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.