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Canada Life – Offshore Savings Account

Type: Offshore unit-linked bond.

Aim: Growth by investing in Canada Life funds and externally-managed funds.

Minimum investment: Annual £2,500, monthly £250.

Place of registration: Isle of Man.

Investment split: One or more of the following funds: Canada Life funds – guaranteed money sterling, guaranteed money dollar, guaranteed money euro, gilt & fixed interest, income, growth; externally-managed funds – Edinburgh safety first, Edinburgh safety first protected, Edinburgh managed growth, Fidelity Japan sterling, Fidelity Japan dollar, Fidelity South-east Asia, Fidelity managed international, Fidelity growth & income, Fidelity Nordic, Fidelity technology Europe, Fidelity telecommunications Europe, Fidelity Euro opportunities, Fidelity special situations, Greig Middleton sterling, Mercury global bond sterling, Mercury global bond dollar, Mercury global bond euro, Mercury UK, Mercury European sterling, Mercury European dollar, Mercury North America sterling, Mercury North America dollar, Mercury global sterling, Mercury global dollar, Mercury UK blue chip, Mercury enterprise Japan, Mercury enterprise European, Mercury enterprise America, Mercury gold & general sterling, Mercury gold & general dollar, Mercury Pacific Basin dollar, Mercury Pacific Basin sterling, Mercury international portfolio, Mercury UK, Mercury UK smaller companies, Mercury global giants, Mercury emerging markets, Perpetual high income, Perpetual international growth, Scottish Value Management UK growth, Scottish Value Management European growth, Tep value, Wise Speke stockbroker managed.

Yield: Nil.

Charges: No initial charge. Annual charge 0.5 – 1.5 per cent, depending on fund.

Commission: Initial up to 7 per cent.

Options: Free switching, monthly withdrawals on investments above £1,000.

Tel: 0800 3285096.

Broker Panel:-

John Holian – Certified financial planner, Maunby Investment Management

Peter White – Financial services manager, Haines Watts Financial Services

Jeremy Marsh – Investment manager, Lupton Fawcett Solutions

John Wright – Proprietor, Investment Management Services

Broker Ratings (ave. marks out of 10):-

Company&#39s reputation: 7.0

Flexibility: 7.0

Charges: 6.3

Commission: 7.0

Product literature: 6.5

Canada Life&#39s offshore savings account is an offshore unit-linked bond which aims for growth by investing in a range of Canada Life and externally-managed funds.

Assessing how it fits into the market, Holian says: “This is most suited to expatriate UK investors looking for a low-cost way of saving without the commitment of a long-term savings plan and the charges it entails.”

Marsh says: “The product seems to be a replacement for clients&#39 other offshore accounts in response to the expected need for lower charges.”

Wright says: “It is a useful addition to the offshore regular-savings and pension markets. It is pleasing to see a company offer a product of this type with some keenly priced charges.”

Commenting on the types of marketing opportunity the product is likely to provide, Wright says: “There is the ability for those already maximising their Isa allowance to save regularly into a tax-efficient savings vehicle. There are also opportunities for future tax planning.”

White says: “It is good for high-net-worth individuals, mailshots and seminars.”

Holian suggests: “There are already products available to meet the needs of the client this would suit. However, it could have limited opportunities.”

When considering the types of client for whom the product is suitable, non-taxpayers feature strongly. Marsh identifies offshore clients, non-taxpayers and some charities.

Wright cites non-taxpayers, people saving over the Isa limit, expatriates and UK-based foreign nationals who will not require funds until repatriation.

White says: “I would suggest higher-rate taxpayers because of the favourable tax treatment.”

Holian says: “Primarily, it is for expatriate workers who are able to afford large regular premiums. It can also be suited to those who may retire to a lower-taxed country when the plan is encashed, such as foreign nationals. It could also suit UK investors looking at tax-efficient ways of saving capital who have already used their existing Isa allowance.”

Examining the product&#39s flexibility, Wright says: “No early termination penalties and free switching is first class. Clients can add single premiums and this all adds up to this being very flexible.”

Holian says: “Flexibility is good, enabling breaks in contributions, with no extra charges on encashment outside the establishment period. The ability to take partial surrenders will be attractive for those requiring the odd amount without necessarily wanting to stop the plan.”

But Marsh thinks the overall flexibility is unremarkable, while White thinks it could be better.

The panel have different ideas about the plan&#39s strong points and useful features. White says: “It is tax-efficient, provides flexibility of saving, there is no term required and clients can withdraw at any time.”

Holian says: “Flexibility is good as there is no long term to commit to and the plan can be kept for as long as the client wishes. The ability to invest in euros will appeal to clients working in continental Europe.”

Marsh thinks the lower costs and sensible choice of other fund managers are the product&#39s strengths.

Wright says: “It has a very good charging structure costed on a single basis. There is a very wide range of funds from good investment houses.” He also feels free switching between funds is a strength.

Assessing the disadvantages of the product, Marsh says: “It still has a restricted range of fund managers and, at 1.25 per cent, the up-front charge is still too high.”

Holian says: “Additional life cover or critical-illness cover cannot be incorporated.”

White says: “Partial surrender is limited to one a year, then charged. The charges are not that competitive.” Wright suggests: “There is not much explanation of the use of this vehicle for pension planning.”

Assessing Canada Life&#39s reputation, Holian says: “Canada Life International was originally Albany Life International, established in 1985. It has built a good reputation in the international market, selling into the UK with some innovative ideas.”

Wright says: “It is improving. Since taking over Albany, it has proved to be an innovative product provider with good administrative back-up.”

Moving on to an assessment of the company&#39s past performance, Marsh says: “Its offshore products are most often used as a container for many investment managers, so the internal fund performances are not really relevant. The internal funds used to be managed by Mercury on the Albany side and were solid, if not spectacular.”

White says: “It is reasonable but not that good.”

When asked which companies are likely to provide the main competition to the product, Wright suggests Eagle Star International and Scottish Mutual. Holian opts for Eagle Star International, Royal Skandia and Friends Provident International.

White mentions offshore building society accounts, while Marsh cites Scottish Life International, Sun Life International and Allied Dunbar International.

Asked whether the commission is fair and reasonable, Holian says: “There is a facility to indemnify commission over one or three years. Level commission is payable on contributions outside this period, allowing an ongoing income. I like the idea of fund-based renewal commission.”

Wright says: “You can get higher commission elsewhere but it is reflected in the charges.”

Turning to the charges, Holian says: “They seem to be lower than on similar plans although commission is lower. As a fee-based financial planner, we would not normally take commission. This would make the plan much more flexible and give better results.”

Wright says: “It is very reasonable. The single-premium costing shows well in the reduction-in-yield figures.”

Looking at the product literature, Wright says: “It is very well thought-out and well explained. It could show pension benefits from high saving.”

Holian comments: “This is quite good in appearance but seems to lack anything exciting in content.”

Marsh says: “It is clear but failed to explain how the establishment period is calculated.”


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