Offshore investments

Savings and investment advice” width=”200″ height=”133″ />The main advantage of an offshore bond lies in the way they are taxed. Generally speaking the growth within the fund rolls up virtually free of taxation, with the proceeds being taxable in the hands of the investor only at the point of encashment, death, maturity, policy loan or assignment.

This means that the plan’s growth is not held back by tax being deducted each year – so the effect of compounding will cause the total growth to be higher.

The tax payable will be dependent on the client’s position at the point of encashment or when a chargeable event occurs. So if they are in a lower tax band at the point of taking benefits there could be significant tax benefits.
Where the investor is likely to spend some of the lifetime of the bond resident somewhere other than the UK, the UK tax regime will allow the years of non-residence to be excluded for tax calculation purposes. Offshore Bonds are particularly suitable for individuals of this type.

The investor protection regimes for offshore products will be dependent on where the investment is placed. In many offshore centres the level of protection is as good as, or better than the UK regime. However a key difference is that investors in offshore bonds may fall outside the scope of the Financial Ombudsman Service. It is important to make the client aware of differences in the protection regimes, particularly where the protection is not as robust as that available in the UK.