How the establishment charge structure for FPI’s Reserve Bond works
The minimum premium you can invest is £50,000 (or currency equivalent).
For any investment made from £50,000 up to £1,000,000 you either pay: -
8.5% on the very first day you establish the bond.
Or, you pay an annual percentage of your premium, over either 5, 8 or 10 years.
For any premium over £1,000,000 (or currency equivalent), if you choose to pay on day one it is 8%. Otherwise, again, you can choose to pay an annual percentage over 5, 8 or 10 years:
Premium from
|
Day one
|
5 year (p.a.)
|
8 year (p.a.)
|
10 year (p.a)
|
£50,000
|
8.5%
|
1.9%
|
1.25%
|
1%
|
£1,000,000
|
8%
|
1.86%
|
1.21%
|
1%
|
You don’t have to be an actuary to work out that it’s cheaper, relatively speaking, to opt for your establishment charge to be taken in one lump sum on the day you set up your Reserve. However, your financial salesperson might point out how unpalatable it is to lose up to 8.5% of your investment in one go, and encourage you to opt for the 5, 8 or 10-year charging structure. Be aware: they make more money if you do!
FPI deducts your establishment charge from the General Transaction Account (GTA) in your policy currency. The establishment charge is based on the amount of money you invest on day one. So, that means, if you opt for a 5, 8 or 10-year charging period but choose to withdraw some of your money within that period, your annual charges will still be based on the original amount invested, you won’t get a reduction in fees if you reduce the amount you have invested.
It’s very important to keep in mind that there is no way out of paying this establishment charge. Therefore, know that financial penalties will apply if you cash-in your policy during the establishment charge period. This is because FPI pays commission to your 'adviser' on the day you establish the bond, and unless you opt to pay your charges up front too, FPI has to claw back its initial financial outlay from your investment.
FPI is never going to be left out of pocket…the charges will always fall to you to pay.
If you decide to add premiums to your bond, the minimum is £5,000 (or currency equivalent), then you will also be charged an establishment charge on that premium too. But you can choose a different establishment charge period for any additional premiums if you want to, or even pay them up front, which works out cheaper.