www.InvestmentGuide.co.uk
www.InvestmentGuide.co.uk Other types of Offshore
Funds
Recognised Offshore Fund Management
Companies
OFFSHORE
(Also called Extra Income & Growth Plan)
Lump sum invested with at a fixed interest rate for terms
of 3-5 years. Usually the bonds pay a high income of around 10% before tax or
"30% growth". However the capital returned may not be 100% and if one or more
share indices falls in value over the period (or falls by more than,say, 20%)
you lose some of your capital so the return will be less, say, 8% a year.
The bonds are usually limited issue. They seem simple to the investor. In
reality they are constructed in a complex way. You invest in an ISA or transfer
money from an existing PEP. The money from the ISA or PEP is invested in an
offshore investment fund, usually based in Dublin. The offshore investment fund
invests in an "equity-linked account" issued by a subsidiary of a major bank or
life company. The subsidiary may be guaranteed by its parent bank. The bank
then uses derivatives and financial futures to try and make some money
at your expense. These schemes sometimes also make untrue claims that there are
no charges or "no explicit charges".
Who can invest Anyone. Usually minimum age 18.
How worthwhile Good value for basic rate taxpayers provided you don't expect the stock market to fall in excess of the stated amount (eg 20%) during the term of the bond. Most bonds limit your potential loss , see also Risk below. You may be put off by the complexity and the way the promoters try and conceal their charges. Higher rate taxpayers compare with National Savings Fixed Issue Certificates and Stock Government Fixed-lnterest. Unsuitable for non-taxpayers.
Minimum £1,000 to £10,000.
Maximum None.
Suitable Lump sums.
Money back At end of term or when you die. Bonds cannot usually be cashed early.
Interest Fixed.
Interest paid Usually yearly by cheque to you or direct to a bank account.
Tax The interest whether paid out or accumulated is usually paid without deduction of tax but is usally taxable and should be disclosed to the Inland Revenue. If the scheme is part of an Maxi ISA, there is no tax to pay.
Fees to pay Probably 5%-6% initially on the initial value of the money invested inthe offshore fund despite claims that there are "no charges" and there will also be fees paid to professional advisers and the people who run the fund which may not be specified..
Passbook Certtificate or statement issued.
Children Unsuitable.
Risk If the stockmarket falls over the period, then you will lose some of your capital. The funds are covered by a compensation scheme for the territory in which the fund is based which may only give a maximum pay out of £13,500 for each investor compared with £48,000 in the UK. It might be adviseable not to invest, more than the maximum compensation scheme for the country. If through an ISA, the investors compensation scheme would apply.
How to invest Look out for advertisements and then ask an Independent Financial Adviser, especially one who will rebate some or most of the commission he gets.
Where from An independent financial adviser willing to give a rebate on the commission he gets.
Other types of Offshore
Funds
Recognised Offshore Fund Management
Companies
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Last updated or checked 28 February 2001