Products Explained

March 24, 2015 / Knowledge Centre

Regular saving plans

A regular saving plan is designed to work on the long term and allows the policyholder to accumulate wealth for personal financial planning targets. The regular investments are invested into a selection of funds that the client will set together with his adviser. There is a pre-set choice of funds which has been pre-selected by the life insurance company from the large number of funds available in the market.

The preselection is designed to provide the policyholder with a good cross selection of the available investment choices in the market. The selection generally consists of 150-250 funds ranging from low-risk money-market funds to single-sector specialist funds and everything in between thereby giving the policyholder an unlimited number of possible selections.

All regular plans have a so called ‘initial period’ this is a period at the beginning of the plan during which the policyholder needs to maintain his contributions. The investments made during the initial period are usually not available for withdrawal by the policyholder until the maturity of the policy. This guarantees a minimum income for the life insurance company during the term of the plan and that those who start are motivated to maintain the plan to maturity.

Once the policyholder has completed the initial period the contributions can be reduced or a contribution holiday can be requested. The initial period can range from as little as five months to a maximum of two years depending on term of the policy.

Regular plans are often used to fund expenses towards the end of the policy term. For instance education fees can be easily withdrawn from a plan whilst the majority of the capital remains invested for the policyholder’s personal pension. In order to do this the policyholder first needs to build up access to capital inside his policy. Access is available to capital and growth on capital that has been invested after the initial period has been completed and taking into account a minimum account balance that needs to remain in the policy.

There are many differences between plans of different providers and it would take more than the space available on this website to describe all differences in detail.

Portfolio Plans

A portfolio investment is also referred to as a lump-sum investment. This is due to the nature of the investment process. A policyholder would invest into a portfolio plan in lumps on an ad-hoc basis without any further regular contribution required by the policyholder.

A portfolio plan has a very flexible investment approach that is much wider than a regular saving plan. A portfolio plan will be able to invest in direct bonds, equities, exchange traded funds, almost all mutual funds and structured notes. This flexibility is what makes a portfolio plan so attractive. Some people consider the portfolio as their personal investment fund through which they conveniently purchase and manage the assets of their choice.

All portfolio plans are designed for long term capital growth and should be treated accordingly. There is no minimum or maximum investment period, but free access to capital generally ranges between 80-90% of each contribution for the first five-eight years after each contribution has been made. Once this period has been completed the full 100% can be accessed for free. With this in mind a portfolio is an ideal medium term tool to accumulate wealth outside of a typical high-street or private bank set-up yet still enjoy full control over the investments in a secure and well regulated location.