"Insurance bonds have suffered in the last two years mainly because of the change in Capital Gains Tax (CGT) in April 2008 which made investments in mutual funds more attractive."
"Changes to CGT which are likely to be announced in the Budget next week include an increase in the current rate1 and a reduction in the exemption threshold could prompt significant outflows from mutual funds into insurance bonds. Insurance bonds are life policies so the underlying funds are subject to different taxation rules than a direct investment into shares or unit trusts.
"For example, withdrawals of up to 5% of the original capital amount are permitted each year without incurring any tax liability"
Defaqto's guide entitled ‘Watch this space' can be downloaded free via the website and includes the following in addition to taxation implications:
- An overview of insurance bonds and the industry as a whole
- Rationale for recommending onshore bonds versus offshore bonds
- Charging structures and features
- Policyholder protection
- Trusts and estate planning
- Future developments and platforms
