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with profits bonds - independent financial advice
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with profits bonds, how do with profits bonds work, - Money Minder
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What Would You like to Know?
How does a With Profits Bond work?
With Profits funds aim to achieve a high return without you having
to invest directly into the stock market where you may have to watch
the value of your investment rise and fall in value day by day.
Although With Profits funds typically invest in shares, fixed interest
securities (mainly Government Stock or Gilts), Property and Cash,
providers smooth out fluctuations in the underlying investment values
by adding bonuses each year.
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How are bonuses added to my bond?
What makes With Profit funds so attractive is the way your money
grows. Every year the company will assess it’s profitability,
investment returns, and what it thinks the future holds. If after
taking into account these factors, things look favorable, the company
will announce an annual bonus rate (known as a reversionary bonus)
that will be added to your plan increasing its value year after
year. Any annual bonuses applied are then guaranteed by being ‘locked
on’.
In general, providers will declare a conservative annual bonus
because the underlying investments will continue to change in value.
In addition, if any money is taken from the bond, for example if
the bond is cashed in or if the bondholder dies, the provider will
usually add a further bonus. This is called the terminal bonus.
The terminal bonus is designed to make sure that you receive your
share of the growth achieved from the with profits fund over the
period that you have been invested.
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How much income can I take?
Under current legislation, up to 5% of the amount you invest can
be withdrawn free of income tax each year. Most with profit bonds
allow you to take a regular income monthly, quarterly, half yearly
or annually. You can normally choose to take an income immediately,
or you can wait until later.
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How can With Profits Bonds help with my tax
planning?
You will have no liability to basic rate income tax or capital gains
tax on the returns you receive because With Profit bond providers
pay the equivalent of these taxes within the fund. This cannot be
reclaimed if you are a lower rate or non-tax payer.
- You may have to pay further tax in the following circumstances;
- You are a higher rate taxpayer when you cash in all or part
of your bond, die, or assign the bond for money or moneys worth
- The growth from your bond makes you a higher rate taxpayer when
you cash in all or part of your bond
- You take regular withdrawals of more than 5% of the amount you
invested and, including this income, you are a higher rate taxpayer.
- You encash a bond when you are over 65 and the gain, when added
to your income, affects any age related tax allowances that you
may be in entitled to.
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How have With Profits Bonds performed?
As part of Money Minder Financial Services ongoing
commitment to regularly review investment opportunities for our
clients, we have recently undertaken a survey of some of the best
performing With Profits Bonds.
Our results have proved that the best performing bonds have achieved
considerably higher returns than building society investments over
the same period as can be seen from the graph below.
Value of £20,000 invested 01/08/1995
and withdrawn 02/08/2000**
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How do I invest into a With Profits Bonds?
If you would like to look further into investing in a with profits
bond, you can email us at info@money-minder.com
or call us FREE on 0800 197 88 88 between 9am and
5pm Monday to Friday when we will be happy to discuss your requirements.
We are able to offer a full advice service and recommend the most
suitable With Profits Bond for your circumstances.
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