Our most flexible international investment bonds

Frequently Asked Questions

• What is an international bond? 

  Investment bonds are a tax wrapper, like an ISA – your clients can pay money in and take money out as and when they want. Like ISAs, bonds follow tax-rules that set out how they work and when clients might have to pay tax. ISA tax rules are more generous than those for bonds, so most people would only consider an investment bond once they’ve used up their ISA allowance. 

  An international, or offshore bond, is an investment bond issued by companies outside of the UK. Learn more about international bonds here, including the difference in tax treatments for international and onshore, or UK, bonds.

• What are the advantages of international bonds?   

  International bonds offer clients tax-efficient withdrawal options to supplement other income without affecting tax allowances or benefits. 

  There's minimal tax reporting for clients. International bonds do not suffer tax on the underlying investments and they grow virtually free of tax over a longer period of time; this is known as gross roll up. Clients do not hold the underlying investments directly, so there is no personal reporting or tax on the dividends, capital gains and interest produced by the funds. See this Briefing Note for a comparison of the different types of bonds. 

  Clients can invest in different currencies, with a choice of Euros, US Dollars or Sterling. 

  Your clients can also segment their international bond. The greater the number of segments, the more flexibility clients have in tax planning and passing wealth down the generations.

• How are international bonds taxed?

  Like UK bonds, international bonds follow the chargeable events regime of taxation. Certain transactions will trigger chargeable events. A chargeable event causes a chargeable gain calculation, and these chargeable gains are assessed for income tax.   
   
  Bond chargeable gains are classed as savings income, so individuals can set the bond gain against any available 0% savings rates (personal savings allowance of up to £1,000 and starting rate for savings band of up to £5,000) and any remaining personal allowance. See our Briefing Note for more information.

• What transactions cause a chargeable event?

  Chargeable events include:

  • Death giving rise to benefits, i.e. where the sole, or last of multiple, lives assured passes away and the bond comes to an end
  • Assignment for money or money's worth. However, an assignment by way of gift does not cause a chargeable gain.
  • Altering the policy to add or remove a life assured.
  • Maturity.
  • Excess withdrawals - when you take partial or regular withdrawals of more than the available 5% tax deferred allowance.
  • Surrender of all rights under the policy, i.e. cashing in the full bond or individual segments or policies.

• Is top slicing relief available on international bonds? 

  Top slicing relief may be available to reduce or avoid any higher rate or additional rate tax liability depending on the personal tax position of the investor. See this Briefing Note for more information on how top slicing relief is calculated for offshore bonds where an individual is assessed for tax on the chargeable event gain (CEG). 

• Can the ownership of an investment bond be assigned?

  Yes, it is possible to assign the legal ownership of the bond or individual segments within it. An assignment is the process of transferring ownership, by deed, from the current owner(s) (the assignor) to a different person or entity (the assignee). This allows any income tax assessment for an investment bond chargeable gain to be deflected away from the original owner to a new owner, who may pay lower rates of tax.  

  Where an investment bond is subject to a trust, then, depending on the situation with the trust, either an assignment or an appointment can be used to change the tax point for the income tax assessment. Learn more about this in our Assignment or Appointment briefing note.

• What is segmentation of an investment bond?

  Investment bonds are made-up of a series of individual policies. Segmentation is the process of dividing the bond into a number of ‘mini’ policies (known as segments), which are usually identical but can be dealt with individually. These are designed to give flexibility in the bond.

• Why are segments important in tax planning?  

  The facility to split an investment bond into a greater number of segments can provide added flexibility and tax efficiency. Read this case study for more information on the benefits of segmentation, and to see how Jerry and Sally used segmentation for the Premiere Account. 
  

• What fund or investment choice is available on the Premiere Account?

  Clients have access to a wide range of investment funds and cash deposits through our International Open investment range, using assets we are permitted to hold on their behalf.   

  The accounts provide true open architecture to appoint multiple discretionary investment managers, link to different platforms, and switch between them in the bond wrapper, without causing a tax event. 

  Investing in our Segregated Portfolio Service means clients can access a wider range of investment types, such as equities and bonds without adverse tax consequences. 

  Find out more about our investment solutions here:

  • International Open Investment Range
  • Discretionary Fund Managers
  • Investing on platforms with an international bond
  • Segregated Portfolio Service