FRIENDS PROVIDENT INTERNATIONAL RESERVE BOND REVIEW
Who are Friends Provident International?
Friends Provident is a well-known financial brand for expats, offering savings, investment and protection plans across the United Arab Emirates and Asia. The company has 500 staff across offices in Dubai, Hong Kong, Singapore and the Isle of Man.
What is their International Reserve Investment Bond?
It’s an international lump-sum investment product that offers potential for capital growth over the medium to long term (five years +). It has two plan options — whole of life and capital redemption. The whole of life version includes an element of life cover, whereas the capital redemption version provides a guaranteed maturity value.
It can provide you with regular withdrawals, although please note this will reduce your capital value. If the capital redemption version has been chosen, withdrawals will also reduce the guaranteed maturity value.
These structures, used in the correct way, can be used to meet complex tax planning needs of clients. The Friends Provident Reserve Investment Bond provides the investor with the ability to defer and plan taxation. Being able to hold assets in a tax-efficient environment and pay no tax on the capital increases or income distributions until a time specified by you and your financial adviser, can be an invaluable planning tool.
What are the investment options within the product?
It then has two investment options — collective investments and personalised assets.
It gives you access to the world’s investment markets through unit trusts, investment trusts and open-ended investment companies. The personalised assets version could also include international equities, fixed interest securities, structured notes and deposits.
Access to more than 150 funds from some of the world’s leading fund managers offering a reasonable choice of investments, although the underlying annual management fees can be expensive — and certainly higher than if accessing the fund manager directly.
The funds are risk rated and cover all of the major markets and asset classes.
Performance statistics are updated monthly, and fund prices updated daily on the fund fact sheets via FPI’s Fund Centre in an easy to use format.
What currency can I invest in?
The policy can be denominated in US dollar, GB pound, Hong Kong dollar, Japanese yen, Swedish krona or Euro.
Who is the Reserve Investment Bond suitable for?
Friends Provident International Reserve is an international investment plan suitable for customers with a lump sum to invest for a minimum of five years, who seek capital growth or regular withdrawals, or a combination of both.
Reserve is available to those who are aged 18 and over. If the plan has lives assured, the minimum age is 2 years old and at least one life assured must be 80 or younger.
What are the main risks with the Reserve Investment Bond?
What you get back in the future depends on how well the investments perform. The value of the plan can go up and down. You could get back less than you’ve paid in.
FPI only guarantee the value if the capital redemption version is chosen and the plan is cashed in at the end of the 99-year fixed term.
When you cash in your plan, you may get back less than your illustration shows. This could happen for several reasons, for example, if:
- Investment returns are lower than shown
- FPI charges are higher than shown
- You take out more money than shown.
What are the Charges applicable to me?
The Friends Provident Reserve Investment Bond has two key charging structures which are entirely dependent upon what is agreed and disclosed between you and your adviser. if you’ve been recommended the FPI Reserve Bond, your financial adviser should provide you with an illustration and personal charging structure. This will detail all charges that are taken from your investment.
FPI charge for setting up and administering the policy and offer the choice between two charging structures:
Establishment Charge Structure:
If the establishment charge structure is chosen, the establishment charge will apply. This can be 1% per annum for 10 years which means that on a £500,000 investment the charge will be £50,000 even if the fund decreases. There will be surrender costs of 10% reducing by 1% per year if the policy is encashed before the end of the 10 year establishment period.
Annual Policy Charge Structure:
If the annual policy charge structure is chosen, then the initial charge or an annual policy charge will apply.
If you cash in your policy during an initial charge period, an exit penalty will apply. The amount of this charge will be equal to the outstanding initial charges. This charge will not apply if the initial charge is paid upfront.
FPI will take a fixed amount on the first day of each calendar quarter for the lifetime of the policy.
It depends on the currency you save in — but in GBP it’s £99.50 per quarter, every quarter for the lifetime of your policy…
What happens if I want to access my money?
If you cash-in your policy during an initial charge period, an early cash-in charge will apply. The amount of this charge will be equal to the outstanding initial charges. This charge does not apply if the upfront initial charge period is chosen. Details on how it is treated is available in the relevant brochure.
However, if you select the upfront initial charge period then there is no lock in — no surrender penalty.
What happens to my Reserve if I die?
This depends on whether a whole of life plan or a capital redemption plan is selected.
Whole of life plan — If you set the plan up on your own life, the plan will end if you die. FPI will pay a lump sum equal to 101% of the cash-in value.
You can set up the plan on up to ten lives, so that it continues after the first death. FPI pay 101% of the cash-in value, or, if lower, the cash-in value on the death of the last survivor only and the plan will then end.
The death benefit is not a guaranteed amount because we cannot guarantee the value of your plan. It will depend on the cash-in value at the time of death.
Capital redemption plan — As there are no lives assured, the plan continues until it is fully cashed in, or until it matures at the end of the 99-year term. Following your death the plan may be assigned to the beneficiaries or cashed in by your personal representatives, or by the trustees if the plan is written in trust. If cashed in, the cash-in value of the plan will be paid.
If you want to learn more abut the Friends Provident International Reserve Bond click here, or you can download our free guide on how to get your investments working.
For more insights, further advice or guidance, you can get in touch HERE
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