In spite of the likely adverse impact of the proposed 18% flat rate of capital gains tax, investment bonds are not dead in the water, according to a poll of IFAs carried out by investment research group Defaqto.
In research for its report Unit Linked Bonds in the UK 2007, Defaqto found 71% of IFAs were predicting a drop in unit-linked bond business of up to 25%, but only 11.5% expect investment bond business to decline by more than 75%. Even with-profits bonds retain some support, with half of IFAs who do not currently use the products saying they would consider doing so in the future.
As well as the likely impact of the new CGT rate, the report considers the implications of the Retail Distribution Review, the growing importance of fund supermarkets and how life companies are likely to react to the growing influence of multi-manager propositions in the consumer investment field.
Fraser Donaldson, principal consultant – investment at Defaqto commented: “While unit-linked bonds are going through a rough patch at the moment, the product still has attractions and, provided these are capitalised on and properly promoted by the insurers, unit-linked bonds will have an enduring place in many investment portfolios.”
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