For Expats we don’t recommend insurance based long term savings plans
The reason is that traditional Life company savings products are very expensive with onerous terms and conditions that reward the salesman, life company and fund managers rather than the expat investor. Our preferred savings plan has low charges, provides access to a range of low cost global indices and in certain cases a guarantee on maturity irrespective of investment performance.
We ran some numbers.
Our client wanted to invest $500 per month for 25 years. We obtained a quote from a traditional and highly recommended life company that projected a return of $358,961 at a growth rate of 7% p.a. Our preferred plan produced $516,479. That’s a huge 44% difference. Same premium, same term and same growth rate assumption. This is just one example but the difference is in the life company’s high charges.
In addition, the traditional life office return depends on a Terminal Bonus that is designed to compensate for the salesman’s commission at the beginning. This is known as front end loading. The bonuses are not paid unless the plan matures meaning that traditional life office do not allow access to all of the investors funds until end of the term.
One life office even charges for stopping premiums as much as 8% p.a. of the agreed premiums at outset. This does not reflect people’s changing circumstances which is particularly relevant for expats.
The traditional life companies levy mirror fund management charges meaning you pay the life company as well as the fund manager even though the life company does no more than provide access to a fund range.
These are just a few of the reasons why we do not recommend insurance based long term savings.
What should you do if you have a Life Company savings plan?
The life companies generally make it difficult to withdraw funds during the policy term. It is simply not within their interests to let you have your own funds. The paperwork is made unnecessarily complex and slow.
We show investors how they can unlock their own money for re-investment in funds that are unavailable within the savings plan. The investor can then transfer to a broader range of investments with lower charges and greater flexibility.
For details of how you can unlock your savings plan please contact us.