Investment Management
Insurance Bonds
Insurance Bonds are investment products offered by insurance companies as opposed to fund managers or investment houses. They enable the investor to invest in a wide spectrum of asset classes, therefore increasing the levels of diversification and potentially reducing the investment risk.
For the investor there are several advantages of this approach, including:
- A large choice of investment funds, which provide options for either diversification or specialisation
- Tax efficiency, particularly for higher rate taxpayers and trusts
- Opportunity for less investment risk than other equity based investment vehicles
However, as with most investment vehicles, there can also be a downside to such investments, including:
- They can be expensive to exit in the early years, with many companies imposing early redemption penalties.
- Even if early redemption penalties are not an issue, many providers reserve the right to levy Market Value Adjusters, which may have a significant effect on the surrender value of the investment.
- Generally, there is no capital guarantee
In the main, investments are made by way of a lump sum single premium, although regular premium Endowment policies are available as a means of spreading the investment over a specific term.
In general, the single premium can start at as little as £1,000 or regular premiums can be from £50 per month.
There will be annual management charges in addition to the possibility of early redemption penalties or market value adjusters.
