www.InvestmentGuide.co.uk
www.InvestmentGuide.co.uk Other forms of investment type Life Insurance
LIFE INSURANCE
Lump sum invested in a single premium life insurance policy linked to units in a fund of stocks and shares mainly invested overseas. A few, called Currency Bond, invest in foreign currency bank accounts or fixed-interest stocks. Some bonds are linked to a single unit trust investing overseas. The units reflect the value of the assets held in the fund plus the accumulated income. You can switch the investment link to a mixed, fixed-interest, money, equity, property or any other type of fund offered by the same company without cashing the policy.
Who can invest Anyone.
How worthwhile If you do not regularly use your capital gains tax exemption limit, consider instead Unit Trust Invested in Overseas Shares or Investment Trust Shares, some of which specialise in overseas shares; these give you the same investment opportunity but do not automatically deduct tax on a gain. Unsuitable for non-taxpayers.
Minimum £500 to £5,000 usually £1,000.
Maximum None.
Suitable Lump sums.
Money back At any time or when you die. You get the current value of the units.
Interest Income is accumulated.
Interest paid When you cash the policy or die. You can choose to withdraw a certain amount each half-year; some- times yearly, quarterly or monthly.
Tax The life company pays tax at the same rate as a basic taxpayer would on this type of income; capital gains made by the life company are taxed at 20% - both usually reflect in the price of the units. With bonds linked to individual unit trusts capital gains tax may be deducted from the proceeds of your policy before you get it, whereas had you invested directly it would usually fall within your individual annual exemption. The proceeds and all withdrawals come tax paid for basic and 20% taxpayers. Non-taxpayers cannot reclaim the tax. Higher rate taxpayers pay extra, currently 18%, when they cash and on withdrawals over 5% a year or if they go on for more than 20 years or on death.
Fees to pay Charges deducted from your investment are 5% to 10% (usually 5%) initially and usually ¾% to 1% yearly although unit trusts which the fund invests in may charge 1½% a year instead or in addition. Some companies have higher charges on premiums under £5,000, say.
Passbook None. Insurance policy issued.
Children Unsuitable.
Risk High. The value of the units goes down as well as up. UK life companies are covered by a 90% compensation scheme based on the current value of your units if the company fails. Do not invest in an overseas life company which is not authorised in the UK as your protection is less and your income or gain could be liable to UK basic as well as higher rate tax.
How to invest Fill in a proposal form from a life company.
Where from Many life companies.
Other forms of investment
type Life Insurance
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Last updated or checked 2 June 2000