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Invest Tax Efficiently In Offshore Bonds To Meet Long Term Goals - Citi UK

15 August 2017Fixed incomeHighlightsEquities
Invest Tax Efficiently With Offshore Bonds - Citi UK

If you're an experienced investor looking to save for the future, you may wish to consider an Offshore Bond. They're a tax-efficient investment that can be a good way to add more flexibility to your portfolio, and can be a good way of investing for longer term goals.

Of course, as financial goals and circumstances vary from person to person, we always recommend that you speak to your Relationship Manager to discuss your individual options.

But how do Offshore Bonds work? We're here to explain the basics, how they're typically used and whether they may be right for you.

What is an Offshore Bond?

Simply put, an Offshore Portfolio Bond is an insurance policy which is written outside the UK – conferring potential tax advantages in the process. Because it is offshore, it's a product that is exempt from Capital Gains Tax – a levy that has to be factored into many other types of investments.

Much like an ISA or Pension plan, this type of investment is known as a 'tax wrapper'. It also allows you to invest in a range of mutual funds and it is possible for you to top up an Offshore Bond with additional funds.

Evaluating if offshore bonds are right for you

Offshore Bonds aren't for everyone; there are a number of eligibility factors that should be considered. " If, for example, you are not a UK resident, or need to access more than 5% of your initial investment each year, or you only want to tie up your investment for a year or two, then an Offshore Portfolio Bond is probably not the right product for you," says Citigold Head of Insurance Products, Stuart Ward. "However, if you are prepared to invest for at least 5-10 years and are fully utilising your annual UK tax allowances, then an Offshore Bond may be worth considering as part of your investment portfolio."

Offshore Bonds tend to fall at the larger end of the investment scale; ideally you'll need to have existing investments in the region of £350k upwards and at least £100,000 available to invest via Citigold's partnership with Old Mutual International. You can retain regular access to this amount, withdrawing up to 5% per year of the original investment amount without income tax liability. However, they should be thought of as a medium to long term prospect because of the nature of the investments. Indeed, to make the most out of their investment, people can assign or gift an Offshore Bond to another person such as a family member as part of inheritance planning–possibly without inheritance tax liability*.

One attractive aspect of Offshore Bonds is that any growth in the funds within the Offshore Bond is not subject to UK tax so investments can potentially grow free of tax* – this is referred to as "Gross Roll-Up". It's only when you decide to encash the growth that tax will be payable, and the amount of income tax payable will also depend on your personal circumstances at that time as well as other factors including (amongst others) how much you are withdrawing and how long you have held the Offshore Bond.

Another appealing aspect of Offshore Bonds is its flexibility. It's possible to make changes to the funds held within the Offshore Bond if your financial goals, risk profile and attitude to risk change over time Although making changes is potentially subject to fees, funds held within an Offshore Bond can be switched around easily – without creating a tax event* – and that can be especially useful when optimising your portfolio. As Stuart Ward explains, "An Offshore Bond offers a range of features which can enable you to utilise the product to suit your needs through different stages of your life."

However, if you decide to invest, it's important to remember that returns can go down as well as up and not all investment products are suitable for everyone.
Click to learn more about offshore investment bonds.

Taking the next step

Depending on your circumstances, Offshore Bonds can offer a medium to long term investment solution.

"We're really pleased to add Offshore Bonds to our client proposition," Stuart Ward says. "Their flexibility and tax efficiency will make them an attractive consideration for many of our clients."

Speak to you RM for full information and to see if an Offshore Bond might be right for you.

Check out our different types of investment products.

*Citi does not provide tax advice. We strongly recommend that you seek independent tax advice to determine whether this product fits your requirements. Investments are subject to the prevailing tax regime which may be subject to change and could affect the potential benefits available to you.

Investment returns can go down as well as up. Like other investment products, Offshore Bonds are subject to investment risks, including possible loss of some or all of the principal amount invested. Past performance is not indicative of future results, and investments can go down as well as up.

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