Offshore Regular Savings FAQ

Q1. What is a regular savings account?
A1. A regular savings account is an account that you can fund on either a monthly, quarterly or annual basis. It allows you to plan and budget in order to build up a capital sum over time, by paying into a wide range of underlying funds from your disposable/surplus income. The choice of funds available range from cash, fixed interest/bonds, mutual funds, hedge funds, property funds. The typical account will have around 60 to 80 funds to choose from, offering funds to suit every style of investor.
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Q2. You only offer/advise upon disciplined forms of savings accounts, what is a disciplined form of savings account?
A2. A disciplined form of savings account is an account that is primarily for individuals who have a pre defined savings objective. As an example, assume you needed to save towards funding your children’s education fees, or towards your retirement. These examples represent a pre defined savings objective, and in most cases, these objectives need to be funded over many years in order to generate the amount required. This type of savings objective is referred to as a medium to long-term savings objective. Therefore, for an investment company to attract clients that remain loyal over the medium to long term, the investment company has to reward this loyalty to retain its customers. This is achieved by offering a very cost effective service. The average growth required per annum to offset the fees of a disciplined form of savings will range from 0.5 ~ 1% depending on the term chosen. Generally the average growth required to offset the cost of a disciplined form of savings is less for longer terms.

A typical non-disciplined account, offers instant access and total premium flexibility and the ability to close the account from day one. Therefore, the providers of these accounts will charge a higher fee for using their accounts. The reason for the higher fees on a non-disciplined account is that the company has no assurance of your loyalty, and it is costly to maintain and open and then close accounts all the time. Therefore, the investor pays a higher fee for the extra flexibility.

A disciplined form of savings account is very unsuitable for someone without a pre defined savings objective, due to the restrictions applied when accessing the funds within the account. On average, you cannot access the premiums paid within the first 18 months of a disciplined form of savings. The first 18 months on average will need to remain invested throughout the selected savings term. All other premiums paid will be accessible at any time. However, it is not advisable that you withdraw money from your disciplined savings account, because you may fail to reach the target amount you originally had in mind.

Nearly everyone with a genuine savings objective, prefers the cost effectiveness of a disciplined form of savings account, and they are not concerned by the limitation with regards to accessing their money, because they understand that if they keep withdrawing their money from the disciplined account they will more than likely never reach their original savings objective.

The most important aspect with a disciplined form of savings account is to ensure that you can comfortably afford to maintain the initial premium levels you select.

In addition, the first rule of financial planning, is to ensure that you have an emergency fund of cash within your bank account to cover any immediate situations that require the use of cash (other than general living expenses). We advise you build between 3 to 6 months net income within an instant access deposit account, before deciding to start a disciplined form of savings. This will ensure that you have an emergency fund in the event of a crisis, without the need to touch your disciplined savings account, and avoid the risk not achieving your savings goals and objectives.
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Q3. What are the benefits of an offshore savings account?
A3. An offshore savings account has a number of inherent benefits, which are as follows:

· Your money grows free of all forms of taxation

· Extensive offshore fund choice

· Wide range of currency options

· Extremely cost effective over the term

· Defer any potential tax liability to a time of your choosing

· Confidentiality

· Low minimum investment levels (typically from $150 per month)

· Comprehensive protection.
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Q4. Why do I need to specify a savings term?
A4. The accounts STAR Financial advises upon are classed as disciplined forms of savings. They are therefore very cost effective over the term of the account. The account provider calculates the cost of the account depending on the term selected. It will then set the fees and bonuses to be applied to that account. If the account is cancelled early, they will take all of the fees that would have been applied to the account, had the account been held to maturity, before returning any proceeds to the account holder? The reason for this is that the accounts are very cost effective over the term of the account, and if you decide to cancel early, you have benefited over the short term by paying the fees based on a longer term account.
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Q5. How safe is my money within an offshore savings account?
A5. Probably safer than anywhere else! Let us explain what this means.
STAR Financial only advises upon accounts that are domiciled in an AAA credit rated jurisdiction and one that has a government enforced policy protection scheme. This ensures that up to 90% of the value of your account (not capped) is protected in the event of anything happening to the account provider. This is the most comprehensive form of protection available. Most banks only offer a very small amount of protection to its account holders (Capped maximum of 10 million Yen in Japan). Full details on request. On top of this, our preferred provider of offshore savings accounts is a Standard & Poor’s AA credit rated company with over 170 years of history and currently manages assets in excess of $100 billion.
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Q6. What is the minimum amount I can save each month?
A6. From as little as $150 per month, $450 quarterly or $1800 annually, although this amount will vary from provider to provider.
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Q7. What payment options do I have?
A7. You can fund your account using any of the following options:

· Bank transfer

· Credit Card

· Standing order

· Cheque

Credit card payment is by far the most popular method with our clients, due to the cost effectiveness of using the credit card, plus the fact that you can claim Air-miles or other bonus awards from your card provider. Standing order and Cheque payments only apply to British bank account holders funding their account in pounds sterling.
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Q8. Can I alter the payments (increase/decrease, stop and start) in the future?
A8. Yes. However, you can only decrease or stop the premium amount after the first 18 months on average. You can increase premiums at any time. Basically, you can increase, decrease, stop and start whenever you like provided it is not within the initial period (the initial period is typically around 18 months, although this will depend on the selected savings term). You should ensure that you can afford to maintain the premiums throughout your selected savings term, and only view the decrease and ceasing premiums option as an emergency measure, to avoid any potential penalties or the risk of not achieving your savings objective and goals.
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Q9. Where does my money go to each month?
A9. Your money goes directly to the account provider. At no time does STAR Financial Management receive or handle client’s money. Once the provider has received your money, it will be distributed to your chosen fund selection for investment.
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Q10. How many funds is there to choose from within the savings account?
A10. This will depend on the account provider, however, typically the account provider will offer around 80 funds, in different sectors and asset classes to choose from including internal and external funds. STAR Financial will provide you with a recommended fund selection based on your Regular Savings Questionnaire. You will also receive a fund performance guide so that you can see all of the funds available from the account provider. The initial fund selection can be changed at any time, including switching and redirecting.
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Q11. What currencies options do I have?
A11. You can pay or receive money from your savings account in all of the following currencies:

· US Dollars

· Hong Kong Dollars

· Euros

· Pounds Sterling

If you require other currencies such as Japanese Yen or Australian dollars for example, this will limit the amount of provider options available.
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Q12. Can I access the money from within my savings account?
A12. Yes. However the accounts that STAR Financial Management advises upon are classed as a disciplined form of savings. On average, the first 18 months of your contributions need to remain invested until maturity. All other premiums are accessible at any time. We advise our clients not to treat a disciplined savings account as a bank account. If you access the money from your disciplined savings account, there is a risk of not reaching your savings objective. STAR Financial Management therefore advises it clients to maintain a deposit based emergency fund of at least 3 to 6 months net income. If cash is required for any short-term crisis, it should come from this emergency fund rather than your disciplined savings account. If you cannot afford to maintain premiums at you preferred level throughout the savings term, we advise you to consider starting the account at a lower level, and look to increase the amount you save over time.
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Q13. Can I pay additional lump sums into my disciplined savings account?
A13. Yes. You can pay lump sum payments into your savings account at any time. These additional lump sum payments are not subject to withdrawal restrictions, so you could in fact pay in an additional lump sum today and withdraw it again tomorrow, although we are not suggesting you take out money the day after investing it.
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Q14. How much are the charges for these disciplines savings accounts?
A14. This will depend on a number of factors? Such as the provider, the amount you are planning to save each month and the selected savings term.
Typically, the amount of growth required to offset the costs of the account over the term, is between 0.5% and 1.2% p.a. In general the costs are less if you save a high monthly premium or select a longer savings term. The reason for not stating an exact figure per annum is due to the fact that the costs are based on a sliding scale, for example the costs are higher in the earlier years than the costs in the later years, so it is therefore difficult to provide an annual cost. It is standard to quote an annual growth rate required to offset the costs throughout the term.
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Q15. How often will I receive a statement?
A15. The days of only receiving a paper-based statement are over. You will normally receive an annual paper based statement along with the ability to track your investments on-line 24 hours a day. If you require additional paper based statements, STAR Financial Management can arrange this for you on an ad-hoc basis.
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Q16. What amount of growth will I receive each year?
A16. This will of course depend on your attitude to investment risk and the performance of the underlying funds.

As an example, over the medium to longer term you should be aiming for the following annual average returns over the term of your savings:

· Low to medium risk 5% ~ 7% net p.a

· Medium risk 8% ~ 10% net p.a

· Medium to high 10% ~ 12% net p.a

· High risk 12% + net p.a

With an increase in your risk profile, you have to be prepared to accept a higher degree of short-term volatility as a consequence of higher annual targeted returns. Which means that when you target a set return of say 12% p.a some years will return far less than 12% and some years will return a far greater amount than 12%. We advise our clients on building a balanced portfolio within their account, by diversifying across many asset classes. The aim of portfolio diversification is to lower the overall volatility, whilst aiming to achieve a decent level of annual average returns.
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Q17. What options do I have when my savings account matures?
A17. You have a few options as follows:

· Take the entire amount as a tax free lump sum (transfer it to an account of your choice)

· Leave the amount invested, and withdraw an income from the funds (this income can be paid to an account of your choice)

· Continue funding the account (without the benefit of any bonuses that applied to the original selected savings term) details on request

· Take some of the money as a tax free lump sum, and leave the rest invested

*Offshore savings accounts grow free of taxation, you may however, have a potential tax liability when you repatriate the funds to your country of residence. This will depend on your nationality and/or your country of residence at the time of encashment.
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Q18. What information do you need before I can start an offshore savings account?
A18. First complete the regular savings questionnaire. After we have advised on the most suitable account provider for you, we will then decide on the most suitable funds to be held within the account. To process the new application, we will require the following:

· A certified copy of your passport or national identity card. If this is not available we’ll need other suitable identification that has both your photograph and signature. If you live close to our office we can certify these documents for you free of charge.

· A copy of a utility bill not more than 3 moths old or bank statement showing your name and address (mobile phone bills are not acceptable) for address verification purposes.

· A suitable method of payment

· A signed application form
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Regular Savings Questionnaire

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