Friends Provident International is a name that may be familiar to you if you are an expat with an interest in investment and long-term financial planning.
Friends Provident, headquartered on the Isle of Man but having deep roots in the UK stretching back more than a century, is a prominent financial services provider that offers expat savings plans and insurance options.
A variety of services and products, including financial planning for private investors, are also offered by the company to expats in Asia, Europe, and the Middle East.
In this article, we will take a look at Friends Provident International Summit, and discuss the question of whether or not it is right for you.
Keep in mind that this material is for educational purposes only. If you are considering making an investment with Friends Provident International or are unsure whether or not their products meet your needs and goals, you should talk with a qualified financial advisor or consultant.
We will examine the pros and cons of investing in Friends Provident International, but ultimately we do not advocate doing so due to reasons we discuss below.
If you want to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).
This includes if you have a policy and aren’t happy.
Who are Friends Provident International?
Friends Provident has been in operation for nearly 40 years and is a company that benefits from a solid financial foundation. As a division of International Financial Group Ltd (IFGL), it claims to serve over 216,000 clients worldwide and manage $23 billion in assets.
The company is proud of its local presence in the countries where it works. The company has developed solutions that are flexible in response to changing market conditions and can save clients both time and money.
Actuarial consultancy AKG, which focuses on grading businesses in the financial services industry, has given Friends Provident a B+ grade and a 5-star service grade. This is the best grade given to any offshore life operation.
The firm claims that its clients also prefer its status being able to conduct business from the Isle of Man, a major international financial center with a stellar reputation for investment safety and a bevy of international awards.
The Isle of Man has just been designated as a “white list” jurisdiction by the Organization for Economic Co-operation and Development (OECD) for its exemplary record of international tax information exchange.
The Isle of Man also received an Aa3 sovereign rating from Moody’s and won the International Financial Centre Award at the 2021 International Advisor Product and Service Awards for the third time in four years.
The International Monetary Fund recognizes the island as a leading offshore finance center of regulation, where 9,000 people are employed.
What products do Friends Provident International offer?
Friends Provident International offers a variety of retirement and life insurance programs, as well as other investment vehicles.
The company specializes in unit linked insurance products, which combine retirement planning with insurance against the risks of death, critical illness, and disability.
Due to the complexity of these items, thorough research is required before you purchase.
One can have insurance and stock market or bond market exposure through a unit linked insurance plan, which is a versatile investment vehicle.
Policyholders are obligated to make timely premium payments. The insurance premiums are invested in the market through stocks, bonds, or a mix of the two in addition to covering the cost of actual coverage.
They can take many shapes, but they all have one thing in common: they are kept in some kind of investment vehicle. Examples of such vehicles are pension schemes and individual savings accounts.
Most overseas retirement plans take the form of unit-linked insurance contracts. Unit-linked policies and unit-linked funds, which are similar to but distinct from unit-linked policies, can be found within these vehicles.
Unit-linked funds are separate investment funds that operate independently of the group’s umbrella or parent organization, as opposed to unit-linked policies, which often use the group’s existent asset managers.
Some of the numerous potential applications of a unit linked insurance plan include life insurance, asset accumulation, retirement income creation, and education funding for one’s children.
Typically, these funds are set up by investors for the benefit of their offspring. The death benefit is paid by the insurer to the beneficiaries of the insurance after the death of the policyholder.
The investment possibilities available through a unit-linked insurance plan are structured similarly to mutual funds in that money is pooled.
Therefore, the assets of a unit linked insurance plan are managed with the plan’s ultimate goals in mind. Shares can be purchased in a variety of market-linked plans and funds, or in a single investment strategy.
In most cases, policyholders of unit-linked insurance must make a sizable initial payment. After that, they’ll have to make a premium payment annually, semiannually, or monthly.
We have already considered the benefits and drawbacks of expat savings plans a number of times before. Premiums are always fairly spread out throughout numerous investments, even if they vary from product to product.
When policyholders make regular premium payments, their initial investment grows faster than it would if they had to wait for returns to compound. Moreover, many plans allow participants the option of “topping up,” or adding big lump sums to an existing balance.
Such plans may also contain protection insurance policies, such as critical illness, death in service, and income protection, with payouts changing based on the length of time premiums have been paid.
Your critical illness insurance policy will pay a lump sum payment in the event that you or a family member are diagnosed with a “critical disease,” such as cancer or a heart attack.
Your beneficiaries will get a death benefit from your company’s “death in service” insurance if you pass away on the job or before you retire.
Income protection insurance pays a monthly benefit to an employee who is continuously employed but unable to work due to sickness or accident.
What are the advantages of these plans?
Unit-linked insurance products combine elements of both investment and life insurance. Both term and endowment policies are available, so you can choose to have your coverage last for a specific period of time (typically 10 years) or until your death, whichever you prefer.
If you have never heard of the term “unit linked,” it just means that your insurance guarantees you’ll get one unit no matter what happens.
When compared to a savings account or a systematic investment plan (SIP) in a mutual fund, this strategy offers a better return and a better hedge against inflation.
The benefits of unit-linked policies are in addition to those of standard life insurance and include:
Profits from taxes. The proceeds from unit-linked insurance plans are often considered taxable investment income. Insurance premiums may qualify as a tax write-off in several countries.
Your financial advisor and a tax attorney should help you calculate the tax liability associated with your offshore savings strategy.
Usually, you will not have to give up your unit-linked insurance plan or annuity just because you want to diversify your portfolio with other investments like equities or mutual funds.
Many of these plan providers allow you to make as many fund switches as you like during the life of the policy. A top-up will allow you to make the most of your existing funds.
After the lock-in period ends, you are free to make partial withdrawals of your assets without penalty.
When transitioning from one fund manager’s portfolio to another, there is no early redemption fee like there is with mutual funds if you sell before a specific period has passed.
Enhanced growth potential compared to more conventional savings vehicles. The growth potential of unit-linked plans is proportional to the long-term performance of the underlying funds.
Higher returns are possible in both equity and bond funds. Retirement, buying a home, and giving your kids a better education are all things that can be aided by planning ahead in this way.
Protections and incentives for responsible financial conduct. Unit-linked insurance products provide the financial security and peace of mind that comes with a traditional life insurance policy.
Seventy to eighty percent of an insurer’s investment portfolio is typically allocated to equity-based funds, with the remaining twenty to thirty percent held in fixed income instruments like bonds.
However, with these programs, you have control over how your payments are invested.
Regular, disciplined saving is emphasized as a foundation of good long-term financial planning with unit linked insurance products. Keeping up with your premium payments can provide your family a better chance at future financial stability.
What are the disadvantages of these plans?
Unit-linked insurance and expat savings plans like the Friends Provident International Summit are examples of long-term passive investment techniques.
One main drawback of unit linked insurance contracts is the need to pay taxes on any profits made. Your returns may be significantly impacted by this, depending on your tax situation and the amount of interest and income generated by your assets.
There are a number of factors, including age (premiums tend to grow as we get older) and preexisting health conditions or family history, that might affect the cost of this type of coverage, which can range from 1% to 3% of your total investment amount annually.
The stock market, like any other investment, carries the possibility of experiencing a decline in value.
Thus, while many long-term investors do well with unit linked insurance plans, others do poorly due to their selection of underperforming funds.
Unit linked insurance plans are not considered liquid assets since you cannot access the funds before they mature without incurring penalties or forfeiting a portion of the interest. this period of time is typically at least five years but is sometimes considerably longer.
Unit linked insurance plans are substantial investments because many policies on the market today have early withdrawal terms that reduce your freedom to manage your money as you see fit.
Keep in mind that many expat savings plans and unit linked insurance plans often have steep early withdrawal penalties in addition to their regular expenses.
Expenditures for marketing and management are often factored into early estimates of program costs. End of plan bonuses reimburse the leftover expense to the customer.
Consider the simplest case, in which an individual invests in a savings plan with a term length of ten years. When the premium is paid over a period of 120 months, the yearly cost of the plans is typically between 1% and 2%.
It stands to reason. Since end-of-contract bonuses are rarely refunded to clients, the true cost if the client stops paying midway through the contract is closer to 4% annually.
Depending on the details and limitations of your case, you may be able to select a more cost-effective option or negotiate a more affordable price structure for your account.
It is excellent news if you can commit to investing in a retirement savings plan for its duration. You are one of the lucky few who gets to reap the rewards of these plans.
However, just 3-4% of the population actually buys a policy and keeps it for the typical 20-30 years. Ten- or fifteen-year plans, despite this, can still produce satisfactory returns.
High enrollment costs discourage regular payments from many customers. Customers often cease making payments because they lose hope of receiving the significant payout that is promised at the end of their contract.
In the course of making contributions, many people realize they no longer require the money and want to take it out early.
Another issue with unit-linked insurance plans is that their pricing structure is inconsistent between providers.
Unless you know for sure that you can consistently make the needed monthly installments, you should avoid such typical programs.
Modern service providers provide more customizable options and more enticing methods to minimize costs.
Most unit-linked insurance plans either lose money, break even, or gain no more than 4% annually once members stop making contributions.
If the markets are performing at 8%-9% and the appropriate funds are chosen, the client’s account could increase by 4% owing to non-contribution even if the annual cost of the account is greater than 4%.
These pension plans often include a “indemnity period” of 18 months. You will lose your full initial investment if you stop making payments within the first 18 months.
You will not necessarily lose everything if you stopped making payments after 18 months, but your profits would certainly take a hit.
Therefore, it might be obvious right from the bat that these policies don’t always provide the slack necessary to meet the requirements of an expat’s lifestyle.
This is especially the case if your savings rate is low relative to your income. A non-citizen making $10,000 per month in taxable income should have no problem forking over $1,000 in monthly fees. It could be difficult for a non-citizen to pay the fee if his or her monthly salary is only $3,000.
The disadvantages of continuing to make payments after the promotional period finishes are similar to those of moving to a different plan. Even if your premium is reduced, your chance of experiencing major gains or losses is unaffected.
This is because any additional costs are calculated off of the initial fee. Even if your monthly premium drops from $2,000 to $300, the percentage you pay is based on the higher amount.
But if you have been investing for five, 10, or fifteen years, you might want to keep continuing.
What is Friends Provident International Summit?
Summit is a unit-linked plan aimed at investors with a large sum of money and a longer time horizon (at least five years).
Summit provides a loyalty incentive and early withdrawal of up to 90% of your investment without a penalty.
Those who are 18 or older (at least one life assured must be 79 or under at plan initiation) who are able to understand and accept the risks outlined in the ‘Risks’ section are eligible to apply for Summit.
In order to assist you determine if Summit is the appropriate fit for you, take note of the following details.
Summit aims to offer you a product in which you may put your money where it will do the most good. Summit is designed so investors like you can get at it on a regular basis.
You can withdraw your money from the plan whenever you like (any outstanding establishment charges will be deducted first), but by signing up, you agree to invest a minimum of USD 37,500 in a lump amount and to treat the plan as an investment for at least five years.
Future returns are entirely contingent on the success of the investments. The plan’s worth may rise or fall over time. The amount you withdraw may be less than what you put in. You may receive less than the illustrated amount when you cash in your plan.
There are a number of factors that could lead to this, including but not limited to: lower-than-expected investment returns; higher-than-expected fees; and larger-than-expected withdrawals.
It is possible for the value of some funds to drop significantly and unexpectedly. This could cause a loss of value for your investment.
Changes in the exchange rate can cause the value of a fund denominated in a currency other than the plan currency to rise or fall.
Any future refunds you get will have less purchasing power due to inflation.
Summit is a one-off investment that can be made anywhere in the world and has the potential to increase in value over the course of at least five years.
It allows you to invest in a wide variety of professionally managed funds across the globe. While this option can make your money more accessible, it will also lower your capital value.
How flexible is it?
Your plan can be denominated in whatever contract currency you like. This can be done in any of the following currencies: USD, GBP, EUR, or HKD.
The plan will use the currency you specify for all statements, payments, and other communications. Any freely convertible currency can be used for your investment; however, if the currency you use is different than the currency used by the plan, you will be charged a conversion fee.
Extra payments can be made at any time. It can be cashed in (in whole or in part) whenever you like for a fee.
In order to provide you more options, Friends Provident International structured your plan as a group of parallel plans.
Fund allocations can be changed completely or partially at any time, subject to any applicable limits. You can establish coverage for yourself, another individual, or a family of up to four people under the same plan.
Where are my funds being invested?
Friends Provident Internataional will invest your money in the account(s) of your choice. A variety of Friends Provident funds invest in other funds.
The vast majority of these funds have been handpicked by financial advisors working within the company.
The Fund Centre on the company’s website contains comprehensive information on most of the funds, including recent performance data, pricing, and risk ratings.
Before making any major investing decisions, it is wise to consult a financial advisor about your options.
A maximum of ten funds may be held in a single account. Your payments to Friends Provident will be used to purchase units in the funds you select.
What is the maximum amount I can pay in?
This is the minimum required for the first installment: Dollars 37,500 Pounds 25,000 Euros 37,500 Hong Kong Dollars 375,000
The following is the minimal additional payment if you decide to add to your plan at a later date: To the tune of US$15,000, £10,000, €15,000, and HK$150,000
Why is the loyalty discount?
You will receive a loyalty bonus on the third anniversary of the plan’s start date, as well as on each consecutive anniversary.
The bonus will be added to your plan in the form of extra units. After the third anniversary of each payment you make, you will also receive a loyalty bonus.
What about withdrawals?
You can take out a lump sum or set up a recurring withdrawal schedule from your plan.
After the first five years (beginning on day one), you can withdraw as much as you like without incurring penalties, up to the minimum plan value.
As long as the plan’s minimum value is met, you can withdraw up to 90% of any additional contributions made within the first five years after payment.
Withdrawal minimums are determined as follows, depending on the currency of the plan: A total of US$750, £500, €750, and HK$7,500
Withdrawals can be made on a monthly, quarterly, termly, semiannual, or annual basis. If the requested withdrawal will cause the plan value to drop below the minimum plan value or if the withdrawal allowance (90% of the total payment within the first five years) is exceeded, the withdrawal is not permitted.
If there are still setup fees to be paid, the minimum plan value is 125% of those. Value of the Minimum Plan To the tune of US$15,000, £10,000, €15,000, and HK$150,000
How much do monthly premiums cost?
There is a fee associated with having your plan and investments managed by Friends Provident International.
For the first five years after you start making payments or make any additional contributions, there will be an establishment charge of 0.4% of your payments.
Each fund is assessed an annual administration fee equal to 1.2% of its bid value. The underlying funds incur annual management fees and other expenses. Which funds are selected will determine the final sum.
For further information, see the Fund Centre on the Friends Provident website or consult a financial advisor.
You will see these fees reflected in the unit price of the funds you select and deducted from them directly on trading days. There may be additional fees.
At this time, there are no fees associated with exchanging currency, but the firm retains the right to do so upon one month’s written notice to you at a rate of up to 1% of the amount involved (or USD 15, GBP 10, EUR 15, or HKD 150, whichever is greater).
If you opt to take out the full value of your plan, any remaining establishment fees will be deducted. There is no other early termination fee associated with the Summit plan. Withdrawal processing fees imposed by your bank will be your responsibility.
What are the potential gains?
You will get the policy’s cash value at the time of surrender. The exchange value might fluctuate based on a number of factors. Such factors include the amount invested, the returns generated by the investments, the fees incurred, and the amount of money withdrawn.
What happens if I die?
If you base the plan’s duration on your own life, it will expire when you do. In addition to its monetary value, the plan will pay an additional 1%. Before releasing the death benefit, we shall deduct any outstanding setup expenses.
The plan can be set up on up to four lives, so it will continue even if one of the lives is lost. On the death of the last survivor, Friends Provident will pay an additional 1% of the plan’s cash value.
The death payment is contingent on the value of the plan and is therefore not fixed.
What about taxes?
Insurance firm Friends Provident International is based on the Isle of Man, where it operates tax-free. As a result, the company pays no income tax, capital gains tax, or UK corporation tax.
Except for any investment income or gains taxes withheld at source in the nation of origin, Friends Provident International funds are allowed to grow tax-free.
Using Friends Provident International’s products or services to avoid paying taxes is prohibited by law, and the company does not support such behavior.
The amount of tax you owe is determined by both the laws of the country in which you now reside and your individual financial situation. If you need help with your finances or taxes, you should talk to a professional.
The government of the Isle of Man has signed several agreements to share data and documents. In accordance with the terms of these agreements, Friends Provident International must provide certain information on its policyholders to the Isle of Man Treasury Department.
Consider this for any potential plan participants who are thinking about relocating to the UK. When a person or trust with UK residency receives benefits from a Friends Provident International plan, the company is required by law to notify certain events to UK HM Revenue & Customs.
Where can I find Friends Provident International Summit?
To apply for a Summit plan, just fill out your financial planner’s application and send it back with attached additional paperwork and official documentation verifying your identity and current residence.
Following the completion of your plan’s setup, you will receive your plan’s documentation shortly. Then, each year on the anniversary of your plan, Friends Provident International will give you a statement detailing the plan’s progress up to that point.
Should you invest in Friends Provident International Summit?
Friends Provident International, a division of IFGL, offers investing, savings, and protection products to foreign investors.
Friends Provident International’s fund options allow for diversification across geographies, asset classes, and investor profiles, as well as a plethora of different currencies.
In addition to providing monthly updates on fund performance and pricing, Friends Provident enables its clients to manage their portfolios online at any time by rerouting future premiums and changing current investments through an online portal.
The financial services firm Friends Provident has been around for decades. There are a number of products that may provide decent returns for long-term individual investors who are looking for protection against market volatility or inflation but have more modest investing objectives.
Friends Provident International’s unit-linked insurance products may provide long-term individual investors with reasonable returns if its insurance and expat savings programs are suitable for their needs.
If you want to put money into them, you should consult a financial planner for advice on how to proceed.
However, there are better options for those who want greater returns on their investments than the existing products provide.
When you’re saving for your future, you want to be sure that the money is going to be there when you need it. That is why a savings plan can potentially be a good option.
But if you’re looking for other ways to grow your wealth, there are other more lucrative options to consider when seeking to grow your wealth, such as mutual funds, ETFs, or bonds.
Mutual funds and ETFs are similar in that they allow investors to pool their money together and buy shares of a stock or bond. The difference between the two is in how they are managed: Mutual funds are actively managed by an investment company while ETFs are passively managed by an index fund.
Mutual funds are a collection of stocks, bonds or other assets bought by many different investors through one fund manager. The fund manager then invests the money into these assets based on the fund’s investment objective.
There are many types of mutual funds available, including those that focus on specific sectors or industries and those that invest in a variety of assets such as stocks, bonds and cash equivalents like CDs or Treasury bills (T-bills).
ETFs are essentially mutual funds that trade like stocks on an exchange, allowing investors to buy or sell shares throughout the day at whatever price they want to pay at any given moment when they place an order with their broker.
They also have lower expense ratios than mutual funds because they do not require a middleman (i.e., a fund manager) to manage them for you; instead, their price is set by the stock exchange where they trade based on supply and demand factors.
Bonds are debt instruments issued by companies or governments in order to raise money. Investors buy bonds when they want regular income from their investments — usually about 2% interest per year — but do not want their entire nest egg invested at once because of market volatility.
You might also be interested in our analysis of the Friends Provident International Premier Advance Savings Plan.
If you would like to know more about these options, consider reaching out via email or through a comment down below.
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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
