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Investment Bond

In-Specie Transfers – It’s a Timely Matter


Many of your clients, for whom you may consider an international investment bond an appropriate investment, will already hold other investments such as a portfolio of shares and/or collectives. Could an ‘in-specie’ transfer of all or part of an existing investment portfolio be an attractive option for these clients?

A lot can happen over short periods of time, as you can see in the graph below, so timing really is everything. Transferring funds in-specie reduces their time out of the market, meaning there’s considerably less risk of losses and your clients won’t miss out on the good days. Please note that the in-specie process is dependent on the time taken by the fund manager or deposit provider to register us, the bond provider, as the owner of the assets.

The benefits of In-Specie Transfers

Transferring funds in-specie involves the transfer of ownership of the funds from your client to the international bond provider without physically selling them.

 This can offer a number of advantages, such as:

  • Funds can be transferred to the bond without having to sell and re-purchase them, thus removing any risk of loss associated with being out of the market for any time.

  • Funds can be transferred without the cost of selling the funds and then re-purchasing some or all of them within the bond.

  • Your client does not need to wait for a term-linked deposit or structured deposit to mature before they set up their bond subject to deposit taker’s approval.

  • Funds closed to new business that cannot be bought through the bond can be retained.

  • Income arising within the bond will roll up gross, with no income tax deduction.

  • Future switches between funds will not be liable for capital gains tax.

  • Withdrawals can be made with no immediate tax liability, using the 5% tax-deferred allowance.

briefing note 14

 

Points to consider

  • Wrapping a portfolio in an international bond by transferring assets in-specie is a disposal for capital gains tax purposes. This will create a tax liability if the gain on the portfolio, plus any other gains, exceeds your client’s annual allowance of £11,300 for 2017/18.

  • Holdover relief is not available, even when the bond will be held in a trust, as the tax wrapper has changed. The transferred funds become assets within the bond and it is the bond that then represents the trust property, not the funds themselves.

  • Assets transferred in-specie must be permissible assets and acceptable to the international bond provider. Assets that would make the bond a personalised portfolio bond will not generally be accepted for UK resident investors. 

New business options

There are a number of ways in which assets can be transferred in-specie into a bond and then, if appropriate, into a trust:

  • Directly into a bond.

  • Directly into a bond that is then assigned to a gift trust.

  • Directly into a bond as the loan element of a gift and loan trust.

Administrative simplicity

We will support you through the process, which can be easier than you think:

  • We will vet portfolios in advance to help you to identify which funds can be transferred.

  • If you are a discretionary fund manager/platform manager and the funds are already in a nominee account, we will guide you through the process of moving assets to our nominee account or;

  • We will assist you in understanding which stock transfer forms need to be completed by the client if funds are not already held with a discretionary asset manager/platform manager.

Further information

For more information regarding this, please speak to your account manager in the first instance.

This briefing note has been prepared for professional advisers use only.


Please note that the value of an investment in the bond can fall as well as rise, is not guaranteed and your client could get back less than they invest. This briefing note has been prepared for professional advisers’ use only. The information regarding taxation is based on our understanding of current legislation, law and HM Revenue & Customs practice as at October 2017. We recommend that advisers and investors take their own professional advice.

This briefing note can also be viewed as a PDF

This website is for UK professional advisers only and is not approved for use by private customers.

Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.