Anyone following the currency markets – or even just the news – will be aware of the recent fall in value of British Pounds Sterling (GBP) against the US Dollar, which at the time of writing is a total fall of 18% since the UK voted in a referendum to leave the European Union.
The main question we're getting from British expatriates and other international investors, is "should I worry?"
Well, that depends on the individual situation. Some of these situations could be:
1. People planning to retire in the very near future, and have saved up a retirement fund in GBP but plan to spend it in another currency. This would give you more to worry about than if retirement was still ten years away.
2. People who hold mainly USD (or other currency) investments, but plan to retire in the UK. They are probably in a much stronger position now as the gains from the exchange rate movements alone are worth a lot.
3. People who are very GBP focussed, who are not specifically worried by the exchange rate, but note that the UK stock market is moving inversely to the currency rate – when one goes down, the other goes up. For those who have made paper gains as the markets have risen, will this mean that the markets are likely fall if/when the currency rebounds.
To get some perspective of the present predicament, let's look at a few of the past falls in the value of GBP.
In 2008, a 31% fall in the exchange rate (vs USD) recovered 20% of that back after six months.
In 2010, a 13% fall took five months to recover 12%.
In 2011, a 7.5% fall took three months to recoup 5.2%.
In 2013, an 8% fall took fifteen months to post a gain of 14.7%.
Now in 2016, we're 18% down since the "Brexit" vote in June – and nobody knows when, or indeed if, a recovery will occur, how long it will take, and what level it will recover to. Could now be the time to switch to GBP?
Fundamentally, what is different about the fall in GBP this time? The obvious answer is that this time the UK is leaving the EU, whereas before it was very much in the EU and a powerful member. So will GBP recover again as it has in the past, or will the current trading range of $1.20 - $1.25 (or potentially less) be the new benchmark?
A win for investors with USD & EUR investments
The fact of the matter is that regardless of whether GBP recovers or not, those who want to use, or spend, in GBP in future can now sell their USD and EUR investments and lock in the 18% gain – a clear win, because:
a) If GBP recovers to previous levels, those who converted to GBP now would make money twice – first on the fall, then on the gain.
b) If GBP stays where it is, those who switch now still get the 18% gain locked in, rather than having to worry about if it goes up again.
c) If GBP falls further, those who convert still make a healthy profit from an unexpected event. Not as much as if they could have if they hung on a little longer if this happens, but still a great return – is it worth risking?
The correlation to the UK stock market
Is it just coincidence that the FTSE 100 reaches an all-time high at the same time as GBP hits a 31-year low?
No. Most of these companies are multinationals, who make money all over the world – but report their earnings in GBP. Therefore, when the value of GBP falls, the amount of GBP they earn from revenues abroad increases. Note that their share prices are quoted in GBP – so anyone who invested USD into large UK companies four months ago would not be facing a substantial gain – or loss – as a result of one going up, and the other down.
What does this mean? Well, it's likely to mean that if GBP does recover, the share prices will likely fall – because despite all the drama and sensationalised news reports, there hasn't actually been a substantial change in circumstance for the majority of these multinational companies. So for GBP investors in UK stocks, now could be a good time to decrease exposure to the big UK multinationals.
Those who are worried about the UK economy generally shouldn't be too worried either – the current situation will result in a rebalancing, but not devastation. Remember when one British Pound was worth two US Dollars? That resulted in high levels of 'retail tourism' from the UK to the USA, as it was exceptionally good value to purchase goods from the USA if you were holding GBP.
How about now? According to research by the Wall Street Journal, a "Speedy 30" handbag from Louis Vuitton cost £645 in London last week – that's $802. In Paris, it was €760 ($850), and in New York it cost $970. In China it was $1,115. Expect plenty of 'retail tourism' to the UK if the exchange rate doesn't rebound quickly!
Although the above example relates to luxury goods, the same principle applies to savings and investments – you often have the chance to buy the same thing from a variety of places, at a variety of prices. Could you be getting a better deal?
There's a new book out this week – the author of this blog post hasn't been able to get a copy yet, but it is being serialised in the Telegraph (UK), and it looks like it's going to be a good book.
Why? Well it's written by Mervyn King, now Lord King (how awesome is that for a name), the former Governor of the Bank of England. Not excited yet? That's understandable. But this book, or at least what has been serialised so far, seems to be full of all the things which he couldn't (read: wouldn't) say whilst he was in charge of one of the world's most influential central banks.
Now you may argue, and rightly so, that it's in the interest of any non-fiction author to get a little bit dramatic with things like this. Similarly, it's in the interest of any senior central banker, politician, world leader etc to "under-dramatise" (read: "misspeak", or the noun of your choice to describe saying things which may possibly turn out to be less than 100% true) in the name of stability, or national security, or whatever other excuses can be drawn on.
So, whilst not necessarily suggesting that everything he's written is 100% true, it should be worth reading, and the personal bias of the author of this blog leads breeds the opinion that things he's said after retiring carry a little more weight than things he said whilst in office. It's also worth pointing out that a lot of what he's said is not new, and is not unique to him – many "insiders" reportedly hold the same beliefs (privately), they just feel that they can't say them officially.
There's no attempt to cover absolutely everything here (links are at the bottom for those who want to read more), but here are some choice quotes, and an attempt to translate them from banker-politician-speak to common English. Quotes from Lord King in italics:
"For centuries, alchemy has been the basis of our system of money and banking. Governments pretended that paper money could be turned into gold, even when there was more of the former than the latter" – You have been lied to, for a very long time.
"The crisis was a failure of a system, and the ideas that underpinned it, not of individual policymakers or bankers" – The world's system of government and finance is f****d, but it's not my fault.
"The world recovery since the crisis has been neither strong, nor sustainable, nor balanced" – The world's system of government and finance is still f****d.
"Much of the Euro area has either created or gone along with the illusion that creditor countries will always be repaid" – The Euro area is f****d.
"If the members of the Euro decide to hang together, the burden of servicing external debts may become too great to remain consistent with political stability" – If nothing changes, the situation in Europe will become even more f****d, and may lead to war.
"Put bluntly, monetary union has created a conflict between a centralised elite on the one hand, and the forces of democracy on the other" – Put even more bluntly, the proletariat (workers) are getting shafted by the elite.
"Central banks are trapped into a policy of low interest rates because of the continuing belief that the solution to weak demand is further monetary stimulus" – Central banks are keeping the system f****d because they listen to the elites who benefit from keeping things the way they are.
"As time goes by, parallels between the inter-war period [1919 – 1939] and the present become disturbingly more apparent" – The world is f****d and heading towards World War 3.
"Whether the next crisis will be another collapse of our economic and financial system, or whether it will take the form of political or even military conflict, it is impossible to say… But only a New World Order could prevent such an outcome" – The world is definitely f****d and there will definitely be another crisis… But the illuminati could save us. Or possibly Marxism. Or the return of Christ. Either way, BIG changes are needed.
Of course, the above is very much selective quoting, and there's a little more meat on these particular bones – read the full transcripts here:
And for those of you worried by the comments above, or perhaps amazed by them, it is worth pointing out that before the end of this year we could potentially have the triad of Vladimir Putin, Boris Johnson and Donald Trump making deals on our behalf – so stop worrying! Maybe everything will turn out just fine. Have a great week!
So it's new year resolution time again - are you making some? Here are a few suggestions for making it a wealthy 2016!
1) Save More
Sounds basic, right? It is! You'll have an endless list of things you'll need to pay for - holidays, cars, houses, weddings, kids education - and as time goes on they will only get more expensive. Save more!
Top Tips: 1) Try to have at least 2 different accounts you save and invest into - one accessible for short term expenses, and another for the bigger long term things; and 2) Regularly check your investment returns - it's great motivation to save more! [Find out more here]
2) Plan for retirement
Think that this is the same as number 1? It's not. All the things included in number 1 are optional - but this one will be forced upon you at some point in time, even if you haven't planned for it. Planning is better!
Top Tips: 1) Have a dedicated retirement/pension fund separate from your other savings; and 2) Regularly review what income it is expected to give you at retirement age - and increase the amount you pay in if needed! [Find out more here]
3) Invest for income
If you wanted to sum up Warren Buffet's investment approach in three words, it would be this. It's an approach that has served him well, and it will serve you well also - you will always have money coming to you!
Top Tips: 1) If you're trying to accumulate wealth, reinvest the income instead of spending it; and 2) If you can afford to lock money away for a while, why not purchase a fixed income annuity from a leading global insurance company? [Find out more here]
4) Get Organised
This doesn't just make things easier, it will also make you richer. Different financial products are designed for different purposes - and what may be the best for one purpose may be not so good for another situation!
Top Tips: 1) If you are saving regularly, pick a product which gives you bonuses and incentives to continue saving regularly; and 2) Move money accumulated in regular savings plans into something designed for accumulated savings when you can! [Find out more here]
5) Leave a legacy
Want to guarantee that your family will always have enough money? We all do! 'Universal Life' insurance policies do this - just one payment to buy it, and the insurance cover lives for as long as you do!
Top Tips: 1) Take out multiple insurance policies as and when you can afford them - or use bank financing if you want to defer payment; and 2) If you want to have some input or control over how the money is spent in future, why not set up a family trust? [Find out more here]
So there you go - that's our top 5. If you would like any help with financial planning this year, please contact us and one of our qualified advisors will be happy to walk you through a Financial HealthCheck to give you some helpful suggestions.
And finally - best of luck with the new years resolutions, whatever they are! Have a very happy 2016 :-)
It doesn't seem to be making the headlines as much anymore – but the crisis in Greece is surely about to explode.
Talks between the Greek government and the European Union (and ECB, and IMF) are getting nowhere, deadlines keep being extended with no result, and there isn't actually any money.
To be clear, the "bailout" of Greece wasn't actually a bailout of Greece at all – it was a bailout of those who had lent money to Greece – mainly large financial institutions. The money lent to Greece in the "bailout" was used to pay back loans to the (often privately owned) financial institutions, it didn't go to the Greek government for spending on the Greek people.
The larger European nations are insisting that Greece breaks its previous promises to its own people, by reducing their pensions (amongst other things), so that it can keep its previous promises to larger and wealthier foreign nations and financial institutions.
Of course many western politicians would argue that they have to protect these financial institutions because they hold the pensions and savings of so many "ordinary citizens", but take a look at the miserly annuity rates available from developed economies these days and compare them to the financial reports of the institutions providing them – it's not hard to argue that they might be looking after themselves a little better than they're looking after "ordinary citizens".
In contrast, the left-wing Greek government would argue that there's actually little or no benefit to the overwhelming majority of Greek citizens (who are already relatively poor) for them to have to reduce their own pensions, just to prop up a few huge (and rich) financial institutions from wealthy countries who made some terrible lending decisions.
So the current impasse isn't likely to change – there is no political or economic benefit for the Greek government to agree to the "reforms" demanded by the larger European countries, and no political benefit and only a small short-term economic benefit for the larger European governments to change its demands.
It's common for supporters of left-wing governments to say they stand up for the poor, and for opponents of left-wing governments to say they ruin the economy. In Greece right now, it looks like both sides are going to be proved right.
So who is right? That depends on your perspective. Should debt agreements be honoured? Most people would say yes. Should "the will of the people" prevail in a democracy? Most people would say yes. (The current Greece government was recently voted into power on the back of a promise to not implement the "reforms" demanded by the larger European countries). The problem is, they can't do both.
Personally, I think Greece should stick to its position, not meet the demands of the other nations, look after its own people, deal with the short-term economic problems as best it can, put its remaining resources into ensuring that everyone has the basics – food, shelter, clothing etc – and begin the rebuilding as soon as possible. Literally nothing of any substance is being achieved by the ongoing talks, decision postponements, and half-measures.
Will it happen? I'm pretty sure it will.
When will it happen? Relatively soon I think, although the larger European governments will be keen to try to push the problem a little further into the future (where it will be an even bigger problem, because it's getting worse every day), so there might be some sort of "fudge" for the near future.
But as every politician and economist secretly knows, Greece cannot afford to pay its debts, and never will – regardless of whether they agree to the demands or not.
What will this mean? Certainly a Greece default. They might not call it a default – other phrases commonly used are "haircut", "creditor agreement", "restructuring" etc – but they all mean one thing – creditors aren't going to get some, or all, of their money back (which is the definition of a default).
This may then lead to Greece leaving the Euro (definitely the best thing for Greece in the medium-long term), as officially, no country is allowed to default and remain in the Euro – although also officially, no country is allowed to leave the Euro at all, which leaves a bizarre conundrum.
It's amazing that in a world with so much history to learn from, and so many intelligent people to think things through, that political leaders still think that if you write something on a piece of paper and have a big signing ceremony, everything will turn out as written. That's a massively stupid assumption to make, to put it mildly… but it keeps happening…
So if Greece leaves the Euro, it will be massive news, but ultimately they'll just introduce a new currency (probably called the Drachma again), which will have an artificial conversion rate to the Euro, and which will promptly crash as soon as it's open for trading.
The stock market in Greece will also be redenominated, crash, then everything will carry on as normal for the vast amount of Greek people (no more foreign holidays or luxury imports, but anything produced in Greece will still be there, just paid for with a different piece of paper with a different number on it).
Then, as Greece becomes exceptionally cheap for foreign tourists, and its good become exceptionally cheap for foreign companies, profits (denominated in Drachmas) will soar, the stock market will rise massively, the currency exchange rate will stabilise, and foreign financial institutions will start lending to Greece again. Back to normal.
So keep an eye out – you'll never get a better buying opportunity than immediately after a massive crisis, particularly after a currency redenomination crisis, in a relatively developed nation. And it looks like it's coming soon…
It's a largely mundane part of your financial planning, that takes up a gradually increasing amount of your money as you get older, but it can save you millions of dollars – or keep you alive, if you're short on cash – there's no doubt that medical insurance is a necessity for the whole family.
And in a world where people change their husband/wife/lover more often than they change their insurance provider, you don't have to be a genius to work out that there might be a much better (and much cheaper) option, if you stop to think about it for a while.
This could be that moment – why not think about it for a couple of minutes? It might save you a few thousand dollars.
The prices below are for medical insurance from AXA Hong Kong, with the following features:
- Worldwide cover, including emergency evacuation
- All inpatient and emergency treatment covered
- Direct billing (AXA pays the hospital bills directly)
- High maximum annual claims limit of $1,500,000
- Guaranteed acceptance, regardless of medical history – no medical exam required
|AGE||ANNUAL COST (USD)||AGE||ANNUAL COST (USD)|
Can you afford not to have this?
These prices are based on someone living in any ASEAN country except Singapore (which would be approximately 5% higher), and covers medical treatment in any country – not just the one you live in.
To keep the cost down, these prices include an annual deductible of $1,500 – meaning that you would have to pay the first $1,500 per year, if you make a claim, with AXA paying everything above this amount. That gets you a 40% discount, so if you'd prefer to have AXA paying everything (direct to the hospital, no need to pay for it first, fill out a load of forms, and claim it back later – it's all taken care of whilst you're receiving treatment), just do the maths to work out the price for Nil excess.
If you'd like cover for outpatient treatment, or need to cover pre-existing conditions – such as cancer, heart problems etc – that's available too, at a higher cost, with their "comprehensive" option.
For the sake of clarity: You can be insured, with high levels of cover, even if you've had medical problems in the past, in case the same thing happens again.
This is by far the best medical insurance we've been able to find from around the world – both in terms of cover, and in terms of cost – and it's fully regulated in Hong Kong, and underwritten by one of the world's largest insurance companies.
We've already helped hundreds of families get better cover, at a lower cost, by them buying this insurance through us – but we'd like to make it thousands of families. Perhaps it's your turn next?
For a personalised quotation, we just need your name, age, sex (male/female), and country of residence – if you send those details to email@example.com, we'll send you a quotation and talk you through your different options.
And for more information, there's plenty here: http://www.imperiumcapital.com/medical-insurance
Thanks for reading – we are looking forward to hearing from you.
Happy New Year! We hope you had a great Christmas festive season and are enjoying 2015 so far.
We're kicking off 2015 with some really good special offers, which admittedly are mainly an excuse to tell you all about the awesome financial products we have – but are still really good offers in their own right, and are available until 28th February 2015.
To start, there's a free $5,000 on offer if you start saving $1,000 per month. Yes there are strings attached (obviously), but for most people they're strings which a) benefit them, and b) fit perfectly with what they want to do anyway. So have a look – click here.
For those who want to save a bit more, we've got free luxury travel packages to a wide range of top quality destinations – with some "money can't buy" experiences thrown in. Everything is 5-star – and I'm referring to the financial product as well as the holidays. Click here for more info on that.
We've completely removed our UK pension transfer fees – so if you've still got a pension in the UK, let us help you get at it. It is almost certainly better for you to transfer it out, and I'm only saying "almost" for the sake of legal prudence. I've never come across a situation where it was more beneficial to leave it where it is, and I've done a lot of them. You'll make more money, save a fortune in tax, and be able to pass on the full benefits to your dependents when you die. If you leave it where it is, you won't. Click here for more.
If you like to manage your own investments, now's the time to open an Imperium Capital Investment Platform account. We're offering 90% off the set-up deposit fee, and free trial accounts. It gives you immediate online access to over 7,500 investment funds from pretty much every investment manager globally, and it's got loads of really cool features. The top performing fund in 2014 was the First State Indian Subcontinent fund (+70.51%). Other honourable mentions go to the HSBC Turkey Equity fund (+51.56%), the Fidelity Global Property fund (+41.95%) and the JP Morgan Global Healthcare fund (+29.18%). Click here for more.
If you like straightforward low risk investments, how about bank deposits paying up to 8.8% interest (click here for more info on that), or 1-2 year bonds paying a fixed 10%? The bonds are currently in the final stages of legal approval and should be launched during the week commencing 19th January 2015 – click here for more info.
The villa prices for the Lima Lombok Luxury Resort are being held steady until 28thFebruary, so if you want to snap up a great investment property at a great price with a fantastic financing package, click here for more info.
We can also get you up to $550,000 life and critical illness cover, without requiring a medical, at a great price, from one of the world's largest insurers (AXA), based in one of the most highly regulated jurisdictions (Hong Kong) – click here if you're interested.
Finally, if you'd like an international offshore bank account, we've slashed 60% off the fees – now just $100 (down from $250). Click here to find out more.
So there you have it – some great ideas to give your finances a boost in 2015. As always, if you'd like to discuss any of them with us personally, just let us know – we're all happy to help. Contact us by clicking here.
Have a great 2015!
"Like Bali, 20 years ago" is a phrase often used to describe Bali's neighbour, the beautiful island of Lombok. For those lucky enough to have visited, you'll vividly remember the crystal blue waters next to pristine white-sand beaches, overlooked by majestic fauna-covered mountains.
It's a little piece of paradise – serviced by a new international airport, roads which don't (yet) have potholes in them, and an ambitious government-backed plan to bring Lombok up to Bali's level in terms of tourism (hopefully without the same level of traffic).
From an investment perspective, Bali property has seen very high price growth over the last 20 years – and Lombok is widely tipped to do the same.
We're not property experts, but we know a thing or two about finance, and for the last few months some of our senior staff have been part of a team working on a developing a new type of property financing arrangement, for a new luxury development overlooking Kuta Bay, Lombok.
Traditional financing involves a mortgage – pretty straightforward – you borrow money to buy a property, secured on the property in question. Sometimes as part of the package you get a guaranteed rental yield to help pay for the mortgage repayments. This is all well and good, but we've done better.
We've created a financing package where you don't borrow any money at all, own the property outright with no mortgage held against it, and only pay half price.
In exchange for paying half the purchase cost, the financing company gets the rental yield for the first seven years (less 21 days free usage per year for the owner).
No mortgage, no default risk, no rental risk. Just half price. And at the end of the seven years, you get the rental income from then on. Or you can live in it!
The property in question is the fantastic Lima Luxury Villa Resort, and has a selection of one-bedroom (100/125sqm) and two-bedroom (250sqm) villas, fully furnished to a luxury standard, on a resort which also offers a spa, gym, restaurant/bar, in-room dining, wedding chapel, complimentary car service, and 45m infinity pool.
With prices starting at $195,000 (or $97,500 with the financing package), it's not difficult to work out that it's a great investment opportunity – but if you'd like some more detailed financial analysis, contact us and we'll send it over to you.
For more information on the development itself, including title/ownership options for foreign nationals, click here.
There's also a fractional ownership option - split into units of 10% of a property - contact us if you'd like more details on that.
And of course, if you'd like to buy one (or more - at half price, can you afford to buy two?) just contact us, and we will be happy to help you through the purchase process.
Have a great week!
After an engaging and drama-filled election season in Indonesia, we're not far off from everything settling down and plans being put into action – and there's a LOT of plans.
And we're not just referring to plans of the President-elect either. For many businesses (both domestic and international), the main issue wasn't actually who won (although many had a strong preference), it was more about stability – politically, socially, and economically.
In the last few months, not much has actually happened in Indonesia – at least in terms of business. Afraid to end up in an unknown situation, most projects have waited, and are still waiting, for the new President to officially take up office and get through a full week without incident before signing off on their plans.
Throughout this time though, they haven't stopped planning. As it's turned out, it's accurate to say that due to the long wait, a lot of projects are actually a lot better prepared than they otherwise would have been – and that will be evident from October through to the end of the year by the sheer number of plans which are ready to implement at the point of announcement – which previously was something of a rarity.
Expect to hear a lot of IPO announcements (companies listing on the Indonesian stock exchange), a lot of M&A announcements (mergers and acquisitions), and a lot of development projects (predominantly construction, agriculture, infrastructure, and large resources/energy projects).
But a word of caution – there's a strong likelihood that it's not going to be automatic wealth creation for all – there's going to be losers.
Change, generally, benefits companies who are good at adapting and innovating – and most certainly doesn't benefit companies who are looking back to the past rather than to the future. There are plenty of very strong Indonesian companies, but also plenty of not-so-strong ones, which might run into problems in the next two or three years.
For this reason, we don't expect the Jakarta Composite Index to dramatically increase, although a few quick wins with IPO's will help. And whilst there's a huge amount of "foreign money" waiting to invest in Indonesia (a large part of that being money controlled by wealthy Indonesians but currently held offshore), most of that will be put into ground-level business, rather than investing into stocks.
President Jokowi's much-publicised plan to gradually remove fuel subsidies (which is entirely necessary) will almost certainly be accompanied by a raft of "populist" measures to prevent the poorest Indonesians being disadvantaged. He's made no secret of his intention to build Indonesia from the bottom up – focussing on the needs of the poor, not the rich – and whilst nothing will change overnight when he becomes President, it's worth noting that one of his first major acts as Governor of Jakarta was to raise the minimum wage by 44%... we will be very surprised if he didn't attempt something similar at a national level.
Both of these will have an impact on the rate of inflation, as businesses would immediately take the opportunity to raise prices, which in turn would have an impact on the Rupiah currency exchange rates. But on the other hand, taking millions of Indonesians out of poverty, and making millions of Indonesians slightly richer, immediately creates millions of new consumers, which in turn benefits the wealthy people who own the companies which make and sell things to these consumers. Good, adaptive companies will do very well; others will do badly. Quick tip: Steer clear of companies and/or projects which aren't embracing the changes, they're the ones at risk of doing badly.
Some of these upcoming projects are open to investment – we've got some great opportunities coming up soon that we're involved in, including some very cleverly structured investment property, some fully insured project finance deals (insured with a global A-rated insurer), as well as IPO financing and other investment banking projects. If you'd like to hear about them as soon as we're able to go public, let us know, and we'll make sure you're among the first to hear about them.
We'd also love to hear from business owners and/or senior management who are interested in giving their staff (of all levels, including the very lowest paid) the option of accessing some of the higher-end investment opportunities as a collective (particularly the fully insured ones), perhaps through a bespoke company pension or optional savings scheme – it would be a shame if it's only those who are already relatively wealthy who benefit from this sort of thing.
Until next time – thanks for reading.
There are plenty of insurance products on the market – and many of them are definitely worth having, even at a cost. Any sort of extra protection is worth having, but when it's free, it makes it even more worthwhile.
Actually, this also relates to protecting your whole family – not just yourself. Whilst some would argue that it's not "free" in the traditional sense of the word, from an accountancy perspective, it is. Confused? I'll explain.
Most insurance products offer a fixed payout, IF something happens, in return for a payment which is non-refundable. You'll definitely pay the premium, but there's no guarantee that you'll get anything back.
I'm not knocking these types of insurance at all – they're an essential part of proper financial planning for most people, and in most cases a very cheap way of preventing a financial disaster. But there is another way, where you can get these benefits – for free.
I'm talking about a product from AXA's Hong Kong business – one of our key partners – which guarantees that if you don't claim on the insurance element of it, you'll get your money back – plus interest.
As you may be aware, AXA is a conglomerate of international businesses – for example, AXA Indonesia is an entirely separate business from AXA Malaysia. Whilst they all report to the French head office and repatriate some profits there, each business unit offers different products, and different pricing levels, to reflect the different market places in which they operate. And we're consistently finding that its Hong Kong business is delivering some great financial innovations.
How does this product work?
As soon as it's issued, you'll have life cover AND critical illness cover. A critical illness is any illness or injury that could kill you – such as cancer, heart attack etc. If you get diagnosed with an illness like this, it pays out, almost immediately, whether you end up dying from it or not.
You can also claim multiple times, for different types of illnesses (and death). So, if you're unfortunate enough to get cancer, then have a stroke, then get paralysed, then get a brain tumour – you'll receive four payouts. Plus a fifth payout upon death.
If you don't get a critical illness or die, you get your money back – plus interest. The amount you get back keeps going up, then longer you leave the policy in force. There is one minor catch – to be guaranteed of getting back more than you paid, you have to leave it in force for a few years (the actual length of time depends on your age and what payment timescale you selected).
If you get to age 100 without any claims and/or without cashing it in, you get paid back a significant amount more than you paid in.
What's the initial outlay?
This will vary from person to person depending on age, smoker or not etc, but here's an example of a 40-year old non-smoking male.
For $200,000 cover, the cost is about $12,000 per year if you pay it over 10 years. If you spread it over 25 years, this almost halves to around $6,000 per year – you pay more in total, but this is reflective of the fact that you get full cover from day one, despite having paid significantly less in to it.
You can also pay in one lump sum – so around $120,000, and get a guaranteed minimum of $200,000 back at some point.
By the time our 40-year old non-smoking man reaches retirement age, he can get about $200,000 cash out of it if he hasn't made a claim. If he leaves it in there until he's 80, he can get out about $300,000.
Also, whilst the fixed payout for critical illness claims is fixed at $200,000 per claim (up to a maximum of four, totalling $800,000), the death benefit increases – so death at age 80 would payout about $375,000 to his family. The amount paid out on death is always higher than the amount available to take out as cash.
If he gets to age 100, it'll pay him out $1,165,800. That's a nice birthday present right there.
This is a fantastic product for children.
For exactly the same level of benefits as the example above, the cost dramatically reduces the younger you are. So, for a new-born child, it costs about $3,600 per year if spread over 10 years (total payment of around $36,000, which can also be paid in one go if you like).
That child will then have insurance protection all the way through life, and the ability to take out cash if they need it in future. By the way, if they get to age 100 with no claims (which may be significantly more likely in future as healthcare continues to improve and more diseases are cured), they'll get a cash payout of $2,061,000. That's an even better birthday present.
Enough numbers for now – the only thing left to mention is that you can of course choose the amount of insurance you want, choose the amount you pay initially, and choose how long you pay it for.
The options regarding payment durations are either in one lump sum at the start, over 10 years, 15 years, 20 years, or 25 years.
You can choose a very high or very low level of cover, or anywhere in between, and you can have up to $500,000 cover without the need for a medical exam (if you're under 45, the non-medical-exam limit decreases with age).
You can start with an insurance amount and work out the initial cost, or you can start with an initial budget and work out the amount of insurance you'll get.
If you want to find out what you could get personally, with definitive numbers specifically for you or your family, please contact us – it only takes us a couple of minutes to produce a fixed personal quotation, and we're more than happy to provide it to you with no obligation at all.
You'll not be disappointed – this is a really great product for everyone!
Since the last blog post, a few people have been asking about retiring in Australia – particularly in view of the recent changes to the pensionable age.
If you weren't aware, the Australian government recently announced (alongside a raft of other unpopular measures) that the pensionable age would move to 70 years old by 2035 – basically meaning that Australians born after 1965 would have to wait until 70 to claim the "Age Pension".
Needless to say, that's quite a ripe old age to keep working until through necessity. The general questions have been 'can something be done about it', and 'if so, what'.
The basic answer is yes – there's always something you can do about it. But usually, 'what' exactly to do is the bit that people struggle with.
Ultimately it comes down to three things:
1) Effective planning
2) Timely planning
3) Intelligent planning
Retirement, including the time of retirement and the wealth in retirement, is always in the hands of the individual. Like other well developed countries, Australia's government will ensure that you're not flat broke – but they're not going to keep your fridge stocked with beer and your barbeque loaded with shrimp. That's all up to you.
Effective planning is all about getting stuff done. Plans on paper are great, but it needs to be executed for it to make any difference. This sounds simple, but is the biggest mistake people make –they can confidently state what they want in retirement (they've "planned"), but cannot demonstrate how they're going to achieve it, and are not actually doing anything about it (it's not effective planning). Quick tip: If you're not currently saving for retirement, you're not planning effectively.
Timely planning is all about getting stuff done at the right time, to make it better. It should be fairly obvious that those who start saving up for retirement at 45 end up with a lot less money in retirement than those who start saving at 25. This is particularly relevant to expatriates, because you're often not forced to save for retirement (which you would be at home), and you're living a great life on an expat package so don't really spend too much time thinking about what happens when the expat package finishes. Quick tip: If you're not currently saving for retirement, you're not planning in a timely manner.
Intelligent planning is about squeezing every last drop out of what's available to you. This includes maximising the benefits offered by governments, structuring your financial planning in the most cost-effective and tax-effective way possible, and allocating your accumulated capital in the most efficient way (amongst other things). Quick tip: If you're not a pension expert, or you're not using the services of a pension expert, you're almost certainly not planning intelligently.
One of our colleagues, who is an Australian pensions expert (and remains fully licensed in both Australia & Malaysia), is running a couple of seminars – in Batam, Indonesia, on the 24th June, and in Kuala Lumpur, Malaysia, on the 25th June – with a particular focus on some of the intelligent planning you can do if you own, or plan to own, property in Australia. On the most basic level, anyone who wants to retire in Australia will need somewhere to live, so it's something you should consider now, rather than in future (timely planning).
It'll also cover some of the tax-efficient ways of holding Australian property through a Superannuation (pension), how you can buy a property now (combining the use of international mortgages and pension savings), and how you can ensure that your total retirement package is greater than the sum of its parts.
If you'd like to attend one of the seminars, please just contact us; if you can't attend but would like to discuss the topic anyway, please just let us know and we'll arrange a personal introduction.
Finally, if you're not planning to retire in Australia, most of the above still applies – so get planning!
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