Only 1% of advisers say insurance bonds are always best for clients, as they increasingly consider using mutual funds instead, but offshore bonds' appeal should remain unchanged, according to a survey by Fidelity FundsNetwork.
The research also found a third of advisers were prepared to admit that until now they were largely using only insurance bonds for all of their clients.
Almost half of advisers intend to review clients with insurance bonds with a view to switching them to mutual funds.
Paul Kennedy, head of trusts and tax planning solutions at Fidelity FundsNetwork, said: “It was encouraging to see the survey reveal that 90% of advisers understood that the decision whether to use a life bond or a mutual fund can have a substantial impact on the investor’s ultimate return.
“Almost 100% of them recognised the value that this tax planning adds to their investment service and not a single respondent thought tax considerations were irrelevant,” he said.
While recent changes to CGT have not fundamentally changed the taxation of bonds, they have acted as a catalyst to refocus minds on the appropriate use of mutual funds, said Kennedy.
He believes mutual funds have been under-utilised in the past whereas insurance bonds have been overused, so popularity of onshore bonds may be reduced. The onshore bond appeals to the masses whereas high net worth individuals, expats and non-domiciled UK residents will still want an offshore bond to suit their needs.
However, the use of offshore bonds is harder to analyse, said Kennedy. “With pure tax analysis, for most people residing in the UK, they are not particularly tax efficient. So they’re not really appropriate for the general public and will be as popular as they were,” he said.
“Mutual funds, onshore and offshore bonds all have a place and should be chosen by what is best for the individual depending on tax, investment type and lifestyle,” he concluded.
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