On Monday, Aviva Life International announced that it will not offer new offshore bonds to customers from February 26 following “a significant decline” in demand for offshore investments from UK customers and advisers.
Aegon Ireland, Axa Isle of Man, Standard Life Internat-ional and Royal London 360 all say they remain committed to the offshore market.
However, Royal London 360 chief executive officer David Kneeshaw says UK-centric models may struggle in the current climate. He says: “The real problem is the UK market. Business has for a while been sold on very low margins and not very sensible prices.”
He says the market has shrunk, partly because advisers are no longer able to use offshore bonds as the default opt-ion for high-net-worth clients due to capital gains tax being lower than income tax.
He says: “If the UK market remains as it is and you are a provider that only sells in the UK, then what do you do? If like us you are more dominant in the overseas market, then it does not affect you.”
Association of International Life Offices chief executive Alan Morgan-Moodie says: “Some of our members can operate very effectively in Europe and I do not know why Aviva did not get more stuck in there. The UK has been a pretty horrendous market to be in over the last 12-24 months but firms that have been around for a long time in the UK will weather this storm.”
Chartwell Finance Management director John Boyle says: “Aviva was never a big player in the offshore market and their admin costs were disproportion-ate for the narrow margins that are obtainable with off- shore products.”