RNS Independent Financial Advisers’ partner Andrew Clayton looks at a useful financial planning tool.
Often overlooked in favour of ISAs, Investment Bonds are a useful financial planning tool in the hands of our independent financial advisers.
What is an Investment Bond?
An Investment Bond, also called a Life Assurance Bond, is an investment product, where we invest a lump sum for a client, that can be used to tap into stocks and shares and other useful growth and income generating assets.
High Street banks and building societies often advertise Bonds as well, but they are different altogether, and in that context would usually describe a fixed term savings or deposit account, not an investment in stocks and shares.
How does it work?
When we set up an Investment Bond for you, we review the full range on the market and select a range of suitable investments to go inside it.
It could be one large investment or several smaller ones, to make up a portfolio.
The investments will usually consist of stocks and share-based funds, so they have potential to make a good return and generate a good income.
Because it is stocks and shares based, these investments are best suited for people who want to invest money for medium and longer terms, for example for five years, although you can withdraw money whenever you want to.
What are some of the advantages?
The Investment Bond can generate capital growth for medium to long term gains.
If income is more important, the Investment Bond can pay a monthly tax deferred withdrawal of up to 5% per annum.
You can invest yourself, or jointly.
It is very good for Trustees. So if you are involved with a Trust, or want to set one up to save Inheritance Tax, then we can invest for you.
Corporate businesses can invest, so if you have your own Limited company it can own an Investment Bond. For example, you might have cash balances in the company bank account that aren’t earning interest at the moment.
You can invest on behalf of other people, for example under a power of attorney, so they can be good to help pay for items such as care.
Often, they can be exempt from means testing for care too.
Take advice before investing
Investment Bonds are useful in a wide range of financial planning scenarios, but only when used correctly.
Our financial advisers are qualified to give the advice that you need and would be pleased to discuss the investment opportunities with you.
Andrew Clayton FCA, Dip PFS
Financial Adviser
If this were a football team, you would say that Andrew was a product of the RNS youth system. He joined the firm in 1998, training and qualifying as a Chartered Accountant in 2002. Andrew became a partner in 2008.
Andrew leads the firm’s financial services business, assisting clients to manage their wealth. Andrew likes motor sports and he enjoys keeping fit.