Old Mutual International Collective Investment Bond

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Review summary

Old Mutual International Collective Investment Bond

Old Mutual International

Old Mutual International (formally known as Royal Skandia) is the international arm of Old Mutual Wealth, one of the leading retail investment business. Old Mutual Wealth oversees £123.5 billion in customer investments (as at 31 December 2016). 

Old Mutual Wealth is part of Old Mutual plc, a FTSE 100 group that provides life assurance, asset management, banking and general insurance. Old Mutual is trusted by more than 19.4 million customers across the world and has a total of £394.9 billion assets under management (as at 31 December 2016).

The Old Mutual Collective Investment Bond (CIB)

The Old Mutual International Collective Investment Bond is an offshore, whole of life assurance policy providing benefits on death of the relevant life assured (or ‘bond’) that accepts single premiums.

Overview

The Collective Investment Bond does not permit the holding of highly personalised assets, which is good for both UK residents and returning UK residents. 

This is largely because when a UK expatriate returns to the UK, it is essential to “endorse” the offshore bond so that they can continue to benefit from tax deferred gains.

If you fail to endorse the offshore bond you could find yourself paying income tax on annual deemed gains of 15% of the original sum invested, regardless of whether the investment bond produced any gains.

By instructing the offshore investment bond provider to endorse the policy if you return to the UK, you restrict the invested assets to those which are permissible down to those within a product such as the Collective Investment Bond.

The CIB bond is issued in the form of a single policy or a number of separate polices known as a “cluster of polices”.

The initial charging term is fixed (based upon the commission and charging structure agreed) at the time of the policy activation and this cannot be varied or waived; therefore, early encashment of the policy results in a “surrender charge” or “early withdrawal charge”.

Old Mutual Collective Investment Bond (CIB) Key Features

Extensive choice of old mutual international and external collective investment funds and unit trusts, eurobonds and currency deposits

SelfSelect offers a choice of more than 1,300 funds from over 100 fund management groups, spanning a broad range of asset classes, sectors and markets. This enables you and you and your adviser the freedom and flexibility to build a bespoke portfolio from a market-wide selection of funds.

WealthSelect offers a choice of around 60 fully-researched funds from some of the UK’s best-known investment houses, together with packaged Old Mutual Global Investors funds.

Minimums - Lump sum minimum of £10,000. You can make additional lump-sum payments into your policy at any time with a minimum of £2,500. However your will pay any initial fund charges on all contributions.

Currency - The Old Mutual International Collective Investment Bond can be set up a policy in 1 of 3 currencies including Pound sterling (GBP), Euro (EUR), United States dollar (USD).

Eligibility - The Old Mutual International Collective Investment Bond is a regular premium, whole of life, life assurance contract issued by Old Mutual International (OMI). It is available to most international investors outside of the main regulated territories such as the UK, the USA and Australia.

Choice of external custodian - The structure of a bond means that you need a custodian to hold, on Old Mutual international’s behalf, the assets that you decide to link to your bond. You can choose your own custodian, which is likely to be the financial institution you currently have a relationship and who are advising you. 

If you don’t have your own custodian, then Old Mutual international will use its own appointed custodian to play this important role for you.

Charges - will depend on the type of plan you take out from Old Mutual International as they offer different charging structures largely linked to the amount of commission or earnings being taken by the third party salesman or adviser. They should, but may not always be the case provide you with a charges schedule, which will detail: 

  • The costs Old Mutual international levy for setting up and managing your bond
  • The administrative costs of the fund managers
  • Fees charged by your financial adviser. 

Early surrender - A full encashment will result in exit penalties being applied in the early years through surrender charges linked to the term of the policy. The amount of this charge reflects the cost of Old Mutual Internationals set up fee, including any payments (such as commission) made by Old Mutual International to your financial adviser. This charge may also apply if you cash in part of your bond and the amount remaining is less than either 25% of your total investment, or £10,000/US$15,000/€15 000 (or another currency equivalent). 

Old Mutual International has a great reputation but, in the pursuit of offering flexibility of charging structure to all types of advisers they have created a product that has the same name but completely different costs.

Those costs are dictated by the adviser and we have seen evidence to suggest that some advisers and adviser companies take the maximum commissions.

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
FAQs
Can an Old Mutual International Collective Investment Bond be placed in trust?

Your financial adviser may suggest that you place your collective Bond in trust. This can ensure your wealth is used as you intend during your lifetime and after you die, and may offer some advantages in the future, for example if you are self-employed or get divorced, or if you have an estranged family.

It can also benefit your family or beneficiaries after your death by helping them to avoid probate issues.

Seek personalised advice from a fiduciary.

What happens to my Collective Investment Bond if I move back to the UK?

In the uK, a collective bond is regarded as a portfolio bond.

If you are planning to move to the UK you will become UK tax resident and taxation of the collective bond will be subject to possible ‘chargeable events’.

These events include: full surrender of the policy, assignments for consideration, and regular withdrawals in excess of the 5% tax deferred allowance.

We strongly recommend you discuss your options with a fiduciary before becoming UK tax resident. 

Can you give me more information about the fees and charges levied on Old Mutual's Collective Investment Bond?

The charges for setting up and maintaining your Collective Bond will depend on the kind of funds you choose, your agreement with your financial adviser, and other variables.

Your financial adviser should provide details and explanations, and the charges should also be listed for you in a charges schedule.

Charges cover:

The costs Old Mutual International isle of Man incurs in setting up and managing your bond

The administrative costs of the fund managers.

Fees charged by your financial adviser.

You may need to pay an early withdrawal charge if you cash in your bond fully.

The amount of this charge reflects the cost to Old Mutual of setting up the bond, including any payments (such as commission) made by Old Mutual International isle of Man to your financial adviser.

This charge may also apply if you cash in part of your bond and the amount remaining is less than either 25% of your total investment, or £10,000/US$15,000/€15 000 (or another currency equivalent).

if you decide to move any of the investments into a different fund or asset, you will usually have to pay a dealing charge. this is currently £15 for each transaction.

Most switches involve two transactions: out of the current fund and into the new one – so the charge would be £30.

You may also need to pay other third-party charges such as bank charges, which will be included in the net amount being switched.

There may also be other charges to pay, such as telegraphic transfer charges.

The Collective Bond and some of the investments which may be held within it have fees which exist partly to meet the advice, promotion and distribution expenses.

These may include initial and on-going payments (such as commission) made by Old Mutual to your financial adviser.

These payments could be in addition to any commission payable by the investment provider to your financial adviser in respect of the investment held.

If you want to know how much you're paying, have paid and how much your financial adviser received and continues to received - just ask for an X-Ray Review™.

Is Old Mutual International's Collective Investment Bond right for me?

Old Mutual say:

The collective bond could be right for you if you want to:

take maximum advantage of offshore tax benefits
invest in a wide range of funds
be able to deal investment funds, quickly and simply
consolidate any existing investments you hold in collective funds or unit trusts have flexible access to your investment
use your investment to generate a regular income
invest at least £25,000/uS$37,500/€37 500 (or currency equivalent)
save for growth over the medium- to long-term
create a trust or nomination for your children or grandchildren’s future.

We say:

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Customer reviews
Quietly satisfied

think I've made the right choice with OMI's collective inv bond. I took careful advice, read all literature and even reviews like this one...and for my circumstances and requirements, it seemed like the perfect fit.

Expert verdict
Expert Assessment of Old Mutual International's Collective Investment Bond

The Old Mutual International Collective Investment Bond is an excellent investment product which stands up very well against the competition, but it is also easily mis-used and is normally available at a much lower cost than you may have been made aware at the point of sale.

When used correctly, the OMI Collective Investment Bond is a market-leading product.

Our advice is to incept such a plan only after receiving advice from a fully regulated 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 Collective Investment Bond from Old Mutual International we 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 forwards.

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