Fee Reductions Spells Good News for Expatriate and Offshore Investors

Offshore pensions and savings plan fee reductions to stimulate demand

Drive towards greater transparency

Offshore brokers still lag onshore counterparts for transparency

Offshore savings and pension plans, which for many have traditionally carried relatively high management fees, are set to become much cheaper following changes announced recently by at least one of the major providers in the market. According to Tim Harvey, managing director of UK regulated discount brokers Offshoreonline.org, specialists in offshore investments, Skandia have removed entirely the initial charge on funds bought within their offshore pensions and Collective Redemption Bond wrappers. In some cases, this will mean a saving for offshore investors of up to 5% in fees, meaning that after the costs of the wrapper are accounted for, 100% of an investment will now go into the client’s designated funds.

The move is part of a drive to introduce more transparency into offshore investing and has been welcomed by brokers such as Offshoreonline.org, who point out that charges which apply to the wrapper itself will remain unchanged. Tim Harvey comments, “Balanced offshore pensions and savings portfolios are often complex in nature, with clients tending to want both a wide range of funds and the ability to switch easily between investments. Wrappers such as the Skandia products are ideal for this in many cases, but historically have levied significant initial fees. Discount brokers such as ourselves have been able to reduce these in part, but even with a full rebate of the commission paid to the intermediary, charges have still been retained by the wrapper provider, such as Skandia. With these charges now removed, the whole process is far more transparent for the client and cheaper too”.

Offshoreonline.org have confirmed they will continue their policy of discounting fees associated with offshore pensions and savings wrappers.

Charges on offshore investments are for many a hidden problem. Expatriates and international investors using local brokers outside of the UK have traditionally not benefited from the same level of protection and regulation enjoyed by UK investors, so charges have frequently remained buried or undisclosed to the client. Indeed, Offshoreonline.org’s own research has revealed this to be one of the most common complaints amongst investors who are often unaware of the proportion of their investment which is swallowed in fees, as no obligation exists offshore to disclose fee structures in the same way as in the UK.

Tim Harvey ends, “We are expecting an increase in interest in offshore products such as Skandia’s pension and savings accounts, as these offer high levels of choice for investors and low cost switching of investments, which can be ideal for those who like to take an active role managing a portfolio. However, overseas clients should always challenge their broker to lay out in detail information on all charges that will be deducted, as is the case if advice is provided from brokers such as ourselves in the UK”

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