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www.InvestmentGuide.co.uk Other forms of investment type Life Insurance
LIFE INSURANCE
(Also called Managed Bond, 3-Way Bond, Multiple Bond, Balanced Bond)
Lump sum invested in a single premium life insurance policy linked to units in a fund of shares, property and fixed interest stocks and/or bank deposits managed by professionals who seek to raise your return by choosing the right kind of investment at the right time. The units reflect the value of the assets held in the fund plus any accumulated income. You can switch the investment link to a property, fixed-interest, money, equity, international or any other type of fund offered by the same company without cashing the policy. Beware of 'managed' bonds which are really equity bonds and have no property or fixed interest investments.
Some companies have higher charges on premiums under £5,000. Others give discounts for large amounts.
Who can invest Anyone.
How worthwhile Potentially good value for basic rate taxpayers who choose a company which does well. An alternative might be to split your investment between Investment Trust Maxi ISA (or Unit Trust Maxi ISAand/or investment trusts and/or unit trusts) and Life Insurance Property Bond (or direct investment in property if you have a lot of money) and/or Stock Maxi ISA (and/or Stock Government Fixed Interest and/or Stock Government Index Linked). Unsuitable for non-taxpayers. Higher rate taxpayers interested in tax avoidance might consider instead Offshore Life Insurance Bond.
Minimum £500 to £5,000 usually £1,000.
Maximum None.
Suitable Lump sums.
Money back At any time or when you die. You usually get the current value of the units.
Interest Income, dividends and rents are accumulated.
Interest paid When you cash the policy or die. You can choose to withdraw a certain amount each half-year; sometimes 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. The proceeds and all withdrawals come tax paid for basic and 10% taxpayers. Non-taxpayers and 10% 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. For investments not involving UK equities, there may be a tax advantage in using an Offshore Life Insurance Bond esepecially of you intend to retire abroad.
Fees to pay Charges deducted from your investment are initially 5% to 8% (usually 5%) and usually 1% to 1½% yearly.
Passbook None. Insurance policy issued.
Children Convenient for a trust set up for children to avoid inheritance tax and probate.
Risk Moderate to high. The value of units goes down as well as up. UK authonsed Insurance companles are covered by a 90% compensation scheme based on the current value of your units.
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 28 March 2003