The low fee platform for an offshore Lump Sum or U.K pension
I have used the Isle of Man as an offshore go-to for some time for lump sums and pensions. I have even used Cayman, Malta, Singapore, Hong Kong companies but have found them to be expensive lack flexibility, and in the majority of cases not be beneficial for the client.
I recently have used “Custodian” for an offshore bond platform and will give you a review of my personal experience and own thoughts with the facts that are highlighted.
Why do I consider this?
Offshore platforms can be good value to the client, Arden by RL360 are reasonably priced with a good enough fund selection based in the Isle of Man with investor flexibility. Other good products are available as well in the offshore bond market.
But these are one of the few, that I am personally happy with in the offshore lump sum investments section.
Offshore lump sum products that if used in the right manner can be highly effective for example if you are looking to set it within a trust and go over the tax band (like IHT nill band rate in the U.K.) you can save and protect wealth legally for expats so can be well worth it. But most offshore bonds have 1.5%-3% charge, limited flexibility, and rather limited fund section.
Also, if you are looking to move your SIPPs of your U.K pension transferring your AusSuper, or rolling you 401k or IRA (this one really would be an extreme example due to the tax) Offshore. There would be little point if you are not breaching any tax limits to look offshore. As platforms range from 0.25%-0.5% and active management is 1.2% so why would you pay 2.5% at the very least offshore (I have seen people paying 5-6% management and platform fees offshore) when you can get it for a fraction of the price back home.
The U.K., U.S, Australia, Canada all offer online brokerages and even financial advice for a lot less than this. So really is it worth using if you are not getting any tax reductions as an expat.
*Note that if you buy funds from the source directly they can have a high entrance fee and a fee of 1% annually.
What Do I Look For?
When I look for a platform to be used I want it to be a few things, for the “genric” investor.
- Stable
- A good support team
- Reputable
- Good Investment Options
- Good value for the client
- Flexibility for the client to withdraw without penalties if needed
- Something that gives it edge offering something different
Custodian has some of the cheapest fees around with a 1% annual management fee and broker fee all in (The advisor can charge higher) and have been impressed, with the level of service and response time.
Having access to a complete fund range with even Hedge funds and other select funds and Crypto included.
These can be out of the reach of normal (under 10 million USD) investors this to me adds value for the client.
As well offers 90% flexibility charging free withdrawal though the duration of the term.
I am not going to be all for a platform as have to give some, natural perception, being that it doesn’t have the location name as the Isle of Man for a Brit, Hong Kong, or Malta. The company size, although becoming a very popular choice in the expat community. Compared to the size of Generali and other large financial insinuations it doesn’t have the assets under management. But, is fully backed by a large multinational custodian bank so the assets are fully protected and in a tax-efficient low-cost jurisdiction that has a stable banking system.
Facts
Where is Custodian Life based and who do they bank with?
Custodian Life are based in Bermuda and bank with The Bank of Butterfield, which has existed for over 150 years.
What are the positives associated with Custodian Life?
- The policy is much cheaper than most expat investments. The exact charging structure will depend on several factors but are nowhere near as expensive as some of the policies I have reviewed before.
- The speed of service is quick. You don’t need to send in physical documents. This means that setting up the policy, adding money and withdrawals is quick and easy.
- The minimum investments are only $30,000, 20,000GBP, or 25,000 Euros which is much lower than most competitor companies.
- You can hold pretty much any asset on the Custodian Platform. Individual stocks, funds, professional investor assets, and even Bitcoin and several cryptocurrencies. You can also segregate your assets. For example, have $90,000 in conventional assets and $10,000 in non-conversational assets.
- The previous point also means you can gain access to investments that are usually reserved for high net wealth (HNW) investors. Whilst many private banks require people to invest $1m+ in such investments, it is possible to go into these assets with lower account amounts with Custodian
- Custodian Life has partnered with Extante in the EU. This helps an investor gain access to “Custodian Trader” and further increase their investment opportunities.
- Security. Custodian Life has a “segregated account system” which means a client’s assets are held separately from the companies liabilities. So even in the unlikely event of a bankruptcy, a client’s assets shouldn’t be used to pay off liabilities. This is a much better security than a government “guarantee” that only covers a specific amount of cash.
- There are not usually big penalties associated with getting out of the investment, which is unlike most of the traditional expat investments.
- It is a tax-efficient structure for most expats.
- As most of the procedures can be done without the need for physical documents, it is a portable investment. In other words, if you get a job in another location, it won’t affect your investment as much as some of the old-fashioned providers that require a lot of documents to be sent by post.
- 24/7 online access to valuations.
- Locals and expats can sign up, which is excellent for people that want international solutions, even if they aren’t an expat.
- They can take money from both cash and under-performing investments. In other words, if you have $100,000 in cash and $100,000 with an expensive investment you aren’t happy with, you can make a $200,000 investment. However, it can take 4-8 weeks, for cash or assets to be sent from other investment providers.
What are the negatives with this investment?
- Like most other expat providers, Custodian Life can no longer accept American expats, or indeed American taxpayers. So if you are British, but with an American passport, you probably can’t be accepted anymore.
- As you will go into Custodian Life with an advisor, your mileage will vary. In other words, Custodian is merely “an umbrella” to hold any investment. How that umbrella is used, is key. This isn’t a negative about Custodian per see, but merely that your returns will also depend on your advisory company. For example, in the last 12 months markets have been up substantially, but your returns would have depended on the investment decisions made on your behalf.
Frequently asked questions
Is it a life insurance company?
Custodian Life is regulated as an insurance company, but it isn’t life insurance in the traditional sense of the word.
Your beneficiaries only get 101% of your account value. So if your policy is worth $100,000, your beneficiaries will get $101,000.
There are advantages, including tax benefits, of being regulated as a life insurance company, even if the policy is in reality an investment.
What currencies can you invest in?
You can invest in USD, British Pound Sterling, Euros, Norwegian krona (NOK) and Swedish Krona, AUD, SGD.
However, if you send money from another currency into the USD account, it will automatically be converted.
In other words, sending South African Rand into the USD account would be automatically converted to USD, rather than sent back.
What are the minimum top ups?
If you want to increase your investment over time, the minimum increase is $10,000, 10,000GBP and 10,000 Euros.
Can you invest with a partner?
You can have a joint policy with a husband or wife.
I have been proposed a Custodian – how do I know the investments held within the bond are sound?
This depends on many things. If you have been proposed a Custodian and want a second opinion, please email me.
Conclusion
Custodian Life is an excellent alternative in the expat market. However, your returns will of course, partially depend on what assets you invest in within the investment.
If your investment is being mismanaged, your returns won’t be as high, as if sensible investments are being used.
