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A Brief Guide to Offshore Bonds
If you have already maximised your annual allowances, such as pensions and ISAs, you will be looking for alternative methods of saving. Offshore bonds can be an extremely effective financial planning tool that adds value and supports wider estate planning, retirement planning and asset protection goals.
Tax Efficient Solutions
Along with a range of core benefits, they represent a highly tax-efficient way to invest that allow clients to maximise potential returns. Offshore bonds have become more and more sought-after in recent times due to the pension allowances squeeze, reduced lifetime allowance and rise of inheritance tax receipts putting greater pressure on investors. By allowing clients to defer and resourcefully plan taxation, the bonds are a simple, versatile financial, retirement, inheritance tax and trust planning tool.
So, how does it all work? The offshore bond effectively acts as an investment wrapper set up by a life insurance company in a jurisdiction with a favourable tax regime such as Monaco. Operating under the gross roll up structure, these investments can be switched without the requirement for any tax reporting and without Capital Gains Tax (CGT) implications for the best possible returns.
If you’re looking to fulfil common and key financial goals such as building up a retirement nest egg or helping your children and grandchildren take first step up the property ladder, bonds can be a great option. They are also popular for those wish to move or retire abroad or those currently resident outside the UK who wish to protect their assets should they choose to return. If you have more complex tax planning needs, offshore bonds may also be the perfect solution thanks to their transparent and flexible nature.
The Benefits of Offshore Bonds
As a non-income producing asset, offshore bonds do not need to be included on a tax return (unless there is a chargeable event) and do not require heavy admin or time-consuming annual tax reporting. Instead, they act as a central holding point for a diversified range of assets from income to growth.
Bonds are commonly described as a way for people to regain control over their wealth. Offshore bonds allow clients to maintain control over their money and associated tax liability. Common features include no lock-in period, allowing clients to access money at any time, as well as no subscription limits; as this means any amount can be paid in, it is a very popular benefit with those using offshore bonds for retirement and trust planning.
Many of our clients have commented favourably on the flexible nature of the bonds. For example, tax-deferred withdrawals allow clients to access up to 5% of their original premium each year for 20 cumulative years with no immediate income tax liability. Bond holders also have the option to defer tax and time the surrender of an offshore bond in order to control how, when and where they pay tax.
As there is no CGT due on offshore bonds (unless they have been exchanged for money or money’s worth), this offers an added level of flexibility as funds can be switched without any tax implications. In addition, clients can benefit from personal income tax allowances and savings allowance.
In another example of the versatility of offshore bonds, clients have the option to encash segments rather than taking withdrawals across the whole policy, making it far easier to pass on wealth to dependents. This provides a solution to a key concern for many individuals, as segments can be assigned as gifts without any income tax charge; they can also be gifted into trust and assigned out of trust without any income tax or CGT charge. Bonds can also be fully or partially assigned to another family member or individual – an option that is not available via many other popular investment channels such as ISAs.
Offshore Bond Products
Choice is the key word when it comes to offshore bonds. Our team at Vintage work with providers and solutions in the Isle of Man and Ireland to propose a choice of jurisdictions with guaranteed peace of mind as your funds are located close to home and easily accessible.
We also work with a wide range of discretionary investment managers and bond providers to offer a full roster of collective investment funds, platforms, unit trusts and currency deposits as well as up to 99,999 segments. With such wide investment parameters, every client can benefit from greater flexibility and solutions that complement and enhance their overall investment portfolio as well as support future tax planning.
The Offshore Bonds that we offer are available as a redemption or whole of life policy. A redemption policy comes with a fixed term of 99 years while a whole of life policy stays in effect until the death of the last surviving relevant life assured, after which the pay-out is 101% of the surrender value.
As a flexible planning tool in every aspect, bonds are available for a wide range of clients and typically utilised by those aged 18-90. Payments into your bond can be made in a wide range of currencies and online access allows full visibility 24/7. Access to money can be made via one-off or regular withdrawals to suit the individual and support ongoing financial goals.
Choosing the Most Effective Offshore Bond Solution
Our team at Vintage have in-depth experience in selecting the most effective offshore bond solutions for our clients informed by key factors including the desired level of flexibility, access, risk and inheritance tax efficiency. As independent investment experts, we fully manage the bond on your behalf including applications, performance monitoring and carrying out transactions.
We offer a range of different structures as well as advice on the best place to invest your bond; we also frequently advise on how to utilise various trust arrangements and offshore bonds for maximum planning efficiency. Contact us today for more information on how offshore bonds can support your financial planning and asset management goals.
Risk Disclaimer: Your funds are subject to tax implications at any time. The value of investments can fall as well as rise at any time, and you may not get back what you invest.