Although sales of offshore investment bonds have grown impressively, with an increase of almost 20%...
Although sales of offshore investment bonds have grown impressively, with an increase of almost 20% in 2004 over 20031, it is still the case that only a small proportion of financial advisers recommend these products to their clients.
In 1994 only 16% of IFAs2 wrote any offshore bond business at all and, while this was at the time predicted to grow to 40% by 20043, it is perhaps surprising to see that just 50 IFA firms account for 50% of the offshore bond business written today4.
An offshore investment bond will not be appropriate for every client, but it may well be of interest to those seeking more flexibility, choice and tax efficiency than an ordinary UK-domiciled investment bond can offer. Some of the common needs that can be met by offshore products include inheritance tax planning, control over taxation timing and wealth management. And with increasing numbers of Britons planning to retire abroad, the demand for more portable investment products is growing.
The ever-changing financial services market means that new opportunities arise all the time, as the forthcoming simplification of pensions will reveal. For example, by 2010 the minimum age from which pension benefits can be taken will be raised to 55, so anyone retiring before that age may need an alternative source of income.
An offshore investment bond could be used to provide this. And there will be a limit on the amount that people can invest in a pension and still get tax relief, both in terms of annual contribution and total pension fund value - £215,000 and £1.5m respectively for the 2006/7 tax year. Those wishing to invest more than this may turn to offshore investment bonds as a tax efficient means of building an additional fund. Offshore bonds have much to offer a wide range of clients and should not be reserved for the wealthy few.
1 Source: AILO press release, March 2005
2 Source: Acuity Consultants
3 Source: Acuity Consultants
4 Source: Touchstone and Acuity Consultants
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