IIp25-26_Hartford.qxd 12/1/09 15:47 Page 3
Offshore finance | 25
Broadening the
appeal of offshore
bonds
Offshore bonds are still shrouded by mystery
in the eyes of many advisers
by Andy Marks,
Managing Director, Sales,
The Hartford
D
espite the continuing momen- withholding tax. Over the long term this could Below we’ve provided a more detailed com-
tum in sales of offshore bonds, prove to be a valuable benefit. parison of onshore and international bonds.
as many as 27% of advisers
avoid using them, with a further Onshore Bond Offshore bond
20% saying that they do not The life company pays tax on its life funds The life company doesn’t pay UK tax on its
know enough about offshore
at 20%, less deductions for indexation relief funds. Therefore an international bond
bonds to recommend them.
and other expenses. The amount paid is offers growth which is free from tax, apart
However the advantages of offshore investing
normally therefore between 15% and 18% from potentially a small element of non-
are clear – namely tax efficiency, tax control
and estate planning flexibility. In fact in a
per annum. reclaimable withholding tax.
recent survey by YouGov for The Hartford,
15% of consumers said that they would consid-
But…
er offshore bonds, rising to 34% if they had
more control over their income and the ability
Onshore Bond
Offshore bond
to pass on wealth to dependents with an
An investor with an onshore bond receives
An investor with an international bond
income guarantee.
a 20% tax credit for tax paid by the life
won’t receive a 20% tax credit for tax paid
So what is this valuable business opportunity
company on its life funds.
by the life company on its life funds.
advisers are missing out on, and why are half of
advisers choosing to ignore it?
This means that when an investor encashes enable them to potentially take advantage of
The facts an international bond, they will be liable to the preferential tax treatment of the bond. A
As many readers will know, the main advantage 20% basic rate tax on gains, plus an additional higher rate tax payer taking 5% tax deferred
of an international bond over an onshore 20% on any gains within their higher rate tax withdrawals, then encashing the bond at a time
bond is that the international bond is based bracket. when they are no longer a higher rate tax payer,
outside of the UK, so the investment will grow As with onshore bonds, the determining fac- indicates a very tax efficient use of a bond,
virtually tax free, subject to a small element of tor will be individual client circumstances that whether onshore or offshore.
www.investmentinternational.com January 2009 Investment International
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