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Chartered Financial Planners

Chartered Financial Planners - Independent

Tel: 01332 416585

Chartered Financial Planners

Chartered Financial Planners - Independent

Tel: 01332 416585

Why Use An Investment Bond

The principal attractions of using a bond as an investment vehicle are as follows:

  • Bonds are not deemed to be ‘income producing assets’; this negates the need for individuals or trustees to complete self-assessment tax returns.
  • Funds within the bond can be switched without the requirement for any tax reporting and without rise to Capital Gains Tax.
  • 5% can be withdrawn from the bond without immediate tax liability for 20 years cumulatively.
  • As well as the ability to draw funds from the bond within the relatively well known 5 per cent rule, there are a number of “exit strategies” that can be considered to minimise the tax on final encashment.  These include the use of “top-slicing” relief combined with encashment in a year of lower income and/or assignment to a lower or non-tax payer.
  • Bonds can be taken out with multiple lives, not true with ISAs or pensions.
  • Bonds can be placed in trust.
  • For higher and additional rate taxpayers, and especially where the underlying investments are expected to deliver a relatively high level of yield (interest or dividends), the tax deferring qualities of a UK bond will be particularly valuable.  This is especially so for larger investments over the longer term.

WE believe onshore investment bonds are a particularly useful tool to satisfy the needs of investors looking for:

  • growth on their investment over the medium to long term
  • a range of income options including fixed levels of withdrawals
  • pre/post retirement income provision with option to improve planning to minimise future tax liabilities and the flexibility to support changing needs
  • a suitable investment vehicle for estate planning
  • a range of funds available to help tailor a portfolio according to your attitude to risk and investment goals

However onshore bonds aren’t right for everyone, we believe they are not typically suitable for potential investors that:

  • are non-tax payers, unless other benefits such as estate planning or fixed income needs outweigh payment of the equivalent of basic rate tax within the bond
  • haven’t considered other investment types that may be more suitable to their needs, especially tax favoured products such as ISAs and pensions
  • aren’t willing to accept any risk to their investment
  • can’t commit to a medium to long term investment
  • are not UK resident.

What our customers say

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Ginny pretty much has done everything for me. I'm careful with my money but not necessarily financially savvy or have the willingness to be so. Ginny's enthusiasm and professionalism bridges the gap to my incompetence in this field.

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