Five reasons to buy life insurance sooner rather than later

By Toby Simpson, Regional Sales Director, Friends Provident International

August 2016

Listening to the radio recently, I heard a snippet about how the UK government and the UK life insurance industry had renewed an agreement under which insurance companies have pledged not to require customers and potential customers to undergo predictive genetic tests as a step to obtaining health or life insurance. The agreement –was introduced in 2001 and has been reviewed and renewed every few years since.

This means that UK insurance companies will not use the results of genetic tests  to predict the likelihood of a person developing certain conditions,  and in turn to calculate the amount of premium to be charged. If they were to use the results of such tests, an otherwise healthy person could be charged a higher premium purely on account of their DNA, over which they have no control.

However genetic testing may one day become a routine part of health and life insurance. There are several compelling reasons to take out life insurance sooner rather than later, and to consider other types of cover such as critical illness and income protection.

Reason one: if you wait until you need it, you may not be able to get it

If you have a protection need – such as a young family or as cover for a loan or mortgage -  it makes sense to buy life cover as soon as possible.  If you wait until you develop a serious illness, or if you have had one in the past, life, critical illness and other types of insurance may be more expensive and difficult  - if not impossible - to obtain.

Reason two: peace of mind for life’s uncertainties

Considering your own mortality is not something you should spend hours thinking about, it could get quite depressing and would be a waste of time. But the fact is we’re all going to die one day. Hopefully peacefully, after a long life but unfortunately many people die suddenly and unexpectedly. Having a life insurance policy – with an appropriate level of cover – can mean family and dependents may not have to worry about their immediate financial security if this were to happen.

Reason three: covering funeral expenses

Life insurance can be used to  pay funeral costs, which can be considerable, especially for expatriates.

Reason four: providing for children’s education

Of the many expenses potentially faced by families, paying for children’s education is often considered one of the most important. If death or an inability to work through serious illness, leaves a question mark over a family’s ability to fund children’s education, then the proceeds of life or critical illness policies could be used to pay for school or university if the breadwinner is no longer around to fund it.

Reason five: tax planning

If you think you may be affected by inheritance tax (IHT) on your estate, life insurance policies can be used to pay the bill, leaving your estate and beneficiaries effectively untaxed. It’s worth remembering that while life insurance payments are not typically subject to income or capital gains tax, in some countries they are liable to inheritance tax themselves. Writing a life insurance policy in trust – meaning the proceeds are paid to the trust, with the trustees instructed to distribute the funds in a predetermined way – should mean a life insurance policy payment is not subject to IHT.

All information contained within this article correct at the time of publication, August 2016.

Toby Simpson is Regional Sales Director for Friends Provident International and lives and works in Singapore.

Copyright 2016 © Friends Provident International Limited.  
All rights reserved.

The views and opinions expressed are the personal views and opinions of Toby Simpson and do not necessarily represent those of Friends Provident International.

The contents of this article are for information only and do not constitute investment advice. Readers should seek their own professional advice before making investment decisions. Friends Provident International Limited accept no liability for loss of any kind incurred as a result of reliance on the information or opinions provided in this article.

How do you find a good financial adviser?

By Toby Simpson, Regional Sales Director, Friends Provident International

March 2016 

How do you find a good financial adviser? Ask a friend, search the Internet, check a trade association? Perhaps more fundamentally, do you even need a financial adviser in the first place? 

Taking that last question first, I think the answer for almost all expats is “yes”. Working overseas means you may receive higher wages and pay less tax than you would in the UK. Essentially, you probably have a higher disposable income. While I wouldn’t begrudge anyone the opportunity to enjoy the freedoms and opportunities their income and life abroad affords them, they should equally make sure that at least some of the financial benefits are put to long-term good use towards lifetime goals. In this respect, the value of good financial advice is immeasurable. 

Having the right adviser means you are likely to have a good financial plan put in place for you, based on your goals, circumstances, attitude to risk and other factors, which in turn inform the strategies and underlying savings and investments in your portfolio. 

Before you get to this stage, you should ask questions of your prospective adviser to determine whether, in your opinion, they are ‘good’ or not. Below are ten suggestions to ask an adviser that could help you find the right one. 

Questions for your prospective financial adviser:

  1. Are there any areas of client financial planning on which you cannot advise? To ensure there are no gaps in the service that may be important to you. 
  2. Are you whole of market or tied/restricted? So you are clear on the financial products and services that are available to you. Tied advisers may only offer products and services from a limited number of providers. This is not necessarily a bad thing but it is important that you know. 
  3. What are your professional qualifications? Different countries will have different qualifications and professional standards. Find out what an adviser’s qualifications are and you may need to do your own research to check they are appropriate. 
  4. What is your regulatory status? Only ever use a regulated adviser who is licensed to provide the services you are being offered in the country in which you reside. You should be able to check an adviser’s regulatory status with your local financial regulator. 
  5. What will I have to pay? An adviser’s services are never free, even if sometimes there are no apparent initial fees. You should always find out exactly what and how you will pay for an adviser’s services.
  6. How are you remunerated? There can be a subtle distinction between how you pay an adviser and how they are remunerated in total. Some advisers may ask for explicit fees from you for the advice they provide, others may receive different types of commission from product providers they invest with on your behalf. Some may receive both. It is important to know the facts about how an adviser is paid. 
  7. How do you construct client investment portfolios? Are there systems in place for selecting appropriate investments and what are they? Some advisers may outsource their investments to specialists, such as discretionary fund managers, others may do it themselves. If an adviser is picking investments and constructing portfolios in-house you may want to ensure they are suitably qualified and regulated to do this.
  8. Can you show me examples of client financial plans and explain their rationale? A good financial plan is the foundation on which all else rests. An adviser should be able to talk you through real client financial plans to help you understand how they work and explain the reasons for the advice they’ve given. 
  9. How often do you review client plans or have contact with your clients? Financial plans and investments are often long-term in nature, so frequent contact may not be necessary. Nevertheless, it is important to know what to expect from you adviser in terms of contact, how often they will review your plan with you and the level to which underlying investment performance is monitored. If you are paying ongoing fees then you should expect an ongoing service. 
  10. Can I speak to your clients? Any good adviser will be happy to let you speak to other clients so you can ask them questions about the service they've received to help you decide if it may be right for you.

All information contained within this blog correct at the time of publication, March 2016.

Toby Simpson is Regional Sales Director for Friends Provident International and lives and works in Singapore. 

Copyright © Friends Provident International Limited. All rights reserved.

The contents of this article are for information only and do not constitute investment advice. Readers should seek their own professional advice before making investment decisions. Friends Provident International Limited accept no liability for loss of any kind incurred as a result of reliance on the information or opinions provided in this article.

It’s never too soon to start saving for your child’s education

By the Regional Sales Director, Friends Provident International

14 April 2015

As a general rule, UK expats are a pretty resilient, hard-to-shock lot. That’s because we’ve had to be as we’ve adjusted to life in the far-flung, exotic parts of the globe in which we find ourselves. But there is one group who spend a fair amount of time in a state of surprise and occasional bewilderment, at least for a period: those who have just had their first child. 

Many of the reasons for the shocked looks on their faces are well known: the sleepless nights; the dawning awareness of unimagined responsibility, stretching out for decades before them; or simply just the mounting costs of baby clothes that are outgrown after only a few weeks.  

In my experience, a major source of expat parents’ anxiety is the growing realisation of what it’s going to cost to educate their recently-arrived bundles of joy, possibly beginning as early as age one or two with the surprise cost of nursery school fees!  

The issue of our children’s education is, in fact, something all expat parents should think about, not just those with new-born babies. It brings with it many questions, such as whether a family should remain in the foreign outpost in which they currently find themselves, or plan on moving elsewhere – out of consideration for the type of school that would be best suited for their child; the cost of schooling, particularly if private ‘international’ schools are likely to be necessary if they stay put; and even where our children might attend university one day.

‘International students’

One of my biggest surprises, which I am sure is the same for many UK expats is the fact that if you remain abroad, you could have to pay significantly more to send your child to a UK university than you would if you were still back home, even if you’re a UK citizen and your child is too.

The reason for this is that your children will be regarded by UK officials as ‘international’ students, by virtue of where you currently happen to live. This could mean that, instead of tuition fees of GBP 9,000 a year for a UK resident student, your fees per child could rise to as much as GBP 23,000 as an international student. On top of this, there are other costs for international students such as rent, general living expenses and travelling ‘home’ to be considered.

The bottom line is that UK expats with children are likely to face higher education costs than if they were living at home. Planning for these costs may therefore be essential. We know doing so is not easy, but setting money aside as early as possible, in a savings or investment plan, is a good way of helping to ensure education costs are easier to cope with further down the line.

In looking at education costs, it may be worth considering some of the following steps:

  • Your employer may have a scheme to help expat staff pay for private schools for their pre-university age children – nursery through to secondary school (up to age 18). While it is rare to be offered assistance with university fees, help with school fees is quite common, particularly in countries in which the local schools don’t follow the UK or US curricula, and teaching is carried out in a language other than English.
  • Where your child attends secondary school will matter when it comes to applying to universities, as different countries have different curricula. A growing number of international schools understand this and now offer the option of the International Baccalaureate. US universities look for SAT (Scholastic Aptitude Test) or ACT (American College Testing) exam results, while UK institutions want to see A-Levels.

    The time to consider which qualifications your child needs isnotthe year before they’re due to go off to university, but earlier. 
  • If your plan is to return to the UK in time for your children to attend university as UK-resident students, think about how you can arrange to be UK resident – so that they will also be – a full three years before they would be starting university.
  • Be aware that your child may not necessarily want to attend university in the UK by the time he or she is 18. I have heard that certain universities in the US and Australia, for example, have become highly popular among international students, in spite of their generally higher tuition fees for international students. 
  • The key is to start saving for your children’s education as early as possible, I make regular contributions to an investment plan and have found this manageable due to surplus monthly income. The sooner you start, the more time there will be for investment growth to compound, which could make it easier to meet future education costs. 
  • Don’t forget to factor currency fluctuations into savings calculations. If you are being paid in one currency but school or university fees are in another, it may be worth saving/investing in this currency to avoid exposing your savings to currency movements.(For example, if your savings had been in euros and your child’s plan was to attend Harvard University in the US, you would have seen the annual tuition fees rise significantly in the recent past, as the euro has plunged to its lowest level since 2005 relative to the US dollar).

This document is for information only. It does not constitute as investment advice or an offer to provide any product or service by Friends Provident International. Please seek professional advice, taking into account your personal circumstances, before making investment decisions. We can accept no liability for loss of any kind incurred as a result of reliance on the information or opinions provided in this document.

All information contained within this blog correct at the time of publication, 14 April 2015.