Features and benefits of a Zenith Bond
Keep in mind these features and benefits can be eclipsed by the charges discussed above.
FPI says you can access 10% (cumulative) of the initial premium, penalty free, during the first 5 years. We say, no one should have to pay a penalty for accessing their money…ever!
After 5 years regular withdrawals are allowed, penalty free on a, monthly, quarterly, every four months, every six months or annual basis.
The minimum withdrawals are:
Currency
|
Amount
|
USD
|
750
|
GBP
|
500
|
EUR
|
750
|
HKD
|
6,000
|
However, the value of a Zenith must not fall below the following minimums as a result of any withdrawal:
Currency
|
Amount
|
USD
|
7,500
|
GBP
|
5,000
|
EUR
|
7,500
|
HKD
|
60,000
|
Note: any withdrawals taken do not affect the amount of the establishment charge taken. The establishment charge is based on the initial premium, and any additional premiums, and does not reduce even if you withdraw funds. This money is clawed back by FPI to pay the salespersons’s commission for selling the Zenith, which they pay to the salesperson on the day the policy is established.
On a slightly more positive note, investors can currently switch between funds fee free, but FPI reserves the right to alter this at any time.
Other features include being able to invest in a (limited) choice of currencies, 101% death benefit, and the potential for tax-free investing.
One of the core features of a wrapper, like the Zenith is that once it’s set up, there’s no extra paperwork (other than dealing instructions) required to change investments or add new ones. This is commonly sold as a benefit by advisers.
Another perceived benefit is that it can be easier for your heirs and beneficiaries to manage your estate when you die if all your main investments are under a single bond.
The integral life insurance element is not designed to provide real protection. All FPI promises is that they will pay out 1% more than what you deposited - or the market value of the investments upon death - whichever is highest.
So, if the life insurance element is virtually worthless, why is it added? It’s added for these 2 reasons:
- It brings the investment under the protection of the Isle of Man government. The advantage of this is that if Friends Provident International Ltd were unable to meet their obligations to you, then the government should guarantee 90% of the value of your investment at that time. Whether it really would be able to pay out is another matter.
- It can provide tax advantages in some jurisdictions…however, this benefit is massively over-sold, especially to those in low or no tax jurisdictions like the UAE, where being able to defer tax with a bond is not a benefit needed.