When investors are thinking about where to put their money, some core elements will influence their ...
When investors are thinking about where to put their money, some core elements will influence their investment decisions, such as how much they have to invest, how long they are happy to tie their money up for and how much risk they are willing to take. For those investors seeking greater investment freedom than can be offered by some of the more traditional vehicles, offshore solutions with their wider choice and flexibility may be the answer.
As well as tax-efficiency and portability, offshore portfolio bonds provide retail investors with access to a very wide choice of investment funds, which cover the entire risk profile from low-risk cash funds to highly speculative equity funds. Alternative investments such as hedge funds can often be accessed, if that is what the investor is looking for. It is therefore possible to create a highly diversified portfolio within an offshore bond wrapper, with the freedom to switch investments without creating a personal liability to capital gains tax.
Like UK investment bonds, most offshore portfolio bonds will provide access to the life company's own range of risk-rated managed funds and this may satisfy the initial investment need. But it may be useful to have the option to 'upgrade' the bond and broaden the investment portfolio if the client's circumstances change. This is possible with most offshore bonds and the knowledge that this greater investment freedom is there if it's needed may appeal to some investors. There are some funds available through an offshore wrapper that are often not accessible within UK investment bonds, such as funds denominated in currencies other than sterling.
If clients are seeking to move or retire abroad they may wish to have their capital denominated in a currency other than sterling, to help manage the currency risk. An offshore portfolio bond would allow the investor to deal entirely in, say, US dollars. The portfolio bond can be denominated in US dollars, the investment amount can be paid in US dollars and US dollar-denominated funds can be held within the portfolio bond.
Even with the recent change to the way the nil-rate band operates, inheritance tax (IHT) planning remains a priority for many investors. IHT planning is one of the ways in which offshore bonds are commonly used to provide solutions to clients' needs. Together with an appropriate trust, offshore bonds can be used to mitigate the effects of inheritance tax by, for example, the use of a discounted gift trust. The investor takes regular income drawdown from the bond during his or her lifetime and, from day one, reduces the potential inheritance tax bill by removing a worthwhile sum from the estate.
Of course, whenever a trust is used it will be necessary to appoint trustees. The onerous responsibilities placed upon trustees mean that it may make sense to appoint a professional. Since a bond is a non-income-producing asset, the actual ongoing administration of the investment is straightforward for the trustees. But the administration is only part of their responsibilities; investing in the appropriate funds and managing those investments on an ongoing basis can be demanding, especially for the layman. Some of the offshore IHT plans are provided by companies who have their own in-house trust services, and this may be a cost-effective and convenient solution.
The residence of the trustees is also an important consideration. If the trustees are resident in the UK, and a chargeable event occurs after the settlor's death that gives rise to a tax liability, the tax will be assessed on the trustees' rate (currently 40%). If the trust is established with trustees outside of the UK - say, in the Isle of Man - any tax that arises following the death of the settlor will be assessed at the beneficiaries' tax rate, which could be lower, making this preferable.
Those with large amounts of capital to invest may wish to instruct others to manage their money as effectively as possible. Active portfolio management is therefore quite often the key and offshore bond providers typically offer the facility for the client to appoint a professional investment adviser. This can be the introducing financial adviser, or a separate third-party specialist. This allows the assets held within the bond wrapper to be professionally managed, whilst still allowing the client to benefit from the tax advantages, flexibility and control of owning an offshore portfolio bond.
- For more information about offshore portfolio bonds visit AILO's website at www.ailo.org where you will find generic details, including tax briefs on various countries and notes on the financial implications for UK residents looking to work or retire overseas.
- Christine Hall is offshore portfolio manager at Axa.
- Aberdeen International (IOM) Life Assurance
- Axa Isle of Man Ltd
- London and Capital Life Ltd
- Canada Life International Ltd
- CMI Insurance Company Ltd
- CMI Insurance (Lux) SA
- Commercial Union International SA
- Eagle Star European Life Assurance Company Ltd
- Fortuna Life Insurance Ltd
- Friends Provident International
- Generali International Ltd
- Generali Worldwide Insurance Company Ltd
- Hansard Europe Ltd
- Hansard International
- Irish Life International
- Isle of Man Assurance
- Monarch Assurance
- Norwich Union International Ltd
- Old Mutual International Ltd
- Prudential International
- Royal Skandia Life Assurance Ltd
- Scottish Equitable International SA
- Scottish Equitable International (Dublin)
- Scottish Mutual International
- Scottish Life International Insurance Company Ltd
- Scottish Provident International Life Assurance
- Skandia Life Ireland Ltd
- St. James's Place
- Standard Life International
- Zurich Financial Services (Isle of Man) Ltd
- Zurich International Life Ltd
The Association of International Life Offices (AILO) is a trade organisation comprising international life companies, based predominantly in financial centres within the EU and UK Crown Dependencies, marketing products internationally cross-border.
Member firms offer multi-currency, tax-efficient products aimed at the international investor and medium to high net worth clients whose needs cannot be fully met by domestic providers.
AILO aims to promote the cross-border life industry and to encourage professionalism and high standards amongst its members through the provision of market, regulatory and taxation information and liaison with regulators and local trade associations.
The association's origins are rooted in the provision of financial services to international expatriates.
This demanding and geographically widespread market has posed every imaginable challenge to AILO's member companies, enabling them to gain invaluable experience in a wide range of product structures, methods of distribution, regulatory regimes, languages and cultures.
- Further information about Ailo can be found on its website www.ailo.org.
AEGON SCOTTISH EQUITABLE INTERNATIONAL
1 North Wall Quay, Dublin 1, Ireland
Tel: + 353 (0) 845 600 0173
Fax: +353 (1) 673 8940
Email: [email protected]
AEGON Scottish Equitable International provides attractive investment solutions, particularly to UK investors. With a heritage in the offshore market dating back to 1995, AEGON Scottish Equitable International is a leading provider in its chosen market. We are part of the AEGON Group, which is one of the world's largest listed insurance companies, with assets under administration of around £200bn. Based in Dublin, one of the world's most dynamic financial centres, we also benefit from an enviable infrastructure. The client service team in Dublin draws on the talents of a large, young, motivated and highly skilled workforce.
Products: A portfolio bond, a packaged inheritance tax plan (a discounted gift trust plan) and a regular savings plan.
AXA (ISLE OF MAN)
Royalty House, Walpole Ave Douglas, Isle of Man, IM12SL, British Isles
Tel: +44 (0) 1624 643 333
Fax: +44 (0) 1624 643 444
Email: [email protected]
Contact: AXA Business Line or your normal AXA account manager
Established in 1992, AXA Isle of Man has considerable expertise in the offshore market. Backed by the size and strength of the AXA group, its success has been built on outstanding customer service, superior e-commerce facilities and competitive products that offer a wide range of investment choice and control.
Products: AXA (Isle of Man) offers Evolution, an offshore portfolio bond with access to a wide range of funds and a choice of currencies and charging structures. The Estate Planning Bond, an inheritance tax mitigation plan, is available with optional 'income' and legacy guarantees.
FRIENDS PROVIDENT INTERNATIONAL
Royal Court, Castletown, Isle of Man, IM9 1RA
Tel: +44 (0)1624 821 212
Email: [email protected]
Contact: Chris Holland
Friends Provident International Limited (FPIL) is one of the most respected offshore life assurance companies in the world.
FPIL has 30 years experience of the offshore industry and has operations in the Isle of Man, Hong Kong, Dubai and Singapore.
Products: A range of single and regular premium offshore life assurance products.
6 Georges Dock, IFSC Dublin 1, Ireland
Tel: + 353 (1) 802 8494
Fax: + 353 (1) 802 8400
Email: [email protected]
Contact: Sales and Technical Support Unit on 0845 300 3899
Norwich Union International has considerable expertise in the offshore market. Backed by the size and strength of Norwich Union, the UK's largest insurance group, we offer a range of sophisticated offshore products. We have recently launched Premier Portfolio, a new open architecture bond that gives investors access to thousands of funds from the world's leading investment managers.
Products: NUI Portfolio and Investment Bonds, NUI With-Profit Bond, NUI Core Funds Bond, NUI Premier Portfolio Bond/Estate Protection Plan.
PRUDENTIAL INTERNATIONAL ASSURANCE
Montague House, Adelaide Road, Dublin 2, Ireland
Contact: UK advisers can call us free on 0808 234 2200 or fax on 0808 234 2000 Non UK advisers can call us on 00 44 1786 400 284 or fax on 00 44 1786 405 579
Prudential International is part of the Prudential Group, one of the UK's largest and best-known financial services organisations. As a group, Prudential has been managing money for over 150 years. It has over £260bn in funds under management (at 30 June 2007).
Products: Prudence Portfolio Bond offers a wide choice of funds, such as unit trusts, OEICs and SICAVs, with a flexible charging structure. International Prudence Bond provides a range of risk-graded unit-linked funds, from Prudential and other leading fund managers, including PAC with-profits funds available in Sterling, Euro and Dollar. Flexible Protection Bond and Flexible Life Plan are our single and regular premium whole of life protection plans.
All the funds available for our products grow largely tax-free. We also offer a range of trusts for inheritance tax planning.
SCOTTISH LIFE INTERNATIONAL INSURANCE COMPANY
Clarendon House, Victoria St, Douglas, Isle of Man, IM1 2LN
Tel: +44 (0) 1624 681531
Fax: +44 (0) 1624 690529
Email: [email protected]
Scottish Life International (SLI) specialises in offshore investments, trusts and tax planning solutions, conducting business in the UK, Germany, the Middle East and through a third party in South Africa. SLI has funds under management of over £763m (as at 30 September 2007) and is part of the Royal London Group.
Products: Single-premium portfolio bond offering flexible and select investment versions; has an additional insurance option which protects the ongoing death benefit value of the bond (UK, int'l); Single-premium bond with capital protection (UK, Ger, int'l); With-profits bond (Germany); Flexible life assurance protection policy (Middle East). Tax planning: specialist technical support in the tax-efficient and controlled transfer of family wealth.
STANDARD LIFE INTERNATIONAL
90 St Stephen's Green, Dublin 2, Ireland
Tel: +44 (0) 845 300 4273
Fax: +353 (1) 475 4025
E-mail: [email protected]
Contact: Your Standard Life account manager, or our dedicated offshore team on the above number
Standard Life International is an Irish life assurance company wholly owned by Standard Life Assurance Limited. Its impressive parent means that it attaches a great deal of importance to excellent customer service and quality products. The Standard Life group of companies has been looking after its customers for over 180 years and has currently over seven million people worldwide relying on them for their financial needs.
Products: Standard Life International's core product is the International Bond, a portfolio bond offering a wide range of investments with a clear charging structure and flexible commission options.
The Expatriate Financial Guide to Bahrain
The Expatriate Financial Guide to Belgium
The Expatriate Financial Guide to France
The Expatriate Financial Guide to Germany
The Expatriate Financial Guide to Hong Kong
The Expatriate Financial Guide to Portugal
The Expatriate Financial Guide to the United Arab Emirates
The UK Why Buy Brochure - A guide to offshore bonds
- For more information go to: http://www.ailo.org/publications/.
Joe McDonnell joins as head of portfolio solutions (EMEA)
Adviser of the Year - South East
Fidelity Multi Asset CIO's outlook
Willis Owen report
From 1 March