Yellowtail Blog

I cannot get over the sheer number and complexity of the charges available under the AXA Estate Planning Bond that I wrote about recently. How can anything that is meant to be so simple end up as complicated as it is?

This is a financial product that has charging options A through to H (seven in all because option E is not available). The option offered to our client by her bank, Barclays, looked like this:-

Invest £200,000 and AXA will notionally inflate the investment value to £207,000 (how?), well this sounds good, clearly money for nothing. However, there is an establishment charge of 0.625% of the original investment each quarter over 5 years. Put like this it doesn’t sound much does it, and after all they’ve given an extra £7,000 to invest.

But hang on a minute, 0.625% each quarter, that’s 2.5% per year, or put another way £5,000 based on the original £200,000 investment. And then they take this for five years, which amounts to an establishment charge of, wait for it…£25,000. By now that £7,000 extra investment doesn’t sound quite so generous does it?

So, just to set up this bond AXA want to take a net £18,000 from which they’ll pay (in this particular case) Barclays £12,000. Nice work if you can get it. Add onto this the fund annual management charge of 0.5% per annum, that’s a further £1035 each year on the original £207,000 and then another quarterly administration charge of £17.50.

So having worked my way through this little lot, there’s only another six different combinations of charges to wade through. This is one product we’ll be staying well away from.