Everything costs money and that includes your offshore regular savings plan.

Most regular savings products are charged generically the same, but the specific charges are dressed up differently so it becomes almost impossible to compare one plan to another. And remember, you cannot depend on the product's illustration system to show you which one - for the same average growth rate over the same length of time - is most cost-effective, because the truth is that some product providers' illustration systems don't include all their charges. Yes, you read that right.

So how can we compare one offshore regular savings plan to another? Well, the answer is that you need to employ a firm of professional actuaries, and you need to measure the Reduction in Yield (RIY).

Simply put, the RIY shows the effect of all a plan's charges as a reduction in the growth of a plan. This is measured as a percentage. In other words, if you have a plan whose growth is 10% (for the sake of argument) and the charges of the plan have an RIY of 1.7%, then your net growth is 8.3%. Obviously, the lower the RIY, the more is left in your plan to compound. We are certain at Caravel that we offer our clients the most cost-effective plan on the market. Now we have the proof! Which plan is it? Here are the figures:

COMPETITIVE LANDSCAPE OFFSHORE: LONG-TERM SAVINGS PRODUCTS

(Illustrations for $1,000/month, 15-year term accounts) Source: Lifebase

Total contributions would be $180,000

Reduction in Yield per annum:

"Caravel Product" 1.31%
Investor's Trust 1.51%
RL360 1.93%
Generali (now Utmost) 1.96%
Hansard 2.08%

These are the figures assuming an average annual growth rate of 5%.

But that's only half the story.

Full Surrender

When the actuarial firm ran the figures for a full surrender (that's when you encash the entire account early and take the proceeds, closing the account), there are usually penalties to pay. In our 15-year case, if you fully surrendered in year 3, you'd be murdered on penalties but if you do so in year 14, the penalty would still be dollars and cents, but much lower than in earlier years.

"Caravel Product" comes out top in every single year from Year 1 to Year 14. The penalties are less. A demonstrably cheaper product, a lower penalty year-on-year for fully surrendering, better access to money during the plan (this has not been touched on here): what is there not to like?