# Teacher needs advice



## TRitch (Oct 16, 2010)

Hello all,

I'm new to this forum and hope that it is a place that I can find some sound financial advice.

I am a teacher in Ontario but have spent 11 years overseas. While overseas I began investing in an Expatriate Fund with Royal Skandia that is now worth $17000. I began this investment in case I did not return to Canada, but two and half years ago I did just that... return to Canada (Ontario to be specific) to teach.

Now I am paying into the Ontario Teacher's Pension Plan as well as the Royal Skandia fund as well. I am beginning to find that paying into both is making my financial situation a bit challenging. On top of that I have a personal line of credit which I owe $7000 on at 6%. If I could get out of the Skandia investment I would but it seems that I would surrender 50% for early withdrawal.

Does anyone have any advice on what I should do? Is there any way around paying the 50% penalty or at least lessening it a bit?

Thanks in advance.

Trevor


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## MoneyGal (Apr 24, 2009)

I'm not sure we know enough to provide any advice. All I know about Expatriate is that they are a broker, and Skandia is an insurance company. I don't know what the redemption fees are on this product, and whether there are any ways to reduce them. (I don't even know what the product is...sounds like something pension-like or designed to replicate a pension - most investment funds don't have any kind of minimum commitment.)

However, if you are asking for advice generically, your question is whether you should stop paying into an investment fund and redeem early while you have other debt and are finding the commitment overwhelming. The answer is probably yes...based on the limited amount I know so far.


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## MoneyGal (Apr 24, 2009)

Also - it would be helpful to know what the purpose of the invested funds is. Is it for retirement income? Are you on track to reach that goal through other means?


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## TRitch (Oct 16, 2010)

Thank you MoneyGal for the response. I realize that there is not enough info for people to understand my situation well enough to comment significantly. That is partly due to the fact the that Royal Skandia is an expat company based out the Isle of Man in the UK which few if any are familiar with. It is even more due to the fact that I, embarrassingly, don't know too much about it myself.

I was teaching in Thailand when I realized that I needed to be doing at least a little forward thinking financially. A trusted colleague had an account with Royal Skandia and a financial advisor whom he trusted. I went with it thinking that I may have never returned to the comfort of the Ontario Teacher's Pension Plan. But, obviously things have changed.

I'm trying to get more info from Skandia and will provide that when I get it. Meanwhile, my account is a Managed Savings Account and general info on it can be found here http://www.royalskandia.com/investments/msa.asp .

I think you were right in your assessment that what I am really trying to figure out is whether I should stop paying into an investment fund and redeem early. I am almost certain that this is the right move but I am trying to find out what the best way to do this is.

In addition to all of this I have the added dilemma of potentially having the opportunity to buy back years into my OTPP. I asked them about this and this is the response I received... "There are two options that you may qualify for. The first is to transfer pension credit service to the Ontario Teachers' Pension Plan, and the second is to buy back credit for other employment. With both options you must have belonged to another pension plan that is registered in Canada." However, the way I read that it seem unfortunately unlikely.

Thanks again for any comments. I do feel that I am in a very poor financial position at the moment. Any constructive comment or information I receive can only help.


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## MoneyGal (Apr 24, 2009)

Well...do you intend to stay enrolled in the OTPP until retirement (and do you have a decent number of years to pay into the OTPP before your anticipated retirement)? Do you know what your expected pension will be at normal retirement age from the OTPP, if you stay enrolled in the plan until then? 

An indexed, defined-benefit pension plan is rare and growing more so. I suspect that you are, in fact, *not* in a poor financial position but an enviable one, in which your retirement needs are essentially handled so long as you remain with your current employer.


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## MoneyGal (Apr 24, 2009)

OK, also looking further at your specific investment: this is a form of insurance-linked policy (in Canada, this would be known as a "segregated fund"). The surrender charges on this policy are very high. 

Another question: do you plan to retire in Canada, where you are taxed on your worldwide income - and so the tax advantages of this policy would be lost to you?


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## TRitch (Oct 16, 2010)

Thanks again for your help. Answering these questions forces me to organize my thoughts a bit.



> Well...do you intend to stay enrolled in the OTPP until retirement (and do you have a decent number of years to pay into the OTPP before your anticipated retirement)? Do you know what your expected pension will be at normal retirement age from the OTPP, if you stay enrolled in the plan until then?


That is a tough question. I know that continuing to work in Ontario and paying into the OTPP is the best thing that I could do. I see this as the likely option for my future. I can't say this for sure 100% though. If I remain for the next 18 years I will receive $31000 per year after taxes.



> OK, also looking further at your specific investment: this is a form of insurance-linked policy (in Canada, this would be known as a "segregated fund"). The surrender charges on this policy are very high.


At the moment the surrender charge seems to be 50% which is tough to swallow. I am hoping this can be softened a bit and maybe with a bit more time the penalty might be lessened. I am waiting to get more info from Skandia.



> Another question: do you plan to retire in Canada, where you are taxed on your worldwide income - and so the tax advantages of this policy would be lost to you?


That's another tough question. My wife is from Thailand and there is a definite chance that we retire there, for all or at least half of the time.

At the moment I am hoping that I can find an acceptable way out of the expat fund. This would likely be best for the immediate future and hopefully I could ensure that whatever the long term future entails I would be able to prepare effectively for that (particularly if I were not to continue working in Ontario for the next 18 years).


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## the-royal-mail (Dec 11, 2009)

I just have a quick question. Is this Skandia place well known, trustworthy and reputable? Do you know for sure they will be around when you go to cash in/retire in 20-30 years? Just something to think about.

I wonder if you could transfer this to something similar in your target country?


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## MoneyGal (Apr 24, 2009)

OK, without knowing any more specifics I am going to give you an analogy which might be helpful. 

You could think of the Skandia fund as a form of insurance which you bought in the event you would not have pension income from another source. 

As it turns out, you don't need the insurance, as you have now enrolled in a very robust pension plan. The cost to break your insurance policy is 50% of the value - that is the cost of the foregone premiums, which, as it turns out, you did not need. 

The only reason I am offering this is that you say you are "almost certain" that the right thing for you to do is to quit paying the premiums.


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## humble_pie (Jun 7, 2009)

salut trevor, you are in good hands with MG but i have a couple minor sidebar notes to add.

i feel it's unlikely skandia will cut you any especially nice deal. Nor do i see how you can buy extra credit in ontario teachers' since they have written you that your other pension plans have to have been registered in canada; which skandia was not i assume.

not knowing exactly where you will retire is a common state. I think few are those with an adventuresome spirit who, in mature youth or approaching young middle age, can definitively announce exactly where they will be at age 65 & what they will be doing ... or even to whom they will be married ...

i do have a feeling about skandia in the isle of man that could be on the dark side, depending on who they are, which will be impossible to find out because it's a tax haven jurisdiction. What i was recalling were those manx banks, trusts & insurance companies, and those channel islands banks, trusts & insurance companies, who in many ways, either as corporations or as agents, were holding so many of those icelandic bonds when iceland went bust couple years ago. It was a shocking disaster on the other side of the pond. As i recall the british government said it would bail out UK residents who held iceland bonds but would cut adrift everybody in the tax havens. I don't know how the story ended up, but it was devastating for people who had hidden accounts holding iceland bonds or who depended on companies with iceland bonds in those islands.

we are still in very shaky times, globally speaking. Could ireland go under ? That event would really rattle manx & channel isles banks & financial institutions. Those tax haven banks have no central bank looking out for them. There's literally nothing behind them. That's why the interest they pay - in all currencies - tends to be higher than what an individual might obtain from a domestic bank here in canada.

what i mean by all this is that i for one wouldn't choose to keep any funds in manx or channel isles banks & insurance companies these days. I don't mean i would decide right now, today, bang, that i'd surrender 50% of my savings in such an account, but at least i'd put that option seriously on the radar screen, unless i could find out, absolutely & in depth, who & what is the capital that is behind this skandia, what ties do their parent corps have to decent institutions in their own mother country (and gawd forbid it would turn out that they're panamanian or liechtenstein or some sort of nordic conduit for russian quasi-criminal proceeds.) This is a turbulent sea right now in which you've got your tiny craft afloat, and i'd include in my thinking that it might be a good idea to start moving her towards safe harbour even if it means she sails in without a boatload of loot.


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## TRitch (Oct 16, 2010)

Thanks for the continued interest and advice. I think what I have to establish now is when the best time to cut my losses will be. I will wait to hear back from Skandia about the penalty of early withdrawal and whether it changes over time.


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## Maltese (Apr 22, 2009)

TRitch said:


> Thanks for the continued interest and advice. I think what I have to establish now is when the best time to cut my losses will be. I will wait to hear back from Skandia about the penalty of early withdrawal and whether it changes over time.


Rather than withdraw your funds from Skandia and incur a 50% penalty, do you know if you could leave your funds there and just stop making additional payments? Also, if I were in your situation I'd like to know if the penalty decreases over time or if it will always be 50%.

Just a few more thoughts.


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## humble_pie (Jun 7, 2009)

getting to a moratorium on skandia payments as maltese suggests would be an excellent step, would it not.

meanwhile i looked up your royal skandia & its parent Old Mutual of london & jo'burg.

my first concern - that this story might belong to the dark side of finance which is always present in tax havens no matter how squeaky clean a public profile a haven manages to raise - this concern evaporated. Old Mutual is a large, ancient & publicly-traded company. It is, as the british would say, "most respectable." Below is a link to an interesting story going on right now about another one of its related institutions, Nedbank of south africa.

http://www.forbes.com/2010/10/15/hs...ank-old-mutual-takeover.html?partner=yahootix

things seem to be OK for the time being, save & except that you are obliged to contribute to the skandia fund while also contributing to ontario teachers, and the burden is far too heavy.

if it were myself, i would take the time to search for the best deal possible from skandia. First a payment moratorium. Countless clients before you must have found their circumstances and their needs changing as the years passed after their first recruitment. Surely skandia has ways to deal with what are, in effect, re-negotiations. Is it possible that a wild card might be pleading hardship to skandia ... perhaps your parents-in-law require more financial support than you can manage on a teacher's salary that is encumbered by the 2 large & obligatory pension contributions ...


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## davext (Apr 11, 2010)

Perhaps there is a way to take out the money from Skandia without paying tax?

I know that when I worked in Australia and paid into an Australian pension. I left and I was allowed to take out all of the money with minimal taxes as long as I did not intend on returning to Australia to work.


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## TRitch (Oct 16, 2010)

I did do some research about the company before signing on... but I am quite aware that I went into the agreement a bit unprepared. Especially when it comes to the need for early encashment. 

I have received an e-mail from them regarding my inquiry about this process but it was simply to give me some documents which contained the necessary information. Clearly, if some negotiation is possible it is not noted in the documents. The penalty for complete early encashment is tiered as you get closer to maturation of the account.

One other thing that was mentioned that might be useful is a the possibility of partial encashment. If I can use this option to pay off my PLC (or at least of sigificant amount of it) then continuing the monthly contributions to Skandia is much more conceivable. Removing the need to pay into one of the OTPP, Skandia and paying off the PLC might be all I will need to do in order to steady my ship (to continue the metaphor). 

I have e-mailed back to get more info about the partial encashment.


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## humble_pie (Jun 7, 2009)

TR fwiw i think you are navigating along very well in this challenging multinational situation. Steady & respectful as she blows.

and you may have already locked onto the perfect compromise solution, which would be a partial encashment, hopefully with no or little penalty.

one could hope that skandia's view will be that half a client is better than none. They already know, or they will know soon, that if you can't obtain relief you might opt for total encashment right now. At least by negotiating a partial encashment compromise skandia would get to keep some of the account ... good luck now.


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