The Lemon Fool

emmabeth wrote:Sorry for delay in responding, I've been waiting for the IFA's report.
Firstly, thanks for all the replies which gave much food for thought.
The proposed wrapper is an overseas investment bond. The underlying portfolios are a 50/50 split between Alphabeta fund partners - AB4 portfolio and Morningstar - Moderate passive portfolio.
The overall charges, including IFA fees are 1.395%
I can't help feeling that I could invest directly into a similar portfolio in an ISA without an IFA.
Any views and advice would be welcome

Hi emmabeth - following on from my previous comment, I hope the following helps a little with your decision making:

You are currently 67 and the £500k going into this bond would generate fees of 1.395%, or £6,975 per annum. If you do need care when you are older (AgeUK suggests 14.8% do - so plenty don't!) then let's assume this would be at age 85 for arguments sake (could be younger/could be older). This means that you will pay the above fees for the next 18 years which totals £125,550 (not including growth had the funds been left in the investment). AgeUK's latest report here https://www.ageuk.org.uk/globalassets/a ... tsheet.pdf states that the median period from admission to the care home to death is 462 days (15 months) but that 27% of people have lived in care homes for more than three years. If you are one of these 27%, the fees you would have paid above of £125,550 could have covered £41,850 of fees each year over this three year period and your original investment will not have been touched.

As hiriskpaul has mentioned above, putting your existing ISA funds (which actually can generate a tax-free income!) into a cheap Vanguard fund would cost 0.22% a year, or £1,100 (a difference of £105,750 over the 18 years).

You would have to be in a care home for an awfully long time to deplete your current investment portfolio (not withstanding the growth this could achieve over the next few decades), on top of any pension income that you would use towards the care fees. I'm not saying this couldn't happen, but just as a bit of perspective.

Cheers, OLTB.

Thanks for your input. The vanguard fund does appear to meet my requirements and the historical growth rates are similar to the portfolios recomennded by the IFA
Please can you explain the advantage of investing via Iweb rather than direct to Vanguard

Vanguard, like many passive providers, have both funds (OEICs) and ETFs. They charge custody fees to hold both, but other brokers, like IWeb or Hargreaves Lansdown, have different charges for each, and in some cases don't charge, as IWeb do for my ISA funds. Its worth doing research on this once you've chosen your funds/ETFs

The Monevator site is worth a look at to compare on line brokers for costs etc

http://monevator.com/compare-uk-cheapes ... e-brokers/

emmabeth wrote:The proposed wrapper is an overseas investment bond.

Would you be able to name the provider? Such products can be notorious for hidden or at least well disguised fees and charges.

Standard Life

emmabeth wrote:Standard Life

I had a look at their literature (Google for Standard Life offshore investment bond).

They make a valid point that for those who have maxed out their ISA contributions and are near Lifetime Limits on their pension values, that offshore bonds would represent a tax shelter of sorts. What they don't warn to the extent that perhaps they should is that there's little point in transferring assets already in a tax shelter.

I don't know how valid is the point about hiding wealth from local authority care assessments. If it even became widespread there would be public outcry about someone with several hundred thousands stashed in Dublin or other non-UK havens getting local authority financed care. In any event as others noted, there are already provisions in place regarding deprivation of assets.

It seems the responsibility of the individual to pay the adviser. Standard suggest that either this is deducted before they even see the money for investment or that they will pay it out of the investment if so requested. In the latter case it counts against the 5% withdrawal allowance.

It sounds to me as if the IFA overstepped the mark in not making it clear that this is useful in addition to ISA, not instead of.

Or, rather, they have missold the product.

Mel

It’s quite probable that the advisor is recommending the offshore bond as part of a Discounted Gift Trust or Loan Trust, which relates to IHT planning. It is very common and perfectly legitimate. It’s not “dodgy” or “criminal”.

The advisor should have provided full recommendations and reasons why. If you’re not comfortable with it, tell them. They should make sure you fully understand the risks, that’s up to them to do without any prompting.

Ask a different financial advisor if you’d like a second opinion. You make the choice, certainly don’t be rushed into anything.