There are a wide variety of different types of investment bonds. The main division between the products available is between onshore and offshore investment bonds which are taxed very differently. This website explains the way both onshore and offshore bonds are taxed and also allows you to find out more about the products through our Research & Buy module.
All investment bonds are categorised as non-qualifying, single premium “whole of life” policies, although the life cover aspect is nominal, typically being between 100.1% and 101% of the value of the bond. Equally the description “single premium” does not preclude the investor from making “top up” contributions later on either a regular or ad hoc basis. They have no fixed term so can be encashed in whole or part at any time. Most investment bonds can be divided into a number of segments for maximum flexibility and tax efficiency.
Investment bonds provide the potential for capital growth over the medium to long term and are considered longer-term investments with an investment term of at least 5 years. Full details of charges are within the Illustration which you can request from our “Get a Quote” module.
Essentially an investment bond is a tax wrapper, within which the investor has a wide range of different funds to chose from which cater to different risk ratings.
As a collective investment, investment bonds pool the assets of many individual investors. Most investment bond providers offer a wide range of funds accessible from their investment bonds which cover a wide range of risk. There is an ability to switch between funds with nil or minimal charge. It is possible to switch funds within the bond without triggering a tax charge.
Examples of the types of fund available from within an investment bond are as follows:
- Guaranteed – Some investment bonds allow the investor to add guarantees to the capital.
- Distribution – This provides a rising income from a fund that distributes the dividends arising from the underlying assets.
- With Profits – These funds benefit from “smoothing” where bonuses are added each year either by an increase in the price of the units or by the declaration of additional units.
- Managed – The fund manager decides the mix between equities, fixed interest and commercial property.
- UK Equity – The fund invests in UK shares.
- International – A portfolio of worldwide shares from a range of countries.
- Specialist – Commodities, Technology, Ethical funds.
If you are unsure as to which funds are commensurate to your risk profile, we have devised an interactive risk questionnaire which you can use to help determine your investment allocation.