staff cuts from their recent strategic review. 8/10
Value for money
The single-pricing structure for the funds means more money is invested on day one to benefit from potential growth. To get full allocation of 100%, you need to invest at least £100,000, but investments of over £250,000 attract a 101% allocation rate. Charges for surrender within the first five years should not pose a barrier to investors, who should be investing their money for at least five years in the first place. 8/10
Andrew Merricks, head of investments at Skerritt Consultants
Offshore bonds nowadays should be able to offer virtually unlimited choice of funds and should certainly not restrict it to as few as 100 or so. Also, it is actually very difficult to find the funds they offer, and even more difficult to find what the charges are on these funds.
There is the standard free switching between funds (although they reserve the right to charge in the future), but the discontinuance charge is something that I avoid at all costs. In any investment, I think it is vital that you can change your mind without penalty. Also, their minimum top-up level of £20,000 seems high. 2/10
Their website was not very forthcoming when I tried to find out more about the product. 4/10
Not having the need to try their technical support, it is difficult to score them, but I am assuming they are available and helpful, as is the case with most insurance company helpdesks. This is an area in which insurance companies continue to be good. 6/10
Value for money
I really can't see why I would use this product in preference to the numerous others that are available. It is a competitive market in which you need something extra to rise above the alternatives. 2/10
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