Perspecta Investment Loan Program with Standard Life (6152)

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Perspecta Investment Loan Program How it works How the Perspecta Investment Loan Program works The minimum policy requirements To take advantage of this program, policy owners must make annual deposits of at least $50,000 per year for a minimum of three years, or an initial deposit of at least $150,000. While these are minimum requirements, larger amounts or longer durations are permitted. The loan interest rate is 10%. The loan account is credited at a rate of 8%. What is the maximum loan amount? The amount of the policy loan (or loans) is subject to certain maximums. The maximum loan(s) is up to 90% of the available cash value of the contract. In addition, we recommend that you limit the maximum loan amount to the Adjusted Cost Basis (ACB) of the policy. This limitation ensures that the loan amount is not a taxable disposition. Our Wealthcare illustration system will calculate the year that we start to see taxable dispositions. While the policy year may vary somewhat, it is usually around the 7 th policy anniversary. How to help your client get the most benefit The following table shows the policy values of a 45-year-old male who deposits a total of $500,000 over 10 years. Example of Deposits of $50,000 for ten years = $500,000 Year Annual Deposit Cumulative Deposits Cash Value* Adjusted Cost Basis Taxable portion on Full Withdrawal 1 $50,000 $50,000 $35,561 $48,816 0 2 $50,000 $100,000 $80,553 $97,408 0 3 $50,000 $150,000 $126,952 $145,611 0 4 $50,000 $200,000 $174,966 $193,540 0 5 $50,000 $250,000 $229,922 $241,171 0 6 $50,000 $300,000 $286,587 $288,441 0 7 $50,000 $350,000 $352,871 $335,329 $17,541 8 $50,000 $400,000 $418,263 $381,674 $36,589 9 $50,000 $450,000 $488,163 $427,447 $60,717 10 $50,000 $500,000 $559,942 $472,547 $87,394 11 0 $500,000 $575,053 $466,928 $108,125 * Assuming 2% return, Perspecta Optimized, 45 year old male non-smoker, profile 3 (standard), Ontario We can see from the above example that the ACB of the policy exceeds the cash value up to the end of the 6 th policy year. After that, the cash value is greater than the ACB. As the maximum policy loan is 90% of the cash value, it appears the optimal non-taxable loan is obtained around the 8th policy year. After this duration, 90% of the cash value exceeds the policy ACB. Deposits made and loans taken before this period generally create optimum results. Standard Life 4
Standard Life 5 Perspecta Investment Loan Program How it works Recovery Ratio The Recovery Ratio is the percentage of the deposits available for loan purposes. The table below provides Recovery Ratios for a 45-yearold client who deposits a total of $500,000 over 8 years. The Recovery Ratio is high, especially when we consider that we are covering the policy costs and providing significant insurance protection. In this example there is an initial sum insured of $1,652,637. In the WealthCare illustration, the Recovery Ratio appears in the Loan Information Report under the column titled “Cumulative Loan to Cumulative Premium Ratio”. Examples of Deposits of $62,500 for eight years = $500,000 Year Annual Deposit Cumulative Deposits When can policy loans begin? The first policy loan can be taken as early as the beginning of the first policy year, that is, as soon as the policy is in force and the first annual premium has been paid. Thereafter, additional loans are available at the beginning of the policy year. As previously mentioned, the maximum is up to 90% of the available cash value of the contract. Perspecta contains a surrender charge schedule designed to recoup expenses should a policy be surrendered in the first nine policy years. Even with the surrender charges taken into consideration and accounting for the insurance charges associated with the contract, it can be seen that the Recovery Ratio is quite high from policy year 7 onward. Potential Annual Non-taxable Loans* Cumulative Loans Recovery Ratio 1 $62,500 $62,500 $37,875 $37,875 60.60% 2 $62,500 $125,000 $48,919 $86,794 69.44% 3 $62,500 $187,500 $52,504 $139,298 74.29% 4 $62,500 $250,000 $56,365 $195,663 78.27% 5 $62,500 $312,500 $67,354 $263,017 84.17% 6 $62,500 $375,000 $72,105 $335,122 89.37% 7 $62,500 $437,500 $78,460 $413,582 94.53% 8 $62,500 $500,000 $55,580 $469,162 93.83% 9 0 $500,000 0 $469,162 93.83% 10 0 $500,000 0 $469,162 93.83% 11 0 $500,000 0 $469,162 93.83% * Assuming 2% return, Perspecta Optimized, 45 year old male non-smoker, profile 3 (standard), Ontario
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Perspecta Investment Loan Program with Standard Life (6152)

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