Joe Bloggs was earning a high five figure salary and sensibly considered saving a considerable amount of his monthly income towards his retirement.
He entered into a long-term contract with a well respected life insurance company to provide the investments for his pension.
Over the next three years he paid nearly £50,000 into the policy, which was a great start to providing for his retirement.
However, Mr Bloggs was made redundant and did not find work with a similar salary. As a result, he could not afford to continue with the monthly premiums.
Mr Bloggs was informed that if he were to leave his investments in the policy until maturity, they would be worthless because of the ongoing charges. If he were to cash in the investments, his pension would receive under £15,000.
So why did this happen?
The fee structures of such plans are usually complex but essentially they favour the advisers and the company at the expense of the client. Commissions are often not disclosed to clients and can be significant. Therefore there is a great deal of inflexibility built into most contracts. Such policies can offer a reasonable deal for the client but generally only if the client continues to pay contributions to the end of the contract up to maturity.
The world today is not as certain as it once was. The “job for life” is now a rarity and in general, the stability in work that we once enjoyed is being slowly eroded. This is why EFPG considers such life insurance policies to be outdated, inflexible and potentially very expensive, particularly if one’s circumstances were to change in the early years of such a policy.
Such insurance company provided products were the only way that many financial advisory companies, including EFPG, could provide savings and pension plans for their clients. However, after seeing the inflexibility of these contracts, EFPG spent years designing and implementing a solution for our clients that could cope with a less certain world.
EFPG do not take hidden commissions on our products but charge an advice and set up fee instead. We disclose these fees so our clients know what they are paying. These set up fees are universally less than the commissions paid by insurance companies, for policies of similar terms and contributions.
Our regular contribution pension and savings plans are held in safe custody on investment platforms. The fee for administration, the trustee and custody is 1.3% p.a. plus an annual €78 account charge. This means that the ongoing charges are so low that if a client were to stop making contributions, it would not significantly erode the value of their investments.
Our selected fund manager provides high quality investments with ongoing fees of between 0.50% p.a. and 1.25% - cheaper than comparable funds available in life policies, with no regular trading fees and no bid offer spread.
EFPG provide an extremely flexible, high quality and efficient investment structure for our clients to fit in with today’s ever changing world.