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Investment Bonds

Investment bonds are lump sum investments held through insurance companies.  They are sometimes referred to as Life Assurance Bonds as they do have a small element of life insurance provided - typically adding an extra 1 per cent or less to the value of your investment if paid on death.

The minimum investment is typically £5,000 or £10,000 and they are normally designed to produce long term capital growth, but can also be used to generate an income. They should not be mistaken for Fixed Rate Bonds or Fixed Term Deposits as these are deposit accounts offered by banks and building societies and, in general, are capital guaranteed.

When you buy an Investment Bond you are allocated a certain number of units in the fund(s) of your choice.  They work by investment managers placing your money in a ‘pooled fund’ with money from other investors that is then placed in a variety of assets such as stocks and shares, government bonds, property, cash and other investments.  The price of your units - in other words the value of your capital - will normally rise and fall in line with the value of these assets.

Benefits

• Low investment limits
• Tax efficient withdrawals
• Efficient for trust planning
• Wide fund choice
• Death benefits

• Competitive charges - typically 1 - 1.5% annual management charge

Taxation

• Gains subject to income tax
• Taxed at source
• No further liability for basic rate taxpayer (providing gain doesn’t take investor into Higher Rate Tax)

All investment returns are determined by performance, market conditions and overall economic factors which may not be repeated in the future. Therefore, past performance is not necessarily a guide to future returns.

 

 

 

 

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