Providence Life Horizon Portfolio Bond review – that will be the topic of today’s article.
In the review I have written below, I try to get to the point and ask if this is the best option for your money as an expat.
If you already have this investment and are looking for better alternatives as an expat, you can contact me using this form, or via email (firstname.lastname@example.org).
Table of Contents
First, who are Providence Life?
Providence Life are a relatively new company in the offshore financial industry, but are growing quite quickly. They are based in Mauritius, with clients all around the world, due to the many links they have with financial advisors.
The Providence Life Horizon bond is now closed for new policyholders, but there are still many clients who have old policies.
What are the basics about the product?
The product has the following features:
- Over 300 funds available, including from Jupiter and Fidelity.
- Account minimums of $60,000, 50,000 British Pounds, 40,000 Euros, 56,000 Swiss Franc and 8million Japanese Yen, with regular top ups from $6,000.
- The ability to regularly withdraw money, including on a recurrent basis.
- 101% life assurance component. So, if your account surrender value is $100,000, your beneficiaries will receive $101,000 back
- You can put the account in your own name, joint names, trustees, companies etc
What are the average fees associated with these accounts?
It depends on the advisory company. Typical fees are over 1% ongoing, plus the following Providence fees:
- 400 GBP per year
- Custody fee of 35 GBP for buying certain assets
- 25 GBP charging for buying investment Funds
Fees in other currencies work out similar to the GBP charges outlined above.
Typically, there are fees associated with getting out of the account in the early years. On a typical charging structure, you can withdraw 80% in year one, but must pay a 8% penalty if you completely withdraw from the account .
That 8% reduces over the course of the account, dropping to 5% in year 4 and 0% from year 9 onwards.
What are the positives associated with this investment bond?
- It is deemed a tax-efficient structure for certain expats, such as Brits, Australians and South Africans, although tax laws always change, and we aren’t tax advisors. This is due to the offshore life assurance structure.
- The account minimums are very reasonable, considering most options in the industry start at $75,000+
- There are some good investment funds on the account
- You can combine the account with a SIPPS or QROPS as a British expat.
- Japanese Yen, Swiss Francs and some currencies which aren’t accepted on many other solutions, are accepted here. However, this isn’t a big positive in the world we are living in today. That is because most people can convert almost for free, using services such as Wise and Revolut, and having USD or Euro denominated accounts, makes sense for many expats.
What are the negatives associated with this investment bond?
The main negatives are:
- The choice of investments is much weaker than some alternatives in the market. Some of the alternative portfolio bonds have better access to hedge funds, private equity, loan notes, structured notes and other non-correlated assets. As bonds and cash pay so little, gaining access to these diversification tools is important.
- Providence seems like a decent company, but there are some firms which are more well established in the industry, with better balance sheets. Whilst safeguards such as segregated accounts should protect investors if they go bust, it is still an important point to note.
- Plenty of portfolio bonds have superior access in the early years to this one. It is normal to have access to 85%-90% of your money in the early years, rather than 80%.
- If combined with a pension (QROPS or SIPPS), the multiple fees from the advisor, trustee and platform will eat into your returns.
- As with all these products, your returns will be based on the advisor, and not platform. This could either be a positive or a negative, depending on who is advising you.
- The ease of business and paperwork requirements is better than the traditional life assurance firms, but superior alternatives exist in this regard.
What are the main issues people are likely to have with this bond?
The main problems come when:
- There is a problem with the advisor, and associated investment choices, rather than Providence themselves.
- Everything is going “ok”, but the lack of diversification of assets on this platform is constraining growth.
Overall, this isn’t a bad product. However, superior options exist in the market for most expats.
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Adam is an internationally recognised author on financial matters, with over 492.3 million answers views on Quora.com and a widely sold book on Amazon