Investment in Generali Vision Plan - cut my losses or hang on?

mairoo

Hi,

I'm in quite a lot of confusion at the moment and thought I'd come on here to get some advice. I'm a UK expatriate living in China.

In 2006 I was advised by someone calling themselves an expat IFA (not in China) to invest in a Vision Plan with Generali. I have recently spoken to an IFA in the UK and have been told that this is not a great situation to be in. Having done futher research, this seems to be entirely accurate and I am kicking myself for not having done a Google search 6 years ago.

The situation is this:

I have invested £24,400 at a rate of £400 a month.
The current plan value is £24,692.60.
The current surrender value is £16,895.76.

The shortfall on the current surrender value is because if I end the plan now, I will still have to pay the admin fees for the rest of the policy (until 2031 - 25 years). These amount to 1.5% of the total premiums paid plus 1.5% of the of the units allocated to the plan.

It seems that I have four options:

1. Keep paying the premiums and hope that in 25 years' time the investment has been worth it (and that Generali don't go bankrupt or something as the fund is not FSA-regulated and not covered in any way).

2. Drop premiums to the minimum £100, although the fees will still be paid based on premiums of £400.

3. Stop paying premiums altogether, in which case fees will continue to be paid based on £400.

4. Cut my losses (£7504.24 on the premiums paid in so far) and reinvest.

The UK-based IFA is suggesting that I invest in offshore bonds through an FSA-regulated platform. I am currently in a position where I can invest more - probably £600 or £700 a month.

I'd be really grateful for any advice anyone can provide. I feel like a mug for having taken the original advice and now want to try to get as many different opinions as possible!

Many many thanks.

mairoo

TonyRover

Have sent you a PM.

GDB2222

It strikes me that you have already paid most of the costs of the Generali scheme, one way or another. You need to ask yourself what the costs are on any new money you put in. That may be very low. I couldn't tell from your description. You also need to know what the alternatives are, eg what is the cost of the offshore bonds you are now being touted? Otherwise, it's out of the frying pan and into the fire for you!

Generali is a major insurance company that's been around for a very long time, so I'm not sure why you think they are likely to go bust?

If you intend to return to the UK, you should think about a UK-based index tracker unit trust, as some of these have charges of well under 0.5%. Even if this is not the most tax-efficient for you, the much lower charges may make it worthwhile.

TonyRover

GDB2222 wrote: »

It strikes me that you have already paid most of the costs of the Generali scheme, one way or another.

Except the ongoing charges and the tax.

Ongoing charges: www[dot]submityourarticle[dot]com/articles/Hugh-Stevenson-1222/expatriate-7681.php
Tax: www[dot]taxresearch[dot]org.uk/Blog/2008/12/05/i-wait-for-alternative-explanation/

GDB2222 wrote: »

You also need to know what the alternatives are, eg what is the cost of the offshore bonds you are now being touted? Otherwise, it's out of the frying pan and into the fire for you!

Very good point. Also check that any adviser you deal with and any products/platforms, etc. they recommend are regulated (i.e. cross-check with the regulator).

mairoo

Thank you for the advice. I've taken further advice and have decided to get out of the plan in favour of something more certain and, yes, fully FSA-regulated. However, before I go anywhere I am going to very carefully check the illustrations, documentation, small print etc.!

mairoo

elouise2086

Hi - I am in more or less the same position as the original poster and would like to know what you all think I should do. I could cut my losses now (would hurt, but I could live with it) but then, as an expat, what am I supposed to do with my savings?? Thanks in advance

radhika

Hi all,
another idiot who has fallen for this here... Please no need for comments about how I should have read the T&C and tried to figure this all out before....I know now :P Came recommended by a friend --- now he is in the same mess.

I have put in quite a bit of money already, over 15.000 USD. I am about half-way through my initial period, which is 28 months (!!!) as it is a 30-year plan.

Now....in my situation, what do you all think? Stick with the high initial premiums (800 USD pm) for another year, and then drop to the minimum ca. 100 USD? Would this eat out all gains just through the admin fees? Or would it make sense if I left it on the minimum payment for 10 years? If anyone is good with this sort of calculations, I would really really appreciate it.

Otherwise, I walk out and lose the 15.000 USD. Which would hurt. A lot. But would I be better off if I stayed in? I would have no probs staying in for the long term, other than being really bitter about this particular plan.

Any recommendations would be extremely helpful, my next payment kicks in in one week, and if I decide to go out, I would like to do it before I lose the next 800 USD!

Thanks so much!!!

sabretoothtigger

Owch I hate the idea of being boxed in like this by fees. What is the growth history of this kind of product, does it even match a ftse tracker

trackers used to have entrance and exit fees, now we live in a more flexible world but it seems there are still traps set up to catch out a few

temagami

I don't want to advise anyone on what they should do in particular with their own policy. But if you want to talk details, you could drop by the Motley Fool UK expat board, where there is a long-running discussion of these bonds and any number of expats who won't hesitate to weigh in with an opinion (usually negative). Can't link due to lack of tenure here, but go Motley Fool UK -> Boards -> Investors Roundtable -> International Expat Investors.

More generally on this subject, I'm sure someone can how offer a defence of why these bonds may be a good investment. But my feeling is that if they were sold in the UK under the regulation of the FSA in the same way that they are pushed to expats in an unregulated situation, there would be regular misselling scandals and penalties.

They are pushed hard to expats because of the insane levels of commission they generate. The reason why they have a long initial period in which the policy has no surrender value is because they pay a huge commission lump sum up front to the adviser, hence all the first couple of years of contributions go towards meeting that.

They have some tax advantages for some investors. But for the average investor, those many well be outweighed by the high fees and lack of flexibility. The ability to adjust your premium after the initial period is in many cases a joke because the fees continue to be based on a percentage of the higher initial premium, as the first poster found.

What else can an expat invest in? Well, in many cases expats are based in a low-tax country with plenty of local financial services options anyway. If not, there are brokerages and fund distributors in areas such as Luxembourg, Singapore and Hong Kong who will usually accept you as a client. You can subscribe to many funds around the world by going directly to the fund management group.

And if you want advice on what to invest in, there are advisers who will come up with solutions based on this kind of approach, rather than putting you into an expensive and inflexible product that might notionally have some tax advantage were you to return to the UK at some point in the future, but unquestionably have a lot of disadvantages. Unfortunately, they aren't the same people who usually come offering their services to every expat in town.

GDB2222

radhika wrote: »

Hi all,
another idiot who has fallen for this here... Please no need for comments about how I should have read the T&C and tried to figure this all out before....I know now :P Came recommended by a friend --- now he is in the same mess.

I have put in quite a bit of money already, over 15.000 USD. I am about half-way through my initial period, which is 28 months (!!!) as it is a 30-year plan.

Now....in my situation, what do you all think? Stick with the high initial premiums (800 USD pm) for another year, and then drop to the minimum ca. 100 USD? Would this eat out all gains just through the admin fees? Or would it make sense if I left it on the minimum payment for 10 years? If anyone is good with this sort of calculations, I would really really appreciate it.

Otherwise, I walk out and lose the 15.000 USD. Which would hurt. A lot. But would I be better off if I stayed in? I would have no probs staying in for the long term, other than being really bitter about this particular plan.

Any recommendations would be extremely helpful, my next payment kicks in in one week, and if I decide to go out, I would like to do it before I lose the next 800 USD!

Thanks so much!!!

I think that some good questions to ask yourself in relation to any plan like this are:

a) What is the current surrender value?

b) If I put an extra premium in, will the surrender value go up by that amount?

c) Is there some other compelling reason to continue with the plan, eg for life cover or because I am near the end of a high cost period in the plan and after that it's fantastic value for money?


I don't think that the amount of money already down the drain is a good
reason to keep pouring more down.

These are generally applicable comments, and I am not advising anyone on what to do with this plan. Apart from anything else, I don't have the plan details.

radhika

Thank you all for the replies. And yes, I have also come to the conclusion that's staring me in the face. Just going to take the bit hit, hurt for a bit, but walk away from all of it. Some lessons cost more than others, eh.... but it's all adding up to our learning.