Providence Life Compass review.
If you already have this investment, or been proposed it, and are looking for better alternatives as an expat, you can contact me using this form, or via email (advice@adamfayed.com).
What are the basic features of this plan?
Premiums start from $300 a month, or 200 Pound Sterling.
You are able to save as an individual, couple (joint life) or entity.
Policy terms range from 5 and 30 years. You can keep saving on this plan until you reach 75. This means that a 55-year-old can invest into a 20-year savings plans.
The following currencies are available for funding the investment:
- USD
- Japanese yen
- Euro
- British Pound
- Australian dollar
The plans are available to most people, with some exceptions, such as US and Mauritius taxpayers and residents, and residents of some European Union countries.
This is due to regulatory restrictions.
What are the fees?
The fees are 2% of the contributions every year. This falls to 0.3% after ten years, in addition to admin and establishment charges.
These fees are negated somewhat by the bonuses, which includes 6% of regular contributors and a loyalty bonus of 5% after ten years.
This bonus is only paid if you maintain the contribution, which means that the fees can easily (indirectly) increase if you stop paying in.
How long is the initial period?
Typically, the initial period is
Are there penalties for withdrawals?
If you cancel the investment early, surrender charges will exist. These charges depend on how long you have been paying into the account, relative to the account term.
For example, in year eight, you will pay few surrender charges compared to withdrawing in year nine on a twenty five year account.
You can do a maximum penalty free surrender, but you will still indirectly face the penalty of not getting the bonus at the end of the account.
What are the positives associated with this plan?
- There are some excellent fund chooses on this plan
- A range of currencies, such as the Japanese Yen, which are difficult to find with every provider.
- This is a tax-efficient way for most expats to invest
- The plans are portable, meaning you can take it with you when you move to your next expat assignment.
- They do accept applications from parts of the world, like Japan and China, where many life assurance firms have left the market.
- There are more expensive plans than this in the market. It certainly isn’t an expensive plan compared to many of the old-fashioned life assurance products out there.
What are the negatives?
- Whilst the plan seems flexible on the surface, any reduction in how much you invest, or premiums unpaid for a considerable period of time, will ensure that you lose your loyalty bonus.
- There are better plans, with the same benefits and fewer of the downsides. All the above mentioned positives, such as tax-efficiency and portability, can be found at lower costs or enhanced investment choices elsewhere..
- If you have a lump sum, you can invest without facing the same kind of big surrender penalties.
- You are dependent on your advisor for the investment choices. This isn’t a negative about Providence, but could be either a positive or a negative depending on who you pick.
What can unhappy clients do?
Those who are already in the plan can either:
- Surrender completely, if they are past the initial stages
- Go for a maximum penalty free surrender
- Try to make fund changes to the account. I have helped clients with this in the past, but many are better off at least considering the full or partial surrender option.
Conclusion
This plan has some positives, but there are other plans on the market with the same benefits, and fewer of the negatives. There is little reason to buy this plan.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters with over 830million answer views on Quora, a widely sold book on Amazon, and a contributor on Forbes.
Hello Adam, I have a providence life compass policy I’m not very happy with. I’m also a bit nervous of having expensive financial advise, so if you could let me know if an initial conversation is possible, and then take it from there, that would be great. thanks, matt
Just seen this after your email. We will carry on the conversation via email.