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Sun Life warms to with-profits



Type: Offshore with-profits bond
Aim: Income and growth by investing in Axa Sun Life&#39s with-profits fund.

Minimum investment: £25,000.

Place of registration: Isle of Man.

Investment split: Property 8 per cent, equities 92 per cent.

Isa link: No.

Charges: Annual 1 per cent.

Bonus rate: 6.5 per cent for sterling, 6 per cent for US dollars and Euros. Additional bonus of 0.5 per cent of investment paid at the end of the sixth year and annually thereafter.

Commission: Initial 5.25 per cent.

Tel: 01624 643440.

The panel: Mark Dampier, Head of research, Hargreaves Lansdown,
Keith Phillips, Adviser, Pritchett Financial Planning,
Peter White, Financial services manager, Haines Watts Financial Services, Brian Duchart, Director, FD Independent.

Flexibility 7.4

Bonus rate 6.7

Company&#39s reputation 8.5

Past performance 7.8

Charges 5.0

Commission 7.0

Product literature 5.3

Sun Life&#39s international&#39s with-profits bond is available in three currency denominations &#45 euros, dollars and sterling. It aims for income and growth by investing in Axa Sun Life&#39s with-profits fund.

Deciding how the bond fits into the market, White says: “It fits very well. It is a premier league player with an excellent record.” Dampier says: “As a lower risk investment product, of which there are few international with-profits bonds.”

Phillips says: “It is one of only a few international with-profits bonds. Therefore, it is a welcome addition to the current options.” Duchart says: “It is suitable for offshore investors concerned about equity uncertainty and volatility in equity markets.”

Identifying the types of clients the bond may attract, Dampier says: “The ideal investors is likely to be an expat, either working towards retirement or an investor retiring abroad.” Phillips says: “My main areas for consideration would be the expat market and high net worth clients who wish to take advantage of having multi lives assured.”

Duchart says: “Those seeking an element of perceived stability in form of annual bonus and who are prepared to sacrifice potential equity returns for this.” White says: “Middle market to high net worth investors. It is ideal for database clientele, more so now due to fluctuations in the market.”

Looking at the marketing potential for the bond, Phillips says: “All expat and high net worth clients should be contacted. Well known brand names will no doubt help.” White says: “It could be a useful database mailing exercise, a possible specialist letter to current offshore clients and as a newsletter inserting with normal mail.”

Dampier says: “Opportunities are mainly in the expat market. For many UK investors, some care would be needed because of the potential for adverse tax consequences in cashing in the bond.”

Moving to the strengths of the bond, Duchart says: The loyalty bonus in year five, the 7.5 per cent withdrawal without market value adjustment and there is no bid/offer spread.” Phillips says: “It is available to accept additional premiums and has various currency denominations.” He also mentions the loyalty bonus after five years, the lack of a maximum age and the bond&#39s Isle of Man base.

White cites the Sun Life name, its past performance, the allocation rates and the offshore tax advantages. Dampier says: The choice of currency denomination will be useful for many if living abroad. However, they should be aware that the currency risk comes not from what the product is denominated in, but where the actual investments are made.”

Discussing the bonus rates, Dampier says: “There is only one way bonus rates are going generally and this is down. The present falls seen in the world stockmarkets, coupled with low interest rates make this inevitable.” White says: “Looking at Sun Life&#39s past performance says it all.”

Phillips says: “I cannot see any reason why these should cause concern. They are still higher than a building society account and the bonus is guaranteed not to be removed.”

Pointing out the negative aspects of the bond, Dampier and Duchart mention the heavy early surrender charges. White says: “I am surprised at the early withdrawal penalties being so high. It could be better.” Phillips points to the high initial premium and feels the charges are not very innovative.

Turning to the bond&#39s flexibility, Dampier says: “In my view, with-profits policies have very little in the way of flexibility.” Duchart says: “It is in line with what might be expected from an investment in an inflexible long-term fund.”

Phillips says: “It is reasonable but I am not sure about the £10,000 minimum balance.” White is more enthusiastic. He says: “It is good, the currency selection is very appealing.”

The panel provide a unanimous verdict on the company&#39s reputation. Phillips feels its reputation is strong and Duchart agrees. Dampier says: It has a solid reputation, particularly in managed life funds. This is coupled with excellent name awareness.” White simply says: “It has proved its reputation with its distribution bond.”

Moving to the company&#39s past performance record, Dampier says: “A market leader with distribution bonds should make the with-profits policy look attractive as the asset mix is similar.”

Duchart thinks its reputation is distinguished. White says: “It is first class. Look at its record in pensions and investments. Is it the Liverpool or Manchester United in the world of the financial services awards?” Phillips says: “Axa has the stronger name for with-profits performance and Sun Life is highly regarded for long term plans.”

Predicting the likely competition for the bond, White says: “Clerical Medical, Scottish Provident and Scottish Life have similar products and good performance records in this area.” Duchart suggests any good offshore fund. Dampier says: “Scottish Mutual, Scottish equitable and Scottish Widows.”

Considering the charges, Phillips thinks they are very original. Dampier says: “It is difficult to say if they are fair because they look very opaque.” Duchart says: “The early surrender charge seems excessive but they are broadly in line with other offshore funds.” White thinks the charges are reasonable, but feels the early surrender charge of 10 per cent in the first year is quite high.

Moving to commission, Duchart says: “I would expect in the region of 6 per cent initial or 4 per cent initial plus 0.5 renewal” White thinks the commission is average and Phillips thinks it is fair.

Looking at the product literature, Dampier says: “It is relatively bland, but will answer many of the questions investors will ask.” Duchart says: “It is lightweight. There is little detail for potential investors looking to place significant sums offshore.” Phillips says: “The colours are horrible, but otherwise it is okay.”

White says: “It is a bit dreary for Sun Life but it is comfortable and acceptable. It has no bright colours or immediate impact, but does Sun Life need that anyway? It is clearly aimed at the 50 plus age group looking for growth, tax savings and minimum risk.”

Summing up, White says: “It is a potential market leader &#45 a sure fire hit.” But Dampier disagrees. He says: “Sorry, I just cannot get excited about a with-profits bond.”


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