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Expat Investor : December 2007
December 2007 EXPAT INVESTOR 9 FINANCIAL PLANNING International banking for global lifestyles. Enjoy the world of international private banking. Open an account with RBC and you will enjoy the benefits of a dedicated Private Banker to understand and manage your financial requirements and aspirations. Ideal for people who live or work overseas, or those who have investments, personal or business interests in more than one country. Choose from a range of currency options and online access offers you flexibility and control, while a VisaTM Gold debit card provides worldwide access to your funds. As a client of RBC you gain access to the RBC Financial Group network of offices and services including international banking solutions, credit solutions, a wide range of investment solutions and integrated wealth management solutions. The Executive Plus Account is a complete international banking solution. It's an account that will take you wherever you want to go. To find out more, please contact Emma Adam or Scott Grant on: +44 (0)1534 283838 email firstname.lastname@example.org or log on to www.rbcprivatebanking.com BANKING • CREDIT • INVESTMENTS • TRUST • TAX CONSULTANCY Understanding life, understanding you. This advertisement is issued by Royal Bank of Canada (Channel Islands) Limited ("RBCCI") on behalf of RBC ® companies that comprise the RBC Wealth Management Network in the British Isles ("the BI subsidiaries"). RBCCI is regulated by the Guernsey Financial Services Commission to carry on deposit taking and investment business and to act as a custodian/trustee of collective investment schemes in Guernsey and regulated by the Jersey Financial Services Commission in the conduct of deposit taking, fund services and investment business in Jersey. Registered office: PO Box 48, Canada Court, St Peter Port, Guernsey, GY1 3BQ, Branch: PO Box 194, 19/21 Broad St, St. Helier, Jersey JE4 8RR. Details of the name and addresses of RBC Wealth Management's main BI subsidiaries may be obtained at the following address http://www.rbcprivatebanking.com. Services outlined may be provided by a variety of subsidiaries and offices, either independently or acting together. Some of the services detailed in this advertisement are not offered in all jurisdictions and may not be available to you. This advertisement does not constitute an invitation or solicitation to apply for any products or services in any jurisdiction to any person to whom it is unlawful to make such a solicitation in such jurisdiction. You should note that the applicable regulatory regime, including any investor protection or depositor compensation arrangements, may well be different from that of your home jurisdiction. This advertisement has to the extent required been approved for the purpose of the Financial Services and Markets Act 2000 by Royal Bank of Canada Investment Management (UK) Limited which is authorised and regulated by the Financial Services Authority. ® Registered trademark of Royal Bank of Canada. Trademark of Royal Bank of Canada, used under license. Forthose with wider horizons. Banking solutions that travel with you. Equity release plans are essentially a way for senior citizens to raise capital from their homes. Many people these days are asset rich but cash poor -- having benefited from a rise in property prices over the years -- but with that benefit entirely tied up in their bricks and mortar. There are two types of equity release scheme -- the lifetime mortgage and the reversion scheme. The first is a kind of secured loan with no repayments required during lifetime. The lender takes their money (including rolled up interest) on the death or entry into long-term care of the borrower. The second is a sale-based scheme where the provider receives a percentage of the sale proceeds of the property -- again on the death or entry into long-term care of the borrower. As neither scheme requires any monthly payments they are both viable options for the cash-strapped but asset-rich pensioner. And yet, as reasonable as these concepts may appear, equity release plans have had a bad name in the past. This is because older style equity release plans were often risky schemes dependent on stock market performance and variable interest rates. Pensioners found themselves owing more money than their properties were worth and unable to move home due to lack of equity (or worse still) facing repossession. In 1991 the Safe Home Income Plan organisation (SHIP) was for med. The aim was to rectify the sector's poor image by provision of new products with a threefold guarantee. All SHIP member equity release providers must guarantee that their equity release products ensure that the customer has a right to remain living in the property either for life or until health issues require a move away from the home, a guarantee that they will never be required to repay more than the property's value and a guarantee that flexibility will apply to allow customers to move home and (if necessary) take the equity release product with them from one property to another. The fact that equity release has SHIP -- an industry trade body -- and is now fully regulated by the Financial Services Authority (with full regulation of reversion plans introduced in April 2007), coupled with the fact that all plans require assistance from an independent legal adviser before completion -- means that this high risk area now has a strong backbone of security and safety. That's not to say that equity release is suitable for everyone. It should still be seen as a product of last resort in many respects. There is obviously no good reason to release equity if it would be more viable for a single pensioner to move from her Equity release -- safe as houses? Fast Facts 10005 Fast Facts 10180 Recent research by Norwich Union shows that the majority of Brits don't understand what the term 'equity release' means. So we asked Stuart Rathe of law firm Lloyd Whitley to explain what it is, who can apply for it and, above all, if it is a safe method of raising money. £1m mansion to a more modest dwelling, or if she had large amounts of money saved to provide for her retirement, for example. It's also important to check whether clients have considered the effect that equity release will have on their dependents after they have gone. Whilst many clients tell me that their children have no expectation of inheritance and just want them to enjoy their retirement, I do consider that it's important for them to at least discuss the issue with children to make sure that they are aware (if not always happy) with their parents' plans. And there is also the issue of state benefits. If a client of mine receives income support, council tax relief or pension credit, then I have to be sure that they understand the release of money from the equity release may affect eligibility for those means-tested awards. (Although if clients are using the equity release money immediately for home improvement or the purchase of a motor home, new car or expensive cruise, then their eligibility is unlikely to be affected as their net savings will be unaffected by the release of the money.) My personal recommendations for any potential equity release customer? Consider the other options first. Is a downsize or utilisation of savings a more sensible approach ? Use an independent financial adviser who can check the entire equity release market and find the right product for you. Make sure that your chosen provider is a member of SHIP. Use a specialist solicitor who is familiar with equity release rather than opting automatically for the local family lawyer. Equity release should no longer be considered a risky venture. Despite the potential vulnerability of the elderly customer, there has never been a safer time to consider equity release as long as careful thought is applied and expert advice and assistance are called upon along the journey . For more infor mation on equity release plans, enquire through the fast facts number below.
January February 2008