Investment Bonds

Bonds are traditionally seen as a safe investment: although their value can vary according to inflation and interest rates, they can provide investors with a regular income which incorporates a level of protection. Investment bonds are a good choice if:

• You have a lump sum to invest (usually at least £5,000)
• You are happy to tie up your money for at least five years
• You understand that the value of investment can go down as well as up.

Most investment bonds last for a lifetime. Usually, there is no minimum term, although you may incur a penalty if you cash in early. Each year, you can withdraw up to 5% of the amount invested without paying any income or capital gains tax.

They are usually classed as a single premium life insurance policy because they payout upon death, but are also an investment product as they can grow in value over time.

At surrender, or on death, a lump sum will be paid out – the amount depends on the bond’s terms and conditions and on investment performance. Tax may be due on any capital gain made.

Investment bonds can be onshore or offshore: the main difference being their tax liabilities. Onshore bonds are subject to UK corporation tax; offshore bonds are usually issued from tax havens outside of the UK where little or no tax is charged on the funds until the money is brought back onshore.

When you invest in a bond, you are allocated a certain number of units in the funds you have selected. You can choose to invest in a range of funds. Each fund then invests in a range of assets – such as shares and property – and the price of your units will rise and fall in line with the value of these assets.

Investing in a diverse range of funds can be an advantage in weathering the storms of market fluctuations but different assets carry different risks which need to be taken into consideration. We will consider your attitude to risk and help you if you are not sure what type of investments would suit you best.

You can also put either an onshore or offshore bond into Trust to protect it for future generations.