Friends Provident International Reserve Investment Bond

An independent review by our team of experts.

Review summary

Friends Provident International Reserve Investment Bond

Friends Provident International is part of the Aviva Group, and has more than 35 years’ international experience.  Its heritage dates back over 300 years.

Friends Provident International develops savings, investment and protection solutions for customers in Asia and the UAE.

With offices in Dubai, Hong Kong, Singapore and the Isle of Man, they employ a staff of more than 500 worldwide.

Overview

The Friends Provident International Reserve Investment Bond is available on both a whole of life and capital redemption basis, to individual and corporate customers (including trusts) resident in many countries around the world.

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.

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.

The primary problems with this product mainly stem from these two key features: -

Firstly, we often see this used for investment purposes rather than tax planning purposes. 

Secondly, we often find that the explicit and implicit costs associated with such an investment haven’t been fully disclosed, and in our view are high.

A knock on problem caused by this lack of charging clarity may be a lack of flexibility caused by illiquid/unsuitable assets or exit penalties. 

Tax wrappers can be expensive if they are not justifiable by the individual’s tax circumstances; overseas they are also often opaque because there is often no regulatory requirement to disclose charges. 

FPI Reserve Bond Key Features

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.

Multi-currencies – can be denominated in US dollar, GB pound, Hong Kong dollar, Japanese yen, Swedish krona or Euro.

Eligibility – the FPI Reserve Bond is a whole of life assurance contract, issued by Friends Provident International.

It is available to most international investors outside the main regulated territories such as the UK, USA, and Australia.

Charges – 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.

Regrettably this does not always happen, or perhaps worse still, a cheaper version is illustrated, whilst a higher cost, less accessible version is sold.

FPI charge for setting up and administering the policy and offer the choice between two charging structures:

Establishment charge structure:

Annual policy charge structure:

Early surrender  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.

The pros

  • Popular expat investment plan
  • Preferred choice of expat financial advisers
  • Strong brand of parent company

The cons

  • Risk of hidden commission
  • Potentially inflexible
  • Commonly mis-used
  • Expensive
FAQs
What are Friends Provident International's Reserve Investment Bond fees and charges?

Well, there's a 6 page brochure that covers them in depth - but even then you won't necessarily get to the bottom of them!

Here are just some of the highlights (if you have a Reserve, get an X-Ray Review™ and we'll tell you what your'e paying as we have to work it out on a case by case basis)...

Establishment charge:

Depending on which establishment charge period you choose, FPI will take an establishment charge either: on the start date of the policy or; on the first day of each calendar quarter during the establishment charge period.

The establishment charge is deducted from the General Transaction Account (GTA) in the policy currency and is based on the amount of money you invest, meaning it will not change as the value of your investment does.

Also meaning, there's a risk your IFA will encourage you to invest as much as possible so the establishment charge deducted is even more...

The standard establishment charges are:

Premium from = £50,000

Day one = 8.5%

Premium from = £1,000,000

Day one = 8.0%

Remember that penalties may apply if you cash-in your policy during the establishment charge period...

You will be charged an establishment charge on each additional premium you pay.

Administration charge:

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...

Early cash-in charge:

If you cash-in your policy during an establishment charge period, an early cash-in charge equal to the outstanding establishment charges will apply.

Then there's the annual policy charge, initial charge, administration charge, dealing charge, asset exchange charge AND our favourite the ad hoc charge...

Who is the Reserve Investment Bond suitable for?

According to FPI, 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?

Well, apart from the cost...here's what FPI say are the main risks to be aware of: -

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.

We 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

–  our charges are higher than shown

–  you take out more money than shown.

Some assets carry a higher level of risk than others and may be subject to sudden and large falls in value. This could erode some or all of your capital.

If you or your investment adviser deal excessively and your portfolio value is relatively small, then the value of your Reserve plan may be eroded and the costs may be disproportionately high.

If you invest in an asset denominated in a currency different to the plan currency, the value can go up and down simply because of changes in the currency exchange rate.

Inflation will reduce the spending power of any money you get back in the future.

What is the 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 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.

  • 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.

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. We’ll pay a lump sum equal to 101% of the cash-in value, or, if lower, the cash-in value plus GBP 10,000, on your death.

  • You can set up the plan on up to ten lives, so that it continues after the first death. We’ll pay 101% of the cash-in value, or, if lower, the cash-in value plus GBP 10,000, 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.

Customer reviews
Sickened by the charges

I can't believe you give this 3 stars? I've seen my lump-sum eroded by charge after fee after commission...

I know I was duped by an adviser, I'm clear on that, but he was only part of the problem. How can Friends Provident punt this product? The charges destroy your money.

Thank you AES

My Reserve was just a part of my portfolio - I wanted a low risk home for a lump sum. I chose - upon advice - the Reserve. It was wrapped up in so many layers apparently for tax efficiency and for my retirement - but when I got my entire portfolio reviewed by AES, the worst part of all was finding out how much I had paid and was continuing to pay for what I thought was the safest part of my portfolio.  The X-Ray report I got from AES was shocking - I had to ring them to clarify if what I was reading was what I was understanding. I urge anyone to get a review done - because I BET you won't know the half of what you've lost until you're shown. Luckily, I wasn 't just given the bad news - I was shown how to fix the mess I was in! Overall, thanks to AES and no thanks to Friends Provident.

Expert verdict
Expert Assessment of Friends Provident International's Reserve Investment Bond

We have seen all too often the FPI Reserve Bond being used or sold to investors within QROPS and SIPPs.

This is done in order to generate more commissions for the salesman.

The FPI Reserve Bond should NOT be used within a QROPS or SIPP, because when you start to draw on your pension, then the charges may still apply on the original investment, which effectively means your charges will go up as the capital decreases - and will erode some of the remaining capital at a quicker rate.

Our advice is to incept such a plan only after receiving advice from a fully regulated UK qualified financial adviser, and to opt for a cleanly priced option without any form of establishment charge or lock-in period (zero-exit penalties). 

If you already have a Reserve Offshore Investment Bond from Friends Provident International we strongly recommend you have a free, no obligation X-Ray Review™ conducted to give you the information you need to make a decision on the best way forward.

There's every chance you're paying far too much for an inappropriate product.

“Thank you AES International for helping me and my family with your low cost no-nonsense approach. It is refreshing!”

Kristian Petersson

“With this sort of service you also expect to be paying very high fees, but it’s just not the case. I would definitely recommend AES.”

Jake van den Dries

“In the short time that I’ve been using AES I’ve made nearly ten thousand pounds and couldn’t be happier!”

Jackie Pym

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