An offshore portfolio bond is a tax efficient wrapper that can hold a variety of assets like stocks and shares or mutual funds. This is a bond that adds the legal and tax shield of a life insurance policy to an investment portfolio. It is structured to simply combine a life insurance policy and a portfolio to create a wrapper that investors can buy, manage and sell their assets through.
A flexible investment that works with you
You may decide that you want to start taking it easy by retiring early or reducing your working hours. The advantage of an offshore portfolio bond is that you can start taking your money before your pension income becomes available at age 55. Plus, usually you’ll only pay tax when you take a withdrawal*, and being able to decide when you take your withdrawals gives you more control over the timing of any tax due. Furthermore, you can change the setup of the investment portfolio as your needs change. For example, you might want growth in the first phase of your retirement and then choose to change the assets to generate an income from your portfolio. And because your funds are invested in a bond, you don’t need to worry about triggering any tax liabilities when switching between funds.
* Tax benefits depend on your personal circumstances and may change in the future.
Flexible tax-deferred withdrawals
You can withdraw up to 5% of your initial premium each year from your offshore portfolio bond (plus any additional premiums from the year when they are added) without any immediate UK tax charge until you have
withdrawn the original value of the premiums paid. So, for example, you could withdraw 5% each year for 20 years, without incurring a tax charge.
Virtually tax-free growth
Our International Portfolio Bond are based in the Isle of Man, Jersey, Guernsey respectively. Being based in either of these jurisdictions means that you will not pay income tax on any gains until you take money from your offshore portfolio bond. The amount of tax you pay will be based on your circumstances at that time. You can change your investment portfolio within the bond as your needs change, without having to worry about capital gains tax.
Control on how you take your money from the bond
You have the option to divide your offshore portfolio bond into many segments. This gives you greater control of how you take money from the bond. You can choose to either cash in just some of the segments or take money
from across all of the segments in the bond. These two options can give quite different results for tax purposes. We can advise you on how to take money from your bond in the most tax-efficient way.
You won’t normally pay tax on the investment growth of your bond until the funds are withdrawn or the policy comes to an end. However, this may distort the tax you need to pay, as the whole gain may be taxed in one tax year. Top-slicing relief is a way of addressing this problem, by finding your ‘average’ gain over the period of the bond and using this figure to determine the amount of tax you will pay. Your financial adviser can give you more guidance on top slicing relief.