The product crunchers examine L&G International's tax-efficient trust scheme, the International Discounted Gift Scheme, now wrapped with its International Portfolio Bond
Legal & General International (Ireland) has wrapped its International Portfolio Bond into a tax-efficient trust scheme - the International Discounted Gift Scheme.
The scheme offers a choice of trust structures to suit individual needs. The Discounted Gift International Portfolio Bond is a single-premium whole-of-life investment bond with no fixed investment period, provided by Legal & General International (Ireland). The bond is only available in conjunction with a Legal & General International Discounted Gift Trust. Together they form the International Discounted Gift Scheme.
The scheme aims:
- to help reduce the donor's inheritance tax liability in the UK, as part of an overall inheritance tax planning strategy;
- to provide the donor with regular payments for the rest of their lifetime;
- to provide growth on the amount invested in the bond over the medium to long term (at least five years, ideally longer) in a tax-efficient way;
- to enable the trustees to pass the remaining trust fund to the chosen beneficiaries following the donor's death, either immediately or at any time subsequently; and
- to provide access to a wide choice of assets from a range of investment managers and deposit account providers, through the bond.
The scheme has been designed carefully to ensure the gift is not treated as a gift with reservation. There are two options: an absolute trust and a discretionary trust. These give donors flexibility in dealing with their financial and personal circumstances.
The value of investments in the bonds can fluctuate, are not guaranteed, and customers may not get their full money back.
A strong heritage
Legal & General International (Ireland) Ltd is a subsidiary of the Legal & General Group and aims to build on the heritage of L&G's UK business by providing quality investment products backed by efficient administration and fund management expertise.
After only six months of operating, Legal & General International (Ireland) has received a B+ rating (very strong) for its overall financial strength from AKG Actuaries & Consultants. This is the highest rating given by AKG to any offshore long-term insurer, shared with only a few other UK financial services companies.
- Available to donors aged between 18 and 89.
- Choice of 3 bond currencies (£, EUR, $).
- Single-premium whole-of-life open-architecture investment bond.
- Two to six lives assured covered (not donor or spouse/registered civil partner).
- Death benefit 100.1% of the surrender value.
- £75,000 minimum investment (or currency equivalent).
- £2,500 minimum additional investment (or currency equivalent).
- Partial surrenders and regular withdrawals subject to trust terms.
- Choice of four charging structures.
- Absolute or discretionary gift trusts available.
- Discretionary asset managers can be appointed to manage the portfolio.
THE PRODUCT CRUNCHERS
Danny Cox, head of financial practitioners at Hargreaves Lansdown
As with any portfolio bond there is very good choice of funds. 8/10
It doesn't seem to have a capital redemption option, which is limiting. 5/10
Legal and General International are no better or worse than any other insurer. The more business you give them, the more attentive they are. 7/10
They have always been good on trust technical support. 6/10
VALUE FOR MONEY
The charges are competitive compared with other offshore bond products. The problem with the Legal & General International Portfolio Bond Discounted Gift Scheme is it doesn't have a wow factor or USP that I can see. 7/10
Alan Smith, director of Capital Asset Management
Although the scheme is not completely 'open architecture' L&G does offer a wide fund choice to cater for most client requirements. As well as L&G funds (active and trackers) the plan offers access to a range of external funds on discounted terms and cash deposit accounts which may be popular in the current economic climate. 8/10
The plan assets may be held in sterling, euros or US dollars, which may be useful. It also offers four separate charging structures and a choice of trusts including discretionary and Aabsolute trust depending on individual circumstances. 8/10
Our experiences with the onshore UK company have been patchy and occasionally, frankly disappointing. It remains to be seen whether or not the Dublin office responsible for servicing this scheme can improve upon their UK-based colleagues. 6/10
We have found LGII's technical team to be helpful and responsive. This is very important when dealing with international and offshore business as matters can become fairly complex, particularly in the areas relating to trusts and detailed tax planning. 8/10
VALUE FOR MONEY
The plan has the usual range of regular administration charges. The four charging structures range from a straightforward initial charge model with no exit penalties to an eight-year charging scheme and a lifetime charge model both with exit penalties built in. Fund management charges are on the whole on a par with the market. 7/10
David Strachan, Save and Invest
It is extensive as would be expected of an offshore vehicle. 8/10
It is evidently limited because of the trust restrictions, but as flexible as allowable. Good number of charging structures which are easily understood. 8/10
It is excellent, easily accessible, very helpful and informative - better than onshore. 8/10
Whilst only needed to rely on this one or twice, I think this is an area which could be improved upon both on and offshore. Accessibility to technical expertise could be made easier. 6/10
VALUE FOR MONEY
It seems fair value for the contract being offered and also transparent. 8/10
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From 1 March