The Benefits Of An Offshore Investment Bond
LEARNING OBJECTIVES
We’re passionate about providing high quality, relevant and up-to-date investment advice to Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
How an Offshore Bond works
The key benefits of an international bond
Understanding the taxation treatment
Best practise when taking investment advice
Offshore investment bonds (OIB) can provide several benefits depending on your financial goals, circumstances and the jurisdiction in which the bond is held.
This article aims to outline the key features and benefits available to you.
What Is An Offshore Investment Bond?
An Offshore investment bond is a life insurance investment product that allows you to save and invest money with additional tax benefits.
They are designed for investors who wish to hold their investments in jurisdictions outside of their home country.
Financial institutions offer OIB's in jurisdictions known for their favorable tax and regulatory environments such as the Isle of Man or Ireland. They provide access to a wide range of assets and allow an investment strategy to be implemented in line with your objectives.
Why Invest In An Offshore Investment Bond?
Tax-Efficient Investing:
Offshore investment bonds have beneficial tax treatment in comparison to direct investment accounts. Your investments are not taxable as long as the money stays within the investment bond, also known as tax deferred.
As such, there is no capital gains tax due when disinvesting or making any changes within your policy. Dividends can also be deposited into cash accounts within the bond or reinvested, without any tax implications.
In certain jurisdictions such as the UK, you can withdraw 5% tax-exempt per tax year for up to 20 years.
Asset Protection:
Your assets are protected twofold;
1) The regulator in the jurisdiction where the bond is held, such as the Central Bank of Ireland or the Isle of Man Financial Services Authority.
2) The offshore bond provider will hold segregated client accounts. Furthermore, they will be awarded a rating by the credit rating agency based on the probability of default or loss.
Extensive investment choice:
Access many types of investments including index tracking funds, bonds, mutual funds, listed shares, municipal bonds and money market funds.
Currency Flexibility:
Invest in all major currencies mitigating exchange rate risk.
Estate Planning:
Offshore investment bonds can be classed as an 'assignable asset'. This means you can transfer them as a gift to your beneficiaries of choice (age 18+) without incurring capital gains tax. You can also assign your bond to a trust to lessen your IHT bill.
Portability:
International providers allow you to transfer to a another tax-advatanged product if you move countries.
Flexible Withdrawals:
Flexible withdrawal options enable you to access your funds as needed without penalties or restrictions. Note this will depend on how the product has been setup by your adviser and the investments held.
Expat Wealth Management
The Wealth Genesis provides cross border expert investment advice for clients globally. Via our discovery meeting, we can understand your position and objectives for wanting to invest. Whether it's income generation, capital preservation, growth, or part of your inheritance tax planning.
As an independent regulated adviser, we recommend solely on the suitability of the product and fund range.
The offshore investment bond presents a compelling option for expatriates planning to return to the UK in the foreseeable future, typically within 5 to 15 years.
These financial instruments offer notable advantages in terms of income and capital gains tax, making them especially attractive for individuals residing abroad.
Contact us below to discuss your investment needs and schedule a call with an adviser.
FAQs
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The Wealth Genesis charges a flat fee of £3000 for initial investment advice. This includes selecting the best investment product, provider, and fund allocation.
An ongoing management fee of 0.85% is charged, which includes quarterly assessments, necessary portfolio modifications, help with withdrawals, and routine servicing.
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The investment options are extensive and multi-currency. For 99% of investors, they are more than sufficient. Note you cannot invest in Bitcoin which we also cannot advise on as it's an unregulated asset class.
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Depending on the type of offshore investment bond used, they can report to your local tax authorities as well as hold back any taxes due.
This is not however universal and would be confirmed at the outset.
