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Quantum – How much, for how long?

Chances are that if you are reading this, you'll have a specific reason for wishing to commit to a medium or long-term regular savings plan. Here we take a look at the importance of saving for the future and give consideration to two key questions, how much and for how long?

Article Summary

  • Saving for the future is important
  • Quantum is a contractual savings plan
  • Quantum is not designed for the short term (less than 5 years)
  • You do not get any money back during the initial allocation period
  • Choosing a premium you can afford throughout the payment term is sensible
  • Quantum operates best when you commit to, and pay premiums for, the whole of payment term.

Why are you looking to save?

Perhaps in your current country of residence there is no state pension provision, or maybe you need to start saving for your children's education. Then again you might just want a small 'nest egg' to fall back on in the future. All very valid reasons for considering a savings plan.

It's hard to remember a time when news sources indicated that school or university fees were actually getting lower - if ever? And what about retirement? Our TV screens seemed to be filled with daily stories of how we should all be making our own contributions towards retirement. So it's easy to understand why you would choose to save regularly, and equally why you would choose a contractual savings plan.

Considering what medium to long-term means and a contractual obligation

When you think about a pension in UK terms, it is a pot of money invested over the period of your working life. That could be from the age of 16 and go all the way up to age 65 or more - a period of 49 years - we'd suggest this is definitely long-term! Until recently in the UK that pot of money could not be accessed until you hit retirement age, and even still, should you access it from age 55 it may well be heavily taxed depending on what you choose to do.

Taking that concept when considering a product like Quantum is important, as you will be making a commitment to save for a period time and if you decide to take all of your money out early it will be subject to a cancellation charge (we refer to this as an 'early surrender charge'). However, by applying an early surrender charge this should give you some pause for thought - why did I originally invest this money? It was for my future, or my child's future, so do I really want to take all of this money out now?

Contractual doesn't have to mean inflexible as Quantum can allow you to access your money early without penalty, but within certain rules. Despite saving for the medium to long-term, this should help you if your circumstances change unexpectedly.

Covering the basics

When you apply for a Quantum you are entering into a legal contract and committing to pay an amount (your premium) on a regular basis for a fixed number of years (the payment term).

Depending on the level of premium and term you select, you may benefit from additional bonuses which we add at the start, during and at the end of the payment term.

Each premium will be invested into funds selected by you (or your chosen adviser acting on your behalf) with the expectation that at the end of the payment term, the value of your policy after the deduction of charges will be greater than the amount you have paid in.

To pay for the set up and ongoing administration of your Quantum, we will deduct charges throughout the life of your policy.

Your financial adviser will be able to explain in detail how Quantum works and how it may be able to benefit your own financial circumstances, but it’s also vitally important that you read through the Quantum literature suite, because when you sign our Quantum Application you are declaring that you have done so.

So how much should I save and for how long?

First of all RL360° do not provide financial advice, your financial adviser will do this based on their knowledge of your financial circumstances. As part of your discussions and fact-finding process your adviser will be able to help you decide on how much to save and over what period.

The length of the premium term you select will depend on your goals and investment horizon as discussed with your adviser. Whilst we do offer additional bonuses for longer payment terms there are some rules that apply, so make sure you read our literature and are aware of these before investing.

With regard to the amount you should save, please consider carefully the affordability of your premiums throughout the payment term you choose.

Your current circumstances may allow you to invest larger premiums than you would have otherwise considered, but have a think whether or not those levels are sustainable over say 20 years? If not, what do you believe will be the minimum period of time over which they will be sustainable? This is a crucial question, because when your Quantum is issued, it enters into an 'initial allocation period'. This will be for a minimum of 18 months but could be up to 24 months depending on the payment term you have selected. During this period if you cancel your policy (we call this an “early surrender”), you get no money back.

It would be fair to say that ideally your premium will be an amount that is affordable throughout the payment term, and should be considered a mandatory amount for at least the first 5 years (the short-term). Quantum gives you the flexibility to lower your premiums, but this should only be considered if you experience significant changes in your circumstances.

Each premium you pay during the initial allocation period will be used to purchase initial units. These units are subject to an early surrender charge should you decide to cancel your Quantum before the end of your chosen payment term.

This is why we have illustrations that you are required to sign, which demonstrate the potential 'policy value' and 'surrender value'. This allows you to see the impact of the early surrender charges on the money you would get back if your surrendered your policy before the end of your chosen payment term.

Why do you apply a charge if I want to surrender my Quantum early?

RL360° incurs costs for setting up your Quantum including commissions paid to your financial adviser.

The early surrender charge is deducted from the value of initial units to recoup the costs that would normally be taken over the course of the payment term where the policy remains active.

In summary

  • Quantum represents a contractual commitment to save money for a future goal over an agreed period of time
  • Quantum allows you to have a level of flexibility over the amount you continue to pay and money which you can take penalty free, but you cannot take it all at any time during the payment term without incurring early surrender charges
  • If you stop paying premiums during the initial allocation period, your policy will lapse and you will get no money back. And if you surrender in full before the end of your payment term, early surrender charges will apply.

"Ultimately a product like Quantum operates at its best when you commit to, and continue to pay premiums for, the whole of the payment term."

Thank you for taking the time to read this article, we hope you found it helpful and informative. Please do take the time to read our Quantum literature.

Literature You Need To Read

Quantum Brochure

An introduction to Quantum, RL360° and the Isle of Man.

Quantum Key Features

More in-depth detail about Quantum, including premiums and bonuses, product rules and restrictions, fees and charges as well as what will be expected of you as a client, and what you can expect from RL360°.

Quantum Investment Guide

An introduction to the fund range including the different investment sectors, fund charges as well as the investment objectives and risk rating for each fund.

Quantum Terms & Conditions

Setting out the contractual rules that apply to Quantum.

If after reading the Literature you are still unsure about any aspect of Quantum, speak to your financial adviser before signing your application.

Key Point - Premium Flexibility

There is flexibility within Quantum to allow you to decrease or even stop premiums for a while, but these options are restricted during the initial allocation period. Once the initial allocation period is complete, these options can be considered where you come up against major changes in your financial circumstances.

Key Point - Initial Allocation Period

Although we use the word ‘initial’ this doesn’t mean the initial allocation period only applies once from the start of your policy. If you increase your premium, the increase is subject to its own initial allocation period based on the payment term remaining.

Key Point - Fund Choice

We do not manage funds, and we don’t choose them for your policy. You policy is linked to the value of the funds you (or your adviser) choose. We suggest tracking the performance of funds within your policy on a regular basis. You can sign-up for our online service to do this.