IPB (CLIAI product)


  • Her income means that she pays higher rate income tax.
  • Has a lump sum of £500,000 available.
  • Looking for a flexible tax-efficient investment.
  • Important that she has access to her investment.
  • Expects to be a basic rate tax payer in retirement.

The International Portfolio Bond

After speaking with her professional adviser Holly decides to invest the £500,000 into the International Portfolio Bond (IPB) from Canada Life International Assurance (Ireland).  The IPB consists of a series of identical international life assurance policies and Holly chooses for it to be set up as 50,000 individual policies and her investment adviser selects a range of investments to be held within the Bond.

The income and growth generated by the underlying investments can be rolled-up free of any UK income or capital gains tax until she decides to take any profit out of the policies.

She is able to withdraw a regular amount if she chooses, she can take 5% of the total amount she has invested, so £25,000 each year as ‘tax-deferred withdrawals’ for a period of 20 years, for example; or 4% for 25 years and so on. As long as the total is less than 100% and it’s no more than 5% a year, any income tax liability is deferred. If Holly decides to take any withdrawals, the IPB allows her to take these payments monthly, quarterly, half-yearly or yearly.

If she doesn’t need this regular amount, the 5% allowance is carried over each year. So if, for example, she wants to take money out after the fifth year and has not taken anything previously, she could take up to £125,000, which is 25% of the amount invested, without any immediate tax liability.

Any potential tax on these withdrawals doesn’t have to be paid until the IPB is cashed-in.

A number of years later and into retirement, Holly is a basic rate tax payer and decides that she needs the money within the IPB. Despite being a higher rate taxpayer when she started the investment and throughout most of her working life, she now only pays basic rate tax on the profit on all the investments held within the bond on encashment, offering significant potential tax savings.

This is because the total profit made is divided across the number of years she held the IPB, but based on her tax position in the year of encashment. This spreading of the profit means that the gains she has made keep her as a basic rate tax payer, thereby avoiding higher rate tax altogether.

In addition to this level of access, Holly’s investment adviser can buy and sell investments within the IPB as they wish, without any capital gains tax liability.

Key benefits

  • The investments in the IPB can grow free of UK income and capital gains tax, deferring the potential liability until the policies are cashed-in.
  • During the investment term Holly is able to take money out of the policy without incurring any immediate tax liability providing she stays within the cumulative 5% allowance.
  • Any tax liability when cashing-in policies is based on the policyholder’s tax position at that time. As Holly was a basic rate taxpayer when she cashed-in her IPB then she avoided any higher rate income tax, despite being a higher rate taxpayer during the investment term.
  • Had Holly retired abroad then when cashing-in the IPB any profits made would be free of UK tax altogether, although she may have tax to pay in the new country of residence.

On Holly’s death

  • The IPB or the proceeds from the IPB would be available as an asset of Holly’s estate and could be passed on to the beneficiaries of her estate in accordance with her will.
  • The value could be subject to inheritance tax unless the IPB was placed under a suitable trust.

Important information

  • The value of investments can fall as well as rise and you should speak to a professional adviser to ensure that any investment is suitable for you.

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.