Mike Robertson Associates Ltd, Lifestyle Financial Planners, Battle East Sussex

Investment Bonds




Investment bonds are investments that are designed to give medium to long term capital growth. They can also be used to provide an income, and include some life cover. Investment bonds should not be confused with guaranteed bonds, offshore bonds or corporate bonds.

How does an Investment bond work?

Investment Bonds do not have a specific term, but they are designed to be medium to long term investments, and as such you should anticipate leaving your money in them for at least 5 years. There may be a charge for cashing in an Investment Bond in the first few years. Most Investment Bonds have a higher risk than regular savings accounts, and so you must weigh up the chance that you could get a higher return with the possibility of losing some of your capital. There are Investment bonds on the market that guarantee that you will not lose your capital, and this guarantee normally attracts higher charges.

When you take out an Investment Bond your Life Assurance company invests this money for you and pays the funds back to you either on death, or if you request a withdrawal. The Life Assurance company will normally pay out slightly more than the value of the fund on death.

How is it Invested?

Most Investment Bonds offer you a choice of funds to invest in, from UK and Overseas shares, Cash, Property, Fixed Interest Securities and more. Some will also offer funds managed by other companies, which may lead to higher fund charges. Many will also offer the option of investing into a with-profits fund. The options available for an Investment bond are vast, and you should contact Mike Robertson Associates for Independent Financial Advice if you are considering this type of investment.

What are the Tax Implications of an Investment Bond?

Unlike NISAs, Investment Bonds are subject to Income Tax. Depending on your circumstances you could be liable to pay Income Tax on any growth in your bond. The investment will pay tax on its growth automatically. If you are a non-taxpayer or basic rate taxpayer you will not normally have to pay any further Income Tax, but non-taxpayers will be unable to reclaim any tax. If you are a high rate taxpayer, or near the threshold for higher rate tax, you may be liable to pay Income Tax on any profit when you cash in the investment and if you withdraw more than 5% of the initial investment a year.

The overall Tax paid on an Investment Bond may be higher than with other Investments such as an NISA, but there may be other benefits that make an Investment Bond more suitable for you. You may take a regular income from the bond, making withdrawals of up to 5% of the initial investment amount (for the first 20 years, or until the original capital invested is returned if withdrawals of less than 5% per annum are taken), tax deferred. If the value of the withdrawals you receive exceeds 5% (cumulative) of the original investment amount, you will be taxed at your highest marginal rate of income tax on the amount above 5%. This may be more desirable to you than other investments that would incur an immediate tax liability.

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Mike Robertson Associates Limited is an appointed representative of Lighthouse Advisory Services Limited, which is authorised and regulated by The Financial Conduct Authority. Registered in England No 4501167. Registered Office 30-34 North Street Hailsham East Sussex BN27 1DW

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Mike Robertson Associates Ltd is located in Battle, East Sussex, near Hastings, Bexhill and Eastbourne