www.InvestmentGuide.co.uk
www.InvestmentGuide.co.uk Other forms of
investment type Life Insurance
Other types
of bond or stock
LIFE INSURANCE
Lump sum invested with a life insurance company at a fixed
interest rate for terms of 1-10 years. Versions which pay out interest are
called Income Bonds; those which accumulate income are called Growth
Bonds. Be sure not to confuse these with so called 'Premium' Income Bonds where the capital returned may
not be 100% and depends on the performance of one or more share indices.
A few Income Bonds have a variable income. You would probably be better
off with a bank or building society account or
an offshore bank account.
Who can invest Anyone. Usually minimum age 18, 17 or 12; maximum none or 79-85.
How worthwhile Fair value for basic rate taxpayers provided you don't expect interest rates to rise during the term of the bond. Some bonds pay better rates the older you are. Terms over 5 years are not recommended. Higher rate taxpayers compare Growth Bonds with National Savings Fixed Issue Certificates, and Income Bonds with Stock Government Fixed-lnterest. Non-taxpayers consider instead of Growth Bonds National Savings Capital Bond, and instead of Income Bonds, National Savings Fixed Income Savings Bond, Stock Government Flxed-lnterest or Corporate Bonds.
Minimum £1,000 to £10,000.
Maximum None.
Suitable Lump sums.
Money back At end of term or when you die. Some bonds can be cashed early but you lose some of your money.
Interest Fixed. Many companies pay higher rates for larger amounts, e.g. over £5,000, £10,000, £20,000, £50,000.
Interest paid With Income Bonds usually yearly (a few pay half-yearly; or monthly with £5,000 minimum investment); by cheque to you or direct to a bank account. With Growth Bonds the interest is accumulated.
Tax The interest whether paid out or accumulated usually comes tax paid for 20% and basic rate taxpayers. Non-taxpayers cannot reclaim the tax. Higher rate taxpayers have to pay extra, currently 18% and 20% from 6 April 2008, either each year, or when the bond matures. The income or proceeds of a Bond may reduce someone's entitlement to Age Allowance.
Fees to pay None.
Passbook Insurance policy issued.
Children Unsuitable.
Risk None provided you don't cash the bond early. UK authorised life companies are covered by a 90% compensation scheme less 'excessive' benefits. Don't invest in an Income or Growth Bond offered by an overseas life company which is not authorised in the UK as your protection is less and your income or growth could be liable to UK basic as well as higher rate tax.
How to invest Look at the lists of best rates below, at present only available from smaller less well known insurance companies.
Where from Click for rates from Money£acts
Other forms of investment
type Life Insurance
Other types of bond
or stock
Last updated 17
December 2007.