Issue 5, May 2021 PCS Vision

In this issue of Vision, we bring you a new perspective on Indonesia, the reasons why you need both a savings plan and life protection, and we share the innovations we’re developing to seamlessly deliver world leading the services to you.

Indonesia's Job Creation Bill (widely referred to as the Omnibus Law) passed on 5 October 2020 and effectively came into law almost a month later on 2 November. The Omnibus Law is aimed squarely at bringing greater flexibility and extensive reforms to the Indonesian economy. If it lives up to its ambitions, it has the potential to supercharge what is already the world’s 16th largest economy by nominal GDP.

The Omnibus Law is expediting approval processes, boosting the country's global competitiveness in manufacturing, simplifying business licensing procedures, enhancing the investment environment, and incentivizing onshore capital flow – in short, greatly increasing the ease of doing business and investing in Indonesia. 

While implementing the revision of 79 laws is yet to be tested by time and the sheer number of simultaneous changes have the potential to produce unintended consequences, the Omnibus Law’s prospective impact on onshore and offshore investments as well as active business opportunities cannot be understated. 

Incentives

The Omnibus Law is introducing strong incentives to Indonesia’s already dynamic and fast-changing market.

Key changes include broadening foreign investment in some rapid-growth sectors that were previously on the negative list. Telecommunication, technology, and media, including all telecommunication network and service activities, can now be 100% foreign owned compared with previous foreign investment restrictions of 67%.

Significant taxation changes are also taking place. Clearer tax-status definition and more transparent recognition of worldwide taxation status helps to encourage investment flow while full or partial tax exemptions for some reinvestments of onshore dividends are freeing up capital between active business and investments. 

Key changes that could present game-changing opportunities

At a minimum, the incentives warrant a reassessment of the balance between investment and active business capital for those already in the Indonesian market. For those not yet in the emerging market, the incentives should prompt an exploratory conversation with experts on the archipelago.

An open mindset to leverage a constantly churning environment

The COVID-19 pandemic hurdles aside, Indonesia is moving fast. To fully explore its depth of potential and successfully maneuver through the legislative and directional changes, an open mindset is crucial, so is advice from experts who understand the country.

The speed of change, latent ambitions of a youthful and innovative populace together with the incentives and opportunities mean that it is time to seriously reframe Indonesia. 

ⁱhttps://worldpopulationreview.com/countries/countries-by-gdp

ⁱⁱhttps://foreigninvestment.bakermckenzie.com/2021/03/16/indonesias-new-investment-list-increases-fdi-opportunities-for-foreign-investors/

ⁱⁱⁱhttps://www.worldometers.info/world-population/population-by-country/

^ivhttps://asia.nikkei.com/Business/Business-Spotlight/Indonesia-s-unicorns-lure-US-tech-giants-from-Google-to-Facebook

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PCS by Mercer are pioneers in remote client service for the ultra-high net worth. We are seamlessly delivering risk solutions despite global lockdowns and border closures. Bill Johnston, Global Head of Sales, explains how we are continuing to provide best-in-industry and personalized services to clients, wherever they might be in the world.

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PCS solution

Life protection for the unexpected

Life expectancy has more than doubled since the year 1900ⁱ, but life is finite and the unexpected does happen.

Life Protection is your family’s insurance against financial uncertainties, especially in the event of untimely accidents. It provides immediate and substantial liquidity when it is most needed, particularly for those with predominately illiquid assets.

The main “limitations” of a life protection plan are that it provides for one moment in time and that it doesn’t provide for the policyholder in their own lifetime – that’s where a life protection plan can work in synergy with a savings plan.

A Savings Plan can give you freedom of choice by giving you long-term financial certainty

Savings Plans are unique financial instruments that have evolved specifically to accommodate the unique needs of HNW individuals. It can actualize your foresight and vision – not just throughout your life, but for all the generations of your family to come.

The combined functionalities of savings plans are hard to replicate with any other single financial instrument without the additional complexity of holding structures such as trusts. Depending on the policy, it can also work in perpetuity – for all future generations. Extraordinarily flexible, the other benefits of savings plans include using it as:

1.       A wealth accumulation and transfer solution

Savings plan is an invaluable wealth accumulation and management tool. Specifically designed to accrue over time and facilitate wealth transfer, it allows you to manage – in detail – how, with whom, and when you wish to share your assets. Policy ownership can be readily and continuously transferred, allowing you to leverage time and compound interest.¹

2.       A source of annuity

In fluctuating markets, having a source of steady income is more compelling than ever. If you don’t want/need the income at any time, you can choose to leave payments to accumulate.

3.       A death benefit settlement option

One of the flexibilities in savings plans is that you can choose to assign beneficiary (ies) and distribute policy payments according to the policy owner’s wishes. This can be done as a lump sum or by annual installments over any prescribed period (up to 50 years). 

4.       Wide-ranging choices

A savings plan provides choices between:

• Emphasis on growth or guarantees
• Earlier or later annuity income
• Premium modes – lump sum premium (with financing^{^}), or annual instalments across 2, 5, or 10 years for better cash flow management

5.       No need for medicals

Savings plan policies are taken without the need for potentially lengthy and complex medical tests and underwriting.

You are unique and PCS by Mercer can customize life protection and a Savings plan for your unique circumstances. We will work with you to build contingency into every aspect of your and your family’s lives – now and always.

¹Timescale is dependent on product purchased

ⁱhttps://ourworldindata.org/life-expectancy

^{^}Subject to bank approval

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 Background

• Clients (brother & sister) are 2nd generation family members managing their listed family business
• The family business was started from humble beginnings by their parents, so the siblings are conscious of respecting, and protecting, their hard-earned wealth – for themselves and their future generations
• They want to ensure their wealth can grow, and last, several generations, while providing income when needed
• The siblings prefer financial instruments that are more stable, long-term and require minimal monitoring, particularly for their children. The preference is to balance the riskier nature of their listed business and their other investments, which have higher risk profiles in order to remain competitive and generate higher returns

 Solution

Working with their private bank and PCS by Mercer, the Clients set up:

• Individual trusts with themselves as the settlors and their children as the trust beneficiaries
• Total of six Hong Kong Savings Plans for themselves and their children
• Two Life Insurance policies insuring themselves for a total cover of US$22.5 million

Key takeaways

1. Savings Plans provide long-term wealth growth and income. The financial instruments can be passed on to future generations for seamless continuity and effective wealth transfer
2. Savings Plans are simple, but highly effective and hassle-free generational wealth transfer solutions. Putting them into a Trust enhances this further
3. Life Insurance policies will provide the 3rd generation with immediate liquidity and financial security should the unexpected happen to either of the Clients
4. Savings Plans and Life Insurance policies together provide greater certainty and security, complementing their higher risk business and investments

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