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Making your investments work smarter
Investing through an offshore bond gives you access to:
A number of our discretionary portfolios can be accessed through an offshore bond wrapper.
These portfolios take advantage of short-term tactical and long-term strategic market opportunities following our investment view. The portfolios are actively managed using a structured, disciplined investment process. Asset allocation and risk control are among the highest priorities.
Multiple discretionary mandates are available to accommodate a range of client objectives, risk profiles and investment time horizons, capturing a well-diversified range of asset classes such as fixed income, equities and alternative investments.
You are taxed on the profits in an offshore bond when you surrender it, not when dividends are paid or when you move between different underlying funds or discretionary portfolios.
The benefits of compounding the investment returns before tax can be compelling when considered over the medium to long term.
Further to the above, offshore bonds have a number of additional advantages.
You can withdraw up to 5% pa of the amount of premium invested without triggering an immediate UK tax charge.
Any unused allowance can be carried forward to the following year. So, if you withdraw 5% a year, you can do so for 20 years without triggering an immediate tax charge. If you choose to withdraw 4% a year, then you can do this for 25 years without triggering an immediate tax charge.
For example, Claire has invested GBP 1 million into an offshore bond. She makes a withdrawal of 3% in year one and then no further withdrawals in the following four years. In year six she would like to withdraw some money. She can therefore take up to 27% of her original capital (GBP 270,000) without triggering an immediate tax liability.
When the offshore bond is finally surrendered the amount of any withdrawals taken are added to the proceeds on surrender to calculate the amount of investment gain which will be subject to Income Tax.
Offshore bonds are set up with a minimum of 100 identical policies rather than one single policy. If you want to make a gift you simply work out how much you would like to give away and then calculate how many policies you need to gift.
For example, Robert and Fiona invested GBP 5 million in an offshore bond five years ago and it is now valued at GBP 7.5 million. The offshore bond was set up as 100 individual policies and so each policy is worth GBP 75,000. They decided to give their children, Bill and Georgina, aged 30 and 32, a gift of GBP 300,000 each – that is, four polices each.
There is no tax charge on the gift from Robert and Fiona to their children, but if Bill and Georgina surrender any of their four policies they will pay tax at their own income tax rates.
Policies may also be gifted to an adult child to cover university costs at a time when the child’s personal allowance is unused. It is important that you seek tax advice before undertaking any gifts or transfers of the policies.
This is a complex area, but there maybe situations where it will be beneficial for overseas investments to be consolidated into an offshore bond. As the offshore bond is non-income producing no overseas income will arise on it meaning the non-domicile can elect to be taxed on the arising basis, so will not be liable for the remittance basis charge.
Long-term saving through insurance-based investment wrappers is popular in many countries throughout the world.
We can provide you with further information about portability, although we would recommend that you take professional tax advice in the specific jurisdictions involved, as this is a highly complex area.
Where you own an offshore bond and have spent a number of years outside of the UK as a non-UK resident then on any disposal of the offshore bond you should benefit from a tax exemption reflecting the gain that accrued when you were non-UK resident.
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