Policyholders are protected by the Isle of Man Compensation of Policyholders protection scheme. However, this does not necessarily protect individual investors from poorly suited products and bad financial advice!
RL360 provide offshore bonds that are not subject to any on-going tax in the Isle of Man.
The RL360 Oracle plan has a minimum investment of $32,000 (equivalent in up to 7 currencies) with the full amount (on large premiums a little more than 100%) invested.
A selection of 170 funds is available with no cash holding. Fund units are cancelled as charges accumulate and if the policy value falls below the minimum, RL360 may surrender the policy and reclaim everything owed.
Fund switch charges are not levied and withdrawals are possible as long as they do not reduce the policy below the surrender value minimum.
This does not make the policy particularly flexible, however, as the surrender value is still ‘locked in’ – the policy holder is still liable to the outstanding establishment charge.
This is 7.5% of the initial premium. The establishment charge is applied over 5 years and pays the adviser commission among other sales costs.
Although plan holders do not need to invest in mirror funds. RL360 still charges 1.2% extra to ‘manage’ your funds. The cost of the underlying fund still stands (normally 1.5-3.5%).
As an example, assuming actively managed funds don’t underperform (which is highly unlikely) anyone seeking to recoup their investment at end of year 3 could incur 6.4% in charges in that year alone!
Since RL360 was subject to a management buy-out and private equity cash injection it has arguably had more ambitious international distribution policies which include the payment of very high levels of adviser commission.
This may bring with it a number of risks which potential clients should consider prior to entering a policy.
RL360 Oracle Offshore Bond Key Features
Life assurance or capital redemption - Oracle can be issued as either a life assurance or capital redemption policy. Your adviser can explain when it may be appropriate to use one over the other, but in general, the capital redemption basis is more likely to suit trustee and corporate investors. This is because the policy does not come to an end on the death of a named individual (the “life assured”), as there are no lives assured and the policy simply continues until its maturity in 99 years’ time.
Limited Range of Funds – In our opinion Oracle provides access to a limited range of funds, although the big named fund managers are included in the list.
Multi-Currency - Oracle is available in the following currencies:
- Pound sterling (GBP)
- Euro (EUR)
- Swiss franc (CHF)
- US dollar (USD)
- Australian dollar (AUD)
- Hong Kong dollar (HKD)
- Japanese yen (JPY)
Charges cover the set-up and on-going administration of the policy, any commission paid to your adviser and RL360’s profit! There are two main components of the Oracle charging structure as listed below:
The standard establishment fee is 7.50% of the premium paid. The fee is collected at a rate of 0.375% quarterly in arrears over the first 5 years.
Each additional premium will be subject to its own establishment fee. The fee will be collected in the same format as described above.
There is a standard on-going percentage administration fee of 1.20% per year, taken as 0.30% of the current policy value or the premium paid, if higher, deducted quarterly in arrears. Each additional premium is subject to its own percentage administration fee.
The percentage administration fee is payable for the lifetime of the policy.
If you choose to appoint an investment adviser there may be an advice fee deducted from your policy. The amount of the fee, and when it should commence, should be agreed between you and your investment adviser. The amount deducted, if any, will be paid directly to your investment adviser.
The funds that are held within your policy will be subject to an annual management charge. The charge will vary per fund chosen and seem to range between 0.5% and 2%.
If you wish to fully surrender your policy you can do so at any time, simply by returning your Policy Schedule, including any endorsements, to RL360’s head office head office along with a completed Surrender Form.
A policy surrendered in full within the first 5 years will be subject to a surrender fee. The fee will be equal to the outstanding establishment fee.
A surrender fee equal to the outstanding establishment fee will also apply to any additional premium if it has been less than 5 years since the additional premium has been paid.
We would recommend that you discuss any withdrawals or surrenders with a financial adviser so that you can decide on the most effective method.