Friends provident Isle of Man surrender penalty

Discussion in 'Investments' started by frankde, Jan 24, 2016.

  1. frankde

    frankde Frequent Poster

    I have been investing in some funds by Friends provident Isle of Man for a numbers of years, basically so much per month.
    I have basically made <1% per year with these funds, and they now tell me there is a surrender penalty if I try and sell these funds... The surrender penalty is more than what I have made with these funds...
    Has anyone else invested in these funds ? Have similiar experience?
  2. Marc

    Marc Frequent Poster

    This sounds like a very typical experience.

    It sounds like you have an "offshore investment bond" these are very popular with salespeople in places like Dubai, Hong Kong and even Spain and are often sold to ex-pats as a form of "pension"

    They have very high contractual charges as well as other hidden charges.

    Since it is a contract it is almost certainly a case of damned if you do and damned if you don't. If you stay with it to avoid the surrender penalty you will continue to pay the high contractual charges whereas if you cut and run you will suffer the early surrender penalty. Either way the contract is costed to cover the typically high commission that would have been paid when it was sold to you.
  3. Dan Murray

    Dan Murray Frequent Poster

    Hi franked

    Sounds like you've got the run around here. It might be helpful if you could provide the name of the contract that you are invested in so that Marc can explain the precise charging terms and in particular explain how the hidden charges are concealed. I think this may help to prevent others being similarly being duped.
  4. frankde

    frankde Frequent Poster

    Hi Marc/All
    Thanks for the replies
    Yes I am an expat myself in Asia and this product was sold to me as a endowwment to cover the loan on a property which was interest only.
    As you say its full of hidden charges, and I learrned this week that the surrender fee which is 1.5 year of my contributions is deduced to cover the commision that was paid the advisor who sold me this product...

    Anyway I also learned this week that I can surrender amost of the fund without penalty and I can cancel my contributions without penalty, which I will now be doing and will leave the minumium amount in this fund. Its funny the product was originally sold as something that would deliver 6% per year which would cover the fees, in reality the return has been close to 1% per year...
  5. Ravima

    Ravima Frequent Poster

    Check your potential liability with Revenue as well.
  6. Rhia92

    Rhia92 New Member

    Hey I'm also in a similar situation myself. I signed up to a short term 2 year scheme with a company based in the Isle of Man that operates in the Middle East (where I live). My financial advisor told me I was signing up to a limited special offer where I would pay in 750 US dollars a month for 2 years and receive a 4500 dollar bonus along with any growth. I could withdraw all this money free of charge at the end of this 2 year period. However, on further inspection, I discovered that my online account actually says the premium term is 25 years. This means that I will be charged a surrender fee of 85% at the end of 2 years, despite what I was told. I have expressed my concerns to my financial advisor and he has told me I will receive 100% of my money plus the bonus after 2 years. After researching online and hearing other experiences of this company, I would rather take the hit now and lose 5 months worth of pay as opposed to 2 years. What do you think?
  7. SBarrett

    SBarrett Frequent Poster

    From past posts on here and reading some of the t&c's, you are likely to be on the hook for the term of the policy. These types of plans used to exist in Ireland but have been done away with. Under these contracts, the person who sells you the product gets a commission of 60%+ of the first year premium. The product provider has to recoup this commission from you and does so over the term of the policy through a high policy fee. If you cash in, they calculate the money still owed to them and they deduct it from your fund value. If you are only just in it, it's probably better to cut you losses.

  8. frankde

    frankde Frequent Poster

    Hi Rhia92
    As mentioned by SBarrett and others in this thread its best to exit out of this plan now and cut your losses
    I had a Friends Provident plan for > 10 years and basically made no money in that period. The fee on these policies is about 6% per year, and as the financial advisor who sold you this plan made a massive commision, this will be charged back to you in the form of an exit penalty.

    Its best to warn your friends in the MIddle East to stay away from such policies and the advisor who sold you this

    For your reference here is a link that describes how a Financial Advisor Company in Japan sold a fund hosted by Friends Provident that they knew to be failing to new clients due to the high commisions they were receiving, eventually the fund did fail and investors lost all their money...