www.InvestmentGuide.co.uk
www.InvestmentGuide.co.uk Other forms of
investment type Life Insurance
Unit
Trust or OEIC
Investment
Trust
LIFE INSURANCE
(Also known as Capital Guarantee Bond,Guaranteed Growth Account)
Lump sum invested in a single premium life insurance policy which rises in line with the growth in value of the FT-SE 100 Share Index for 5 years. You are guaranteed to get your money back over 5 years and schemes may also guarantee a minimum growth rate, e.g. 2.5% a year too. If you want your money back early you get less growth but you usually still get all your capital back. Some schemes offer more complicated guarantees which offer you the chance of 'locking in' an existing gain. The bonds are issued for a limited time and different issues from the same company have different guarantees.
Banks and building societies also offer this type of investment, sometimes with lower charges.
Who can invest Anyone.
How worthwhile Compare with Bank or Building Society Stock Market Guaranteed Bond which may offer better guarantees and lower charges. If the stock market is in the doldrums by the time the bond matures you get a poor return although no loss of capital; if you stop early you also get a poor return. Higher rate taxpayers consider instead Unit Trust Index Tracker. Unsuitable for non-taxpayers.
Minimum £1,000 to £5,000.
Maximum Varies.
Suitable Lump sums.
Money back After 5 years. Or earlier but with some penalty.
Interest Variable. Growth linked to the rise in the FT-SE 100 Share Index sometimes with a guaranteed minimum.
Interest paid After 5 years. Or when you cash if you cash early.
Tax The life company pays tax on income at 20% and capital gains at 23%. The proceeds and any growth are basic rate tax paid for basic rate 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 usually 5% initial; 1.5% yearly.
Passbook Statement sent.
Children Unsuitable.
Risk Full value of original investment on withdrawal. 90% compensation scheme for UK authorised life companies. 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 and higher rate tax.
How to invest See surveys and adverts in the press. Ask for details and compare the guarantees and terms.
Where from Life insurance companies.
Other forms of investment
type Life Insurance
Unit Trust or
OEIC
Investment Trust
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Last updated or checked 2 June 2000