Offshore Bonds | Standard Life (2024)

FAQs

What is the life cover of offshore bonds? ›

An offshore bond is a tax-efficient investment wrapper, set up by a life insurance company that is resident in a jurisdiction with a favourable tax regime, and within which an individual can invest in different types of assets, including equities, fixed interest securities, property and cash deposits.

What is the 5% Allowance? One of the main features of using an offshore plan is the ability to take withdrawals of up to 5% of the premium paid each plan year without triggering an immediate tax charge. This is known as the 5% allowance.

On death, ownership passes to any surviving joint owner or the deceased's PRs. If the PRs take ownership, they can choose to either encash the bond by surrender resulting in a chargeable event or assign ownership to a beneficiary of the estate.

Offshore Bonds are very useful for someone who is a higher rate payer, who wants to invest in income generating investments and would like a no immediate liability to tax income for an extended number of years and happy to address any potential tax liability in the future as part of financial planning exercise to ...

However, there are disadvantages, and these include chargeable event gains that can suffer tax at up to 50% on encashment of a bond; there are no ways to use a capital gains tax allowance as gains are subject to income tax; and on the death of the last life assured, there could be inheritance tax and income tax due.

When an offshore policy is surrendered, an individual can be charged income tax at nil if the personal allowance is available; starting rate 0%; basic rate 20%, higher rate 40% and additional rate 45%.

The 32 year rule report should demonstrate compliance with the 32 year rule by aligning the maturity dates of all of the bonds currently refunded by the refunding bond issue (or of the original bonds in a series of refundings) with those of the refunding bonds.

The 60/40 Portfolio: 60% S&P 500 Index and 40% Bloomberg U.S. Aggregate Bond Index with quarterly rebalancing. Past performance is no guarantee of future results.

Offshore Bond Commissions

The total charges range between 9.5% and 10%. The actual cost of bonds can be as low as 0.25% per annum equating to between just 1.25% and 2.5% over the same term.

Withdrawal or Encashment: Beneficiaries may withdraw the funds or encash the bond, subject to any tax implications and provider's terms. Transfer: Beneficiaries might be able to transfer the bond into their names or a new investment vehicle.

How do you cash in bonds if a person is deceased? ›

Get a certified copy of the death certificate for everyone who has died who is named on any of the bonds. Have each person who is entitled to a distributed bond also fill out and sign the appropriate forms: If they want cash for their bond: FS Form 1522. If it is an EE or I bond and they want to keep it: FS Form 4000.

If only one person is named on the bond and that person has died, the bond belongs to that person's estate. If two people are named on the bond and both have died, the bond belongs to the estate of the one who died last.

Bonds betrayed investors in 2022

Stocks lost 18.6% of their value that year, as measured by the S&P 500. And bonds lost 13.7% of their value, according to the Vanguard Total Bond Market Index. Inflation pushed that figure to 20%, the worst bond return in 97 years, according to a NASDAQ analysis.

This is a rule in tax law which allows investors to withdraw up to 5% of their investment into a bond, each policy year, without incurring an immediate tax charge.

High-yield bonds face higher default rates and more volatility than investment-grade bonds, and they have more interest rate risk than stocks. Emerging market debt and convertible bonds are the main alternatives to high-yield bonds in the high-risk debt category.

Withdrawals after the 5% per annum allowance has been used for 20 years. If an investment bond has been paying a 5% per annum income for 20 years, HMRC deem this to be a return of the investor's original capital and any additional withdrawals would be considered chargeable events each time they are made.

The LLRC is used to gauge a project's ability to pay the total debt outstanding at a given point in time. The ratio is calculated by taking the net present value of cash flow available for debt service and dividing it by the total outstanding debt at the chosen time.

Offshore bonds grow in a virtually tax-free environment which is known as gross roll-up. Individuals can offset their gain against any unused personal allowance, the starting rate of 0% and the personal savings rate if applicable. Individuals may be able to make use of top slicing to reduce the tax payable on the gain.

Each year you can withdraw up to 5% of the total payments made into the bond on a tax-deferred basis. This is cumulative so if you don't take a withdrawal in year one, you can take 10% in year two. Or you can choose to pass it on to your family.