Capital Investment Bond

A Capital Investment Bond enables you to make a single investment into a wide range of funds administered by leading UK Life Assurance Companies and fund Managers. Funds are invested in many different areas, such as Equities, Gilts, Corporate Bonds and Commercial Property. As you will be one of many investors, the fund manager will have access to a wider range of stock than an individual, therefore spreading the risk.

Capital Investment Bond

How much can I invest?

In general, the minimum lump sum investment is £5,000, although for some providers this may be higher. You may be able to make additional investments from time to time, subject to any minimum amount, age limit, or other conditions. In general, there is no maximum limit.

Tax Advantages

The Bond provider pays tax on investment returns at the rates applicable to life assurance companies. You will pay no basic rate Income Tax or Capital Gains Tax on proceeds. If you are a higher rate taxpayer, or become one because of the increase in the value of your bond, you will have to pay tax on any chargeable gain created by any encashment. The rate for this will not be more than the difference between the lower and higher rates of Income Tax charged on savings

Withdrawals and surrenders

You can take money out but, of course, this will reduce the value of your bond. In general, you can make regular withdrawals monthly, quarterly, half yearly or annually. The minimum regular withdrawal amount is usually around £50.You can also take one-off withdrawals from your bond or fully encash it at any time, although most providers will apply surrender penalties during an initial period (5 years is usual) if more than 7.5% a year is withdrawn from your bond. Please see your Key Features Document for full details.

Tax Deferral

One unique feature of a Capital Investment Bond is that you can withdraw up to 5% per annum of the total payments made into your bond without any immediate tax liability each year. This applies to both basic and higher rate tax payers and can continue until the total you have withdrawn equals your original investment. Once you have withdrawn 100% of the total amounts paid into your bond, this allowance stops. Any part of this allowance that you don't use can be carried forward into future tax years until you have used up this allowance.

Age related allowance

With regard to the age related personal tax allowance, as long as no more than 5% per annum is withdrawn (for 20 years maximum) there should be no concern as this is deemed to be a return of capital and not treated as income for tax purposes.

Joint or single life

A Bond can be written on a Single Life or Joint Life basis dependent upon your individual tax position. Under a Joint Life plan the investment will continue throughout both your lifetimes and its value would be paid out after the deaths of both policyholders.

Trusts

It is possible for the Bond to be written under trust so that, in the event of your death, the policy proceeds are paid to your beneficiaries without the delay of waiting for Probate to be granted. Placing the Bond in trust can, under certain circumstances, remove the proceeds from your estate for the purposes of Inheritance Tax, subject to you surviving a period of seven years from the trust’s inception.Within this time, Inheritance tax liability gradually diminishes in line with taper relief.

Death benefits

In the event of your death at least 100.1% of the current value of your fund will be paid out as a lump sum.

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