Old Mutual International OMI Executive Bond Review | Product Review
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Fund Access 2.5 / 5
Charges 2.5 / 5
Accessibility 2.0 / 5
- Widely available and sold, with good company rating
- Offers some tax protection in certain jurisdictions
- With commission rebated it could be considered for a minimum of 5 years investment where no withdrawals required
- It offers time apportionment for those returning to UK
- No flexibility of full withdrawal or full access in the early years without penalty
- Many countries do not recognise any tax concessions
- With commission this is an extremely expensive option, and even part withdrawals can increase real costs
- WARNING: Costs are largely dictated by the charging structure chosen by an adviser. Some advisers recommend a 1% regime and then, after the client has signed, change the charging structure to a more expensive regime to earn more commission
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Old Mutual International (OMI) is a huge South African and London listed insurance company that has specialised in offering a wide variety of investments within its products. Prior to 22 December 2014 the company was known as Royal Skandia before changing it’s name to OMI. OMI operates globally and for many years was a trend setter offering the option of building portfolios and utilising funds from multiple fund managers and providers. This review focus is on the Executive Wealth Account.
Old Mutual International (OMI) is made up of three companies:
Old Mutual International Isle of Man (previously Royal Skandia)
Old Mutual International Ireland (previously Skandia Ireland)
Old Mutual International (South Africa)
OMI offers different products in different regions and some of the products available in the UK are very good. However, this review is based on the Dublin / IOM based Offshore Old Mutual International (OMI) Executive Bond products exclusively. OMI provide investment solutions for expatriate and local customers around the world, including Africa, Asia, mainland Europe, Latin America, the Middle East and the United Kingdom. Old Mutual International (South Africa) provides an investment product to South African residents through Old Mutual Isle of Man, a branch of Old Mutual Life Assurance South Africa (OMLACSA)
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|Policy Currency: The Old Mutual International (OMI) Executive Bond may be denominated in US dollar, GB pound, Hong Kong dollar, Japanese yen or Euro. Benefits will be paid in the plan currency.|
|Why choose the Old Mutual International (OMI) Executive Bond: Both “approved” funds and open architecture are available – unlimited choice of funds. However, funds must be approved by OMI, including in-house and external funds and some funds are “mirror funds” which means you are buying a replica of a management fund, not the actual fund, which leads to price discrepancies which can be large over time. Do NOT assume that funds approved by OMI mean they are recommended or safer options. Some funds are unregulated and very high risk.|
|Old Mutual International (OMI) Executive Bond promotion: What does Old Mutual International (OMI) write about their own Old Mutual International (OMI) Executive Bond? Old Mutual International (OMI) Executive Bond is a quality product for those who wish to save for their future regularly but flexibly – perhaps to supplement savings outside of a pension or other tax-advantaged vehicles. It provides the potential to build up cash for substantial future expenditures, such as paying school or university fees, or supplementing income in retirement.|
|Eligibility: The Old Mutual International (OMI) Executive Bond is a regular premium, whole of life, life assurance contract issued by Old Mutual International (OMI). You can set up a policy in 1 of 7 currencies including Pound sterling (GBP), Euro (EUR), United States dollar (USD) Swiss franc (CHF), Australian dollar (AUD), Hong Kong dollar (HKD) and Japanese yen (JPY)|
|Minimums: Lump sum minimum of £50,000. You can make additional lump-sum payments into your policy at any time with a minimum of £2,500. However your will pay any initial fund charges on all contributions.|
|Charges: This will depend on the type of plan you take out from Old Mutual International as they offer different charging structures largely linked to the amount of commission or earnings being taken by the third party salesman or adviser.
Annual Policy Charges: There is an annual policy charge taken which is a fixed fee and this can be updated at any time. There may also be a percentage of the value of your fund to cover management costs in the early years which typically is between 1%-1.5% per annum and will last for 7 years sometimes through lifetime.
Other Charges: Fund management charges are typically between 1 – 2.5% pa each year- depending on the funds chosen, but these are not typically listed at point of purchase.
Alternatively, if you are not used collective funds then there may be stockbrokers fees when you buy and sell certain assets, but you will not see them listed on the valuation as stockbroker’s fees are included in the total value shown for each sale or purchase and will be reflected in the trade contract note.
Additionally there may be an adviser charge to manage the portfolio, this is also typically can be between 0.5 – 1.5% per annum depending on the chosen advisers service provided.
Pensions (QROPS and SIPP): If the OMI Executive Bond is used within a QROPS or SIPP then there will be additional set up and ongoing fees for the life of the policy. EME does not recommend this product for QROPS or SIPP investing.
Are charges explicit: By explicit, it means that it is clear to see not only the charges for taking out the plan but also the cost of funds annually, any upfront fund costs, penalties on access, etc. Yes, in the main the OMI Executive Bond charges are clearly shown and any professional should be able to interpret them. We have had feedback from clients though that they find it extremely difficult to interpret charges such as how any early access penalties would be calculated.
|Surrender of the OMI Executive Bond: A partial surrender on your OMI Executive Bond may be treated as a one-off withdrawal. Further details on how it is treated is available in the relevant brochure. A full encashment results in penalties being applied in the early years through surrender charges linked to the term of the policy. In effect this means that on polices the first 5, or more typically 8 – 10, years may have quite high surrender charges imposed. For example, a typical plan applies 8% in the first year of each investment ( top ups incl ), reducing by 1.6% each year to 1.6% in year five and 0% thereafter. It is important to be aware that the OMI Executive Bond is a long term plan, if you decided to cancel the plan early you could lose a considerable proportion of the money you have invested; we have heard that as much as 8% of the value of the plan value can be lost by surrendering the OMI Executive Bond early.
Old Mutual International Executive Investment Bond Brochure
Old Mutual International Bond Factsheet
Old Mutual International Executive Investment Bond Terms and Conditions
Quick Summary from TailorMade
Old Mutual International (OMI) has a great reputation but, unfortunately, in the pursuit of offering flexibility of charging structure to all types of advisers they have created a product that has the same name but completely different costs. Those costs are dictated by the adviser and we have been provided a lot of third party information to suggest that some advisers and adviser companies take the maximum commissions (with highest lifetime costs applied to the OMI Executive Bond ) whilst promoting a 1% charging structure.
Therefore, the OMI Executive Bond lacks the transparency of the latest plans available from territories such as the UK, the USA and parts of Europe; ultimately, the OMI Executive Bond can be an expensive option when compared with a pure platform plan.
The type of funds available are also down to the adviser as to whether they are “cheap” or “expensive” versions which relates to what the adviser is seeking to earn. The standard OMI Executive Bond funds have high ongoing fees when directly compared to platform or direct offerings from fund houses via the UK or the USA. The OMI Executive Bond can have high charges on early access where commission has been taken. The OMI Executive Bond offers no standard guarantees that the portfolio will give you the returns you are expecting, but any attempt to take proceeds early in the plans life, or make it paid up, can result in access penalties or higher charges on the remaining invested funds, or both.
Overall the OMI Executive Bond lacks flexibility and access when compared to a pure platform custodian, is not sufficiently transparent, and supposed tax benefits can be outweighed by charges. We do not recommend it within any form of pension planning.
NOTE: The Old Mutual International (OMI) Executive Bond has a successful network of distributing agents throughout the world excluding the main regulated territories. Not all distributing agents have regulation or financial qualifications and may not be aware of the other saving plan options available.
The majority of offshore advisers are recommending products from the Ireland (Dublin) or Isle of Man companies. Unitised investments from other countries held within bonds are NOT protected by the Isle of Man or Ireland protection schemes which they are often advertised as being 99% protected – they are not.
Pensions (QROPS and SIPP) – If the OMI Executive Bond is used within a QROPS or SIPP then there will be additional set up and ongoing fees for the life of the policy. EME does not recommend this product for QROPS or SIPP investing.
There is also an option for the adviser not to charge the client commission, but instead charge a fee. If this option were chosen, it may be of considerable benefit to the performance of the overall investment, as the charges often have a lower impact on the growth of the portfolio. Ask your adviser for further details, as it is not always offered.
WARNING: Costs and information is correct as of July 2016. Please refer to a brochure from the company for current up to date information and any changes on costs or information. You should not buy based purely on information contained within this article and EME do not accept liability for purchases. If you have any doubts then please speak with your financial adviser or a representative of the company for further advice.
If the provider improves or amends its terms then EME would like to hear from them to amend the review page accordingly, and providers are encouraged to comment on errors or omissions to ensure that readers have the latest and correct information.
You can view the details of the OMI Executive Bond and other plans here at an independent website.
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