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www.InvestmentGuide.co.uk Other forms of investment type Life Insurance
OFFSHORE
Lump sum invested in a single premium life insurance policy linked to units in a fund. You have the choice of different types of investments with the latest fashion being cash and derivatives. The units reflect the value of the assets held in the fund plus any accumulated income. You can switch the investment link to the offshore equivalent of the following on-shore life insurance bonds:mixed, property, fixed-interest, money, equity, internationalor 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.
Who can invest Anyone.
How worthwhile Potentially good value for higher rate taxpayers who want to defer the tax they pay and possibly avoid it all together. Good value if you choose a company which does well. Unsuitable for non-taxpayers and basic taxpayers. The main problem is avoiding high and possibly hidden charges and companies which go down the drain.
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 no income or capital gains tax. But dividends on UK shares received by the company have the equivalent of UK basic tax deducted. Taxpayers have to pay extra tax 20% for basic taxpayers, or 40% for higher rate taxpayers on the gain when they cash with no tapering allowance as there is with capital gains tax. However withdrawals of up to 5% a year of the original investment for the first 20 years are exempt (if you don't withdraw the 5% in the year it is first available, you can do so in a later year).
Fees to pay Charges deducted from your investment are initially 5% to 8% and usually 1% to 1½% yearly. Some companies have higher charges on premiums under £5,000. Others give discounts for large amounts. Instead of an initial charge, some companies have higher yeyarly charges for the first 5 years, say,
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. Isle of Man authorised insurance companles are covered by a compensation scheme based on the current value of your units.
How to invest Fill in a proposal form from a life company.
Where from Start with companies based in the Isle of Man who are members of The Manx Insurance Asociation.
Other forms of investment
type Life Insurance
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Last updated17 December 2002