Our Independent Financial Advisers can help you decide whether Investment Bonds are an appropriate way of investing your funds.
Investment Bonds:-
- Are sold by life insurance companies and allow you to invest in a variety of funds managed by their investment managers
- They are technically single premium life insurance policies and carry a small element of life cover
- Your money is allocated between units in funds of your choice and each fund holds a portfolio of investments
- The price of your units will rise or fall in line with the performance of the investment portfolios
- The typical minimum investment for Investment Bonds is £5,000
Investment Bonds offer flexibility if you want to invest a lump sum for the long term:-
- They are designed to produce long term capital growth, but can also be used to generate income for you
- They can also provide tax benefits if you are a higher rate taxpayer and want to draw an income of up to 5%
Tax and Investment Bonds:-
- You do not pay Capital Gains Tax on any gains
- You don't pay basic rate income tax on any income you receive
- Higher rate taxpayers are liable to income tax at a rate equal to the difference between the basic rate and the higher rates
- You are not liable for income tax until you cash in your bonds or withdraw more than 5% per annum of their original investment
- You can carry unused 5% allowances forward from year to year
- If you are normally a basic rate tax payer but cashing your Bonds in pushes you into the higher rate tax bracket, you can still take advantage of "Top-slicing relief" to compensate for this
Charges for Investment Bonds:-
- Charges vary and are not always easy to follow
- Sometimes there is an initial charge plus an annual management charge
- Some bonds have no initial charge, but a higher annual charge in the early years
- Many investment bonds carry substantial early withdrawal penalties if you cash in your bond within 5 years
- Some companies also apply “Market Value Adjuster” to reflect market volatility
It is important to remember with Investment Bonds:-
- The value of your investments can rise & fall
- You might not get back a significant amount of your investment
- Past performance may not be repeated
Please contact us to discuss how our Investment Management team might be able to help you.
