Table 3: product charges
Allocation rates for annual premium $2,000-$2,999 100%
$3,000-3,599 101%
$3,600-4,799 103%
$4,800+ 105%
Premium charge 7%
Establishment charge The following % of all units
purchased during the first 4 years
are cancelled in that period
Premium payment term (years) 5 30%
10 36%
15 43%
20 49%
25 54%
Annual management charge 1.5% pa of unit value
Switching Free of charge
External/underlying fund charges Standard external annual charges
apply. Initial charges are fully
discounted (units bought at NAV)
Policy fee $21 per quarter
Loyalty bonus 1% of unit value each year,
commencing between 2nd and
7th policy anniversaries,
provided premiums have been
paid throughout
Premium term (years) 5-7 2
8-11 3
12-15 4
16-19 5
20-23 6
24-25 7
A 7% loyalty bonus is also credited on the 5th, 10th and 15th anniversaries, if the policy
is also receiving regular premiums at that time.
Surrender Penalty Equal to the outstanding
establishment charge for future
premiums during the 4-year initial
period
Source: LifeBase
premium size, although
there is a 7% initial charge
on all regular premiums.
The annual charge of 1.5%
is taken by unit cancellation,
together with a quarterly
policy fee.
But Paragon’s design –
summarised in Table 3 –
also incorporates loyalty
bonuses, which for the
more persistent investor
can substantially rebate the
quite high establishment
charges over time. There is
a 1% annual loyalty bonus,
starting between the
second (for five to sevenyear
plans) and the seventh
anniversary (for 24 to
25-year plans), plus special
7% bonuses on the fifth,
tenth and 15th anniversaries.
These bonuses are
quite flattering for Paragon’s
projected maturity values,
for policies which pay
throughout the full term.
LifeBase’s projections
suite allows a comparison
of these charges with other
products for projected
maturity values. Table 4
shows the results for a tenyear
savings plan with a
$500 premium per month,
ADDITIONAL FEATURES
� Additional life cover is not available and the standard death benefit
is 100% of surrender value.
� Waiver of premium benefit is not available.
� The policy can be denominated in either £, $ or �� and premiums
may be paid in dirham (for $ conversion).
� Premium escalation at 5% and 10% pa (simple) is optional.
� Regular withdrawals are possible only after five years.
LIFE PROFILE SCOTTISH LIFE INTERNATIONAL’S PARAGON
Table 4: 10-year projections, $500 pm*
Company Product Year 10
value $
Royal Skandia Managed Pension/Savings Account** 74,616
Zurich Int’l Vista (III) (internal funds) 70,369
Scottish Provident Int’l Quantum 69,600
Friends Provident Int’l Premier** 68,025
Zurich Int’l Vista (III) (external funds) 67,710
Scottish Life Int’l Paragon 67,251
Generali Int’l Vision (external funds) 67,233
* Excluding fund charges. ** Special offer terms. Source: LifeBase
Table 5: 20-year projections, $500 pm*
Company Product Year 20
value $
Royal Skandia Managed Pension/Savings Account** 179,881
Zurich Int’l Vista (III) (internal funds) 179,649
Scottish Life Int’l Paragon 179,289
Scottish Provident Int’l Quantum 171,264
Friends Provident Int’l Premier** 169,475
Generali Int’l Vision (external funds) 169,234
Zurich Int’l Vista (III) (external funds) 165,570
* Excluding fund charges. ** Special offer terms. Source: LifeBase
where projected values are
at maturity, assuming 7% pa
investment return before
charges, with external fund
charges of 1.5% pa assumed
(where applicable). Table 5
shows the figures for a 20year
plan.
It illustrates that Paragon
is more competitive on projected
maturity values for
longer-term plans, where
the effect of the loyalty
bonuses is significant –
albeit only for policies that
pay premiums throughout.
Care should be taken
when interpreting these
two tables. The numbers
are projected values at
maturity. But because few
AUGUST 2008 [www.international-adviser.com] INTERNATIONAL ADVISER
policies reach this stage and
pay premiums throughout,
it is arguably more important
to look at the position
for surrender values or
values where policies are
made paid-up part way
through. Work we have
done in this area tends to
show products with higher
maturity values are associated
with lower surrender
values, and vice versa.
l Summary
Paragon is launched into an
important market segment
– regular savings plans – an
area from which SLI has
been absent for far too
long. But the regular premium
market is tough for
any newcomer. It is broadly
competitive on price, more
so for those longer-term
plans that eventually qualify
for the large loyalty bonuses.
The fund range is interesting
and distinctive; it will
be interesting to see how
SLI manages it to suit different
market conditions.
PROFILE
Actuaries Boal & Co launched
the product comparison
software LifeBase Offshore
in 1997. It provides analysis
of offshore life products and
has been used extensively
by life companies. LifeBase
OnLine brings LifeBase to
professional IFAs. For further
details, please register at
www.lifebase.co.uk
KEY POINTS
SLI’s move into the regular
premium market with the
Paragon product has come
after many years of waiting.
The product holds up well
against tough competition.
33
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