The Investment Bond is a lump sum investment providing an element of life cover and the potential for capital growth, whilst still allowing you to make withdrawals from your investment. There’s no set investment period for the bond. It’s been designed as a medium to long-term investment (at least five to ten years), though you can keep it for as long as you want.
Features & Benefits
- Set up regular income payments
- Choose from a wide variety of investment funds
- Switch funds – currently free of charge
- Life cover of up to 101% of the value of the bond (increased to 110% in cases of accidental death)
- Extensive range of trusts for inheritance tax planning
- Minimum investment of £10,000
- Minimum age of 18 for plan holder
- You need to be a UK resident, including corporations and trustees
The value of your bond can fall as well as rise depending on investment performance (and currency exchange rates where a fund invests overseas) and you could get back less than you invested. This type of investment does not offer any guarantees.
Charges, limits and terms may change from time to time.
Tax on Investment Bonds
All gains and income earned within an investment bond are taxed at 20% and paid directly out of the investment bond.
Withdrawals of up to 5% a year are allowed for up to 20 years without incurring an additional tax charge.
If you don’t use your 5% allowance in a given year, the allowance is carried over to the following year i.e. if you make no withdrawals in year one, you could draw up to 10% the following year without incurring a tax liability.
So if you’re a higher rate or additional rate taxpayer, paying 40% or 45% tax on income in the current tax year, an investment bond can minimise your income tax bill.