It is certainly an interesting time to be taking over as editor of a magazine like International Inv...
It is certainly an interesting time to be taking over as editor of a magazine like International Investment. Legal & General's entry into the offshore insurance market with the launch of its Dublin-based subsidiary Legal & General International (Ireland) (see News, page 5) was not a hasty move. Most of L&G's onshore peers have been operating offshore subsidiaries, serving both expatriates and the UK tax planning fraternity, for some time.
According to L&G, which had been asked for many years why it had not gone offshore, the growth of open architecture was the key driver behind the decision to do it now. It will thus be launching the core offshore bond offering on the Cofunds platform, following in the footsteps of Fidelity's FundsNetwork offshore bond, launched earlier this year.
But as the L&G launch was being readied, a potential cloud appeared on the horizon in the form of Chancellor Alistair Darling's plans for the reform of capital gains tax.
While onshore this has been seen as an attack on entrepreneurship, given the proposed withdrawal of taper relief for business assets, the offshore implications centre on the relative attractiveness of offshore bonds and unwrapped collective investments.
Yes, offshore bonds may be a little more costly to run, but they have always had the benefit of tax-free switching and gross roll-up, not to mention flexibility in terms of encashment, when the holder may have dropped down an income tax band or perhaps moved to another jurisdiction. Unwrapped collectives would almost certainly have attracted a capital gains tax charge of 40% for sales and switches.
The proposal to drop the CGT rate to a flat 18% has caused consternation in the offshore market, with insurance firms lobbying the Treasury to reconsider the move. The delay between the announcement and the planned implementation has also made advisers' jobs far harder, as applications already made may become unsuitable, and delays may be caused in placing new business. Life companies are busy producing various scenarios to help advisers whatever the result of the Chancellor's period of reflection, due to conclude before Christmas.
But Government and the regulatory authorities have always blown hot and cold with the offshore investment market, and advisers and providers alike have learned to be flexible as a result. Even if offshore bonds lose ground to collectives for UK residents, non-doms wishing to sidestep the proposed £30,000 annual tax charge could be the next major market (see page 21).
Whatever the outcome, International Investment looks forward to helping intermediaries transact cross-border business for many years to come.
Went into administration April 2018
Threat of legal action looms over Woodford IM
View from the front row
Retirement Planner Forum 2019