Investment Bonds

An investment bond is an investment set up as a whole of life policy usually paid for with a lump sum (or single premium). It must specify a life (or lives) assured and on death 101% of the bond’s value is generally paid as the death benefit.

Investment Bonds are available from most authorised life assurance companies and offer a wide spread of investments. This enables investors to diversify their portfolio, which should have the effect of reducing overall risk.

Investment Bonds are primarily designed to provide capital growth. However, the structure of the investment is such that it can provide regular withdrawals as an effective income stream.

The amount that can be withdrawn is limited to the value of the bond. Withdrawals of up to 5% of the original capital investment can be withdrawn each year for 20 years (until the entire capital is returned), deferring taxation until final encashment. This 5% “allowance” may be carried forward from previous years in which the "allowance" was not fully used. Therefore, a higher rate taxpayer can defer a potential tax liability until the bond is ultimately realised for cash.

Investment Bonds are intended as a medium to long term investment. If you withdraw from this investment in the early years you may not get back the amount invested.

If you have already made use of your ISA allowance and would like further information on making a lump sum investment please contact us.


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