Investment Bonds

What are Investment Bonds?

An investment bond is a type of investment product offered by insurance companies that allows you to invest your money in a range of funds, shares, and other financial instruments. Investment bonds can be used for a variety of purposes, including saving for a specific financial goal, generating regular income, or planning for retirement.

When might investment bonds be for you?

• You want to invest a lump sum – usually at least £5,000.
• You can tie up your money for at least five years.
• You are comfortable with the fact that the value of your investment can go down as well as up and you may get back less than you invested.

How investment bonds work

You invest a lump sum – the minimum is usually between £5,000 and £10,000.

• Most investment bonds are whole of life. There is no minimum term, usually, although surrender penalties may apply in the early years.
• Usually you or your adviser has a choice of funds to invest the money into.
• At surrender or on death (or if not a whole of life bond at the end of the term), a lump sum will be paid out. The amount depends on the bonds terms and conditions and may depend on investment performance.
• Some investment bonds may guarantee your capital or your returns. These guarantees usually involve a counterparty. If so they carry the risk of counterparty failure.

Benefits of Investment Bonds

• Tax Deferral: One of the primary benefits of investment bonds in the UK is the ability to defer tax on investment gains. The growth within the bond is generally not subject to annual income tax, allowing for tax-efficient compounding over time.
• No Contribution Limits: There are generally no specific contribution limits for investment bonds in the UK, allowing investors to make lump-sum premium payments according to their financial capacity.
• Flexible Withdrawals: While there may be a surrender charge for early withdrawals, investment bonds typically offer flexibility in accessing funds. Investors can take partial withdrawals or surrender the entire bond if needed. However, care needs to be taken around taxation of larger withdrawals.

If you would like to arrange an initial meeting with one of our financial advisers to discuss investment options, please contact the SMH Financial Services team on info@smh.group or 01142 664 432.

The value of your investment can go down as well as up and you may not get back the full amount you invested.