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Investments

Top tips for investing

Monday, 15 June 2015 08:00

It’s never too late to review your investments. If you want your money to work hard for you and have the potential for greater returns this year, here are some tips to help

Remind yourself of your financial targets

A year can be a long time when investing, most believe that you only reach a goal that really means something to you.

Perhaps you’ve experienced some changes during the year and it’s time your investment targets reflected them? Welcoming children or grandchildren to a family can change your perspective, so it’s well worth taking some time to think about what’s important to you now.

If your situation has changed, speak with your financial adviser about how you update your targets and progress towards them this year.

Build an emergency fund,

Investments are long-term, so it’s best not to touch them even if you need cash to cover an unforeseen emergency.

To cover such emergencies, you could consider a cash reserve. Try to have at least three months of your regular outgoings in cash, which should cover most problems.

By withdrawing from cash in times of need, you keep your investments tax-efficient. If you had no other option but to take money out of your ISA, you would not be able to put it back in again if you had already reached your annual allowance of £15,000 for the 2014/15 tax year.

Think of risk and return together

Everyone needs to appreciate the link between risk and return.

Low-risk investments usually provide lower returns, whereas higher-risk investments have the potential to produce much higher returns. Generally, the longer you have to reach your goal, the less risk you take.

Investment charges

Charges erode your returns every year, so it’s important that you know for how long and how much you are paying and that you’re getting good service for your money. Always ask your Financial Adviser to show all the charges before you agree to have them work for you.

The risk of high charges is especially severe for older investments, such as dormant pensions. It may be more cost effective for you to transfer your dormant pensions into one pot with lower overall fees.

Always take a long-term view

Investments should be thought of as long term goals that are at least five years away. With ever changing markets, it’s over the long-term that you’ll usually see investment growth. The longer you have to invest, the better.

Invest regularly

Regularly add more to your investments, this avoids ‘lump sum shock’ where you might invest a lump sum the day before a big drop in the market. Over time you’ll make your money back, but by regular investing, you spread the risk. Investing the same amount each month means that you’ll buy less when the market is up and units cost more, and you’ll buy more when the market is down and units cost less. Over time, you should average out at a lower cost-per-unit than if you invested in one lump sum.

Be prepared to top-up your investments

If you find yourself behind your investment target, top up your investment to bridge the shortfall.

By topping up you can keep investments on course and even help you reach your goals early. You don’t have to wait until you’re behind to top-up, you can also add funds when you have extra cash.

Make the most of tax-efficient investing

Use your annual ISA allowance of £15,000. This is tax-free saving and should be one of the first places you invest your money. You have until 5th April to use up your allowance.

Remember the ISA allowance is personal, so a couple can shelter £30,000 from the taxman. The allowance starts again on April 6th and you can’t carry over any unused amount.

As well as an ISA, you can invest up to £40,000 in your pension this tax year. Use your allowance today to get your money invested for longer.

The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance is not a reliable indicator for future results. Please contact us for further information or if you are in any doubt as to the suitability of an investment.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it. - Fraser Brydon - Money Matters

The ISA Shake Up

Wednesday, 06 May 2015 08:00

YouGov have reported in a recent survey that around 77% of British adults (around 38 million people), have little or no understanding of the New ISA rules that came into effect in July 2014.

These changes were announced in March’s budget, which brought cheers from many because they made ISAs simpler and more attractive than ever, and increased the annual allowance to its highest ever level.

The Government’s strategy for change was that it would encourage individuals to save and invest more for their future. Further advantages were also announced in December’s Autumn Statement, allowing ISA benefits to be passed to a spouse on death.

For those individuals yet to take advantage of the new ISA rules it’s not too late to benefit, the tax year ends on 5 April 2015.

What’s changed?

New ISA annual allowance

The amount you can invest each tax year has risen to £15,000. Anyone who has already opened their ISA for this tax year (2014/15) before 1 July 2014, can top up to this new £15,000 annual allowance. In the new 2015/16 tax year the ISA allowance increases to £15,240, this means over the next few months investors can shelter as much as £30,240 in ISAs.

Better flexibility

Before these changes there were restrictions on how you could split your allowance between Cash ISAs and Stocks & Shares ISAs. With the new changes you can split your allowance as you wish.

Improved death benefits

Investments are normally subject to Inheritance Tax (IHT) of 40%, if the total value of your estate exceeds the ‘nil-rate band’. This is currently £325,000 for individuals, or up to £650,000 if you inherit your spouse’s or civil partner’s unused allowance. The Autumn Statement changes mean that surviving spouses will have an additional ISA allowance, equal to the amount the deceased spouse had in their ISA.

Transfer options

The new rules allow you to transfer from a Stocks & Shares ISA to a Cash ISA, and vice versa. Under previous rules you were only able to transfer from a Cash ISA to a Stocks & Shares ISA. This removes one of the biggest barriers to transferring Cash ISAs to Stocks & Shares ISAs, which was that you couldn’t transfer back again.

Purchase short-dated bonds

ISA investors now have the flexibility to invest in individual corporate bonds and gilts with less than five years to maturity. previously ISA investors could only purchase these investments with more than five years to maturity.

Transfer free Stocks & Shares ISAs

You could always hold cash in a Stocks & Shares ISA, but interest was, effectively, paid net of basic rate tax. Under the new rules interest on cash in a Stocks & Shares ISA is paid gross and is completely tax-free. Cash ISAs remain unchanged.

Used every year the ISA allowance allows savers and investors to build a substantial tax efficient portfolio. If you had invested the full ISA allowance every year since ISAs launched in 1999, you could have sheltered as much as £139,080 from tax. This figure excludes investment growth.

The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance is not a reliable indicator for future results. Please contact us for further information or if you are in any doubt as to the suitability of an investment.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it. - Fraser Brydon - Money Matters

With the recent shake up of Commissions, investors are witnessing many changes this year.

With trail commission on funds bought via investment platforms scrapped since 1 April 2014, many investment platforms have had to introduce new ways of charging for their services.

Platforms have now moved to charging either a percentage-based fee, a flat fee or a combination of the two. This makes it easier to compare different platforms.

This means, if you have a relatively small portfolio a platform charging a percentage based fee may be more competitive. If you have a larger portfolio, a fixed fee is likely to offer you the best option. Should you want to manage your ISA, it’s important to know the dealing charges.

Also consider the type of investments on offer. Most platforms offer access to hundreds of different investments but there can be gaps, so make sure your favourites are available.

You can transfer an ISA to a NISA, a New ISA or even an ISA. They’re all exactly the same thing.

Cash ISA Transfer

If you find a better rate or you just want to consolidate your ISAs so they’re all in one place and easier to manage, it’s very simple to do and should take around 2-3 weeks. Contact the new provider, they will ask you to complete a transfer form and, if necessary, open a new ISA for you.

Do not withdraw the money yourself as it will lose its tax-free ISA status and make sure there are no penalties for switching, which could be the case with fixed rate deals.

Stock Transfer

It is possible to transfer existing investments into an ISA wrapper, making them more tax-efficient. Currently the rules do not allow transferring directly into your ISA but, on a platform, the stocks and shares transfer process is still pretty straightforward.

‘Bed and ISA’ enables you to sell the shares then buy them back immediately from your ISA. There are a couple of points to be aware of when doing this.

First, the repurchase happens immediately after the sale to limit exposure to price movement, but you might get back a lower number of shares within your ISA. Commission, stamp duty and any bid offer spread absorbs them. Also, because you’ve sold shares you will realise any capital gains or losses.

A point to remember is that shares in a company Share Save or SAYE scheme can be transferred directly into an ISA, providing this happens within 90 days of the shares being released.

Stocks and shares ISA transfer

Transferring a stocks and shares ISA, especially if you find a more competitive platform is relatively easy: Contact the new provider and set up an ISA account with them.

Complete an ISA transfer form, which will request the ISA details you are transferring and how much of it you would like to transfer.

Decide whether you want an “in-specie transfer”, this is where your existing holdings are moved over or whether you are selling all or some of your holdings first and transferring the cash value.

Your new provider will notify you when your transfers are completed. HM Revenue & Customs has set a 30 working days time limit for transfer, however, some providers have been taking longer with transfers, particularly those that are in specie. Where this happens, you should contact the new provider. If are still not satisfied you can contact the Financial Ombudsman Scheme, who will investigate on your behalf.

You can transfer an ISA to a NISA, a New ISA or even an ISA. They’re all exactly the same thing.

The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance is not a reliable indicator for future results. Please contact us for further information or if you are in any doubt as to the suitability of an investment.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.. Fraser Brydon - Money Matters

'Inflation-proof' your income

Tuesday, 03 February 2015 08:00

Investing in the stock market is a popular way to generate additional income for those in retirement, especially with interest rates likely to remain low for the foreseeable future.

Shares offer the potential for significant long-term income growth. This is vital for those who may rely on the income from their investments for 20 years or longer. Even a relatively low rate of inflation will significantly erode spending power over the long term, so having a fixed income can be disastrous.

By investing in companies which pay rising dividends, investors can ‘inflationproof’ their income – though of course it also means the value will inevitably fluctuate along with the share price. These are exactly the types of companies sought by equity income funds, which principally invest in companies with an attractive dividend.

Furthermore, these funds also offer the potential for capital growth, as they have an in-built ‘buy low, sell high’ discipline. Investing when a company is out-of-favour, and the share price depressed, should result in a boosted yield. If the value of the stock is then recognised by the wider market, the share price rises and the yield falls. The manager could then sell the stock at a profit, having enjoyed an elevated income stream. If markets go through a tough patch the income usually falls proportionately, meaning that the longer term value is eroded.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.. Fraser Byrdon - Money Matters

How to save for your grandchildren

Monday, 03 November 2014 08:00

Save for them

One of the easiest ways to help your grandchildren is to pay money into ‘wrapped’ schemes like Junior ISAs; these are an extension of the adult ISA system and enable children to receive tax-free interest on savings, as well as tax-efficient returns on stock market investments. They have to be set up by parents, but anyone else, can pay in. The big advantage of Junior ISAs is that they roll into adult ISAs at age 18, so offer a way to give young adults a head start.

You can put up to £4,000 a year as from July 2014 into Junior ISAs, split however you like between one cash account and one stocks-and-shares account at any time. If your grandchild has a Child Trust Fund (CTF), the predecessor of the Junior ISA with poorer rates and choice, they are not eligible for a Junior ISA, but that will change from April 2015, when it will become possible to transfer their funds from their CTF.

Investing

As many people use Junior ISAs to invest for a period of ten-years plus, they can afford to put a good proportion of their contributions into stocks and shares, which means higher risk but the likelihood of considerably better longer-term returns than with cash. However, there is a major caveat attached to Junior ISAs. The biggest danger is that at age 18 the child can access the money and spend it however they want.

Set up trusts

Trusts can enable you and other trustees to control how money that you ring-fence is used and in some cases, provide significant tax advantages. They’re often used for providing for specific costs, such as school fees.

There are two main types of trust: “bare” trusts are the simplest trusts and when they are created by grandparents for a grandchild they are taxed on the latter’s tax band, meaning they are normally tax-free. That’s not the case where parents create a bare trust for their children, when it’s taxed at the parents’ rate. The disadvantage, as with Junior ISAs, is that the beneficiary has the right to access the trust cash at 18.

“Discretionary” trusts are more complicated but flexible and you can use one trust to benefit all your grandchildren, or a wider group of relatives. These trusts are typically created for 125 years, so they can benefit multiple generations of your family and the trustees keep control regardless of the ages of beneficiaries. Bare trusts are typically more suitable for sums that will stay in the tens of thousands of pounds, and discretionary trusts for larger amounts. Trusts aren’t cheap to set up, so they won’t be costeffective for smaller sums.

Think long term

More people now go to university than to private schools and most leave with huge debts. Smart planning now could help you to cover your grandchildren’s education costs.

Another ‘life’ goal could be to provide a deposit to help them on to the property ladder. You could help with university fees and a deposit, or maybe aim to save the equivalent of about £30,000 and keep both options open.

Start pensions

The government will top up the maximum pension contribution of £2,880 net a year, taking the actual sum invested to £3,600 gross.

Stakeholder pensions are the cheaper option in terms of fees and allow you to invest in a limited range of funds. Self-Invested Personal Pensions give greater flexibility but also have higher charges.

Grandparents are well placed to help their grandchildren because small contributions now can be life-changing for them later as both grow.

The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance is not a reliable indicator for future results. Please contact us for further information or if you are in any doubt as to the suitability of an investment.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it., Fraser Brydon - Money Matters.

INVESTOR JARGON you need to understand

Monday, 27 October 2014 08:00

A recent report from the Financial Conduct Authority (FCA), the City regulator, says that investment houses and fund managers are failing to provide investors with clear figures on total fund charges, instead offering a number of different charging structures that can lead to confusion.

Asset managers were also criticised for using jargon in information that makes it difficult to understand.

The FCA has declined at this time to take action, but has set out a number of suggestions which it would like companies to adopt, including stopping the annual management charge in favour of spreading charges as an ongoing charges figure.

Confusion can cost you money, because it enables some companies to continue to charge higher fees, therefore understanding the jargon and terms used is very important.

Here are some common terms you need to know.

AMC - Annual Management Charge

This is what you pay to a fund manager each year. The AMC is taken directly from the fund to cover management costs but it excludes many fees including administration, accounting, custodian and legal fees.

TER - Total Expense Ratio

TER is a better indicator of the annual costs as it includes the AMC and some other costs that are taken directly out of the fund, like legal and custody fees, audit charges and any performance fee. TERS are levied at between 1 and 2 per cent. TERs do not, however, include the dealing costs for buying and selling shares or bonds.

OCF - Ongoing Charges Figure

The FCA would like to see OCF as a true measure of fund costs, but does not include any performance fees. The performance fee and transaction costs are disclosed separately.

OCFs are presented in percentage terms and can be misunderstood, so the IMA is keen to introduce another measure of fund charges. This will include transaction costs and be shown in real values of how much profit or loss you have made and how much the fund costs you.

Set up charge

This fee is taken out of your money before it is invested to cover the set up costs. If you pay in £10,000 and the initial charge is 5 per cent, £500 is taken to cover the fee and £9500 balance is invested in the fund.

Clean share class

A clean share class within a fund is where the commission for financial advisers or fund supermarkets have been taken away. A consequence of the regulatory shake-up that started in January 2013, called the Retail Distribution Review, which aimed to make fund charges more transparent.

With clean share classes, the fee you pay to the fund manager or broker who completed the deal are separate. Instead of a typical 1.5 per cent for an actively managed fund you will now usually pay just 0.75 per cent in “clean” fund charges. You then pay the adviser or platform fee on top.

Unfortunately, there is no set way of identifying share classes so it can be difficult to identify which is the clean one.

INC - Income Share Class

This is any income generated by the fund’s investments, like dividends or bond interest, paid out to you.

ACC - Accumulation Share Class

With accumulation shares the income gained from the fund is reinvested back into the fund. Generally, reinvested dividends provide a large part of total returns over the longer term.

Bid-offer spread

If you are buying shares or unit trusts you pay a bid price and when you are selling an offer price. The selling price is often higher than the buying price. With unit trusts the bid-offer spread is often similar to the initial charge, though it may incorporate costs encurred by the fund such as stock broking commission, making the spread bigger.

NAV – Net Asset Value - Discount/premium

Investment trusts are similar to unit trusts because both pool savers’ money to invest in a wide spread of companies, but there are key differences.

Investment trusts are public companies traded on the stock market. You buy shares in the trust and crucially only a limited number of shares are available. Meaning the share price depends not just on the value of the investments held, but also on demand for the shares. If more people want to buy than Sell, the share price increases and vice versa. The price of unit trusts, on the other hand, always reflects the value of the underlying investments less all the charges.

Investment-trust shares can often be bought for less than the value of the shares under ownership. The trust is then trading at a discount to its net asset value (NAV). When the opposite happens and the shares are worth more than the NAV they are trading at a premium.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

Fraser Brydon - Money Matters

ISA Selection

Friday, 15 August 2014 08:00

If you’re looking for a savings account to squirrel away your hard-earned cash, then a good place to start is with an ISA. These tax-efficient accounts let you rack up interest without giving the taxman a share. With the tax-free allowance set at £15,000 from July 2014 they’ll be even more popular.

It is believed that many people don’t actually know the difference between a cash and investment ISA, despite the fact that many people view saving into an ISA a necessity and save on average over £100 per month.

This lack of ISA knowledge could potentially cost savers hundreds of pounds and there are concerns that when the new rules come into force the majority of savers will put their allowance into lower rate cash ISAs rather than exploring investment ISAs for the potential of better returns.

CASH ISA

Cash ISAs are accounts that let you save in cash, keeping things simple and giving you a great home for your money.

There are various versions you can choose from depending on your circumstances. Instant access accounts, where you can put money in and take it out as often as you like and fixed rate versions, where you’ll deposit a lump sum and keep it in for a fixed length of time, with the trade-off usually being a better rate than with instant access accounts and all interest will be free from tax.

Cash saving means there’s no risk whatsoever; as long as you don’t deposit more than 85,000 with any one institution you’ll be covered by the Financial Services Compensation Scheme (FSCS).

INVESTMENT ISA

An investment ISA, otherwise known as a stocks and shares ISA, is different, you’re not saving in cash but are instead actively investing your money in the stock market, but you still retain the tax-efficient element of a traditional ISA.

Again there are different types you can choose, depending on whether you want to invest in individual shares yourself or leave it to the hands of a fund manager, but the majority of these accounts will use collective investment funds to spread risk and allow you to invest across a range of different areas.

The most important thing to bear in mind is that your money isn’t necessarily safe. There’s a greater amount of risk quite simply because you’re actively investing in the stock market, you’re not getting a set interest rate, so your returns will depend entirely on the performance of the funds and there’s a chance you’ll be left with less than you put in.

Investment ISAs are more suited for those with a longer-term view, as although you’ll usually be able to access your money should you need to, it’s not as easy as with a cash ISA. Another key point to remember is that although the FSCS still applies, the rules for investors are slightly different and you’ll only be covered for up to £50,000.

Generally the potential for better returnswhen compared to traditional cash ISAs is higher.

Whichever ISA you choose from July 2014 you’ll be able to save up to £15,000 however you please, so it could pay to consider both options carefully.

The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance is not a reliable indicator for future results. lease contact us for further information or if you are in any doubt as to the suitability of an investment.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

Fraser Brydon - Money Matters

Add some GREEN to your portfolio

Thursday, 10 July 2014 08:00
Renewable energy is becoming a good option for investors as Government subsidies decrease and fundraising lifts off.

Solar farms, wind and tidal power are the renewable energies which are moving into the investment mainstream. The launch of specialist funds and the crowd funding plans mean private investors can invest in renewable for a minimum outlay.

During 2013, developers raised funds directly from investors, this has caused a wave of activity from private investors moving into the renewable energy sector.

In the past, investors could only access renewable energy by investing in complex Enterprise Investment Schemes with high minimum investment. This has now changed with dedicated investment trusts, which are all listed on the stock exchange.

Private investors also have the option to invest through two retail bonds as well as funds issued this year, Good Energy and Energy Bonds.

Each type of investment offers different advantages. Single company bonds are good for investors seeking short term returns and to diversify away from building society type bonds.

Returns are generated from the sale of electricity to the grid and also from Government subsidies or ‘feed-in tariffs’(FITs) for smaller scale projects and Renewable Obligation Certificates for larger scale projects. So the advantage of including renewable energy in a portfolio is the returns are linked to energy prices, meaning as prices rise, returns follow suit.

The main concern for investors has been the reliance of renewable energy on subsidies and because of a wind-down in these subsidies developers are looking to raise capital from private investors.

Renewables are still greatly impacted by Government policy decisions and so they should only be considered by those who already have a significant and diversified investment portfolio in place and are prepared to accept the risks.

For those thinking about including renewables in their portfolio they need to be aware they are not savings accounts, even if returns are steady, your capital is at risk.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

Fraser Brydon - Money Matters

How to invest a CASH WINDFALL

Tuesday, 13 May 2014 08:00
Whether it be an inheritance, a redundancy payment or even a lottery win, receiving a cash windfall can transform your financial circumstances. But a lump sum requires a slightly different approach to investing.

The investment product

Think about how and when you want to access your money. You may wish to save the money for your retirement; the tax breaks available on pensions might make this a suitable area for your investment. But, if you need the money before you reach age 55, then other types of investment may be more appropriate.

You need to decide on the level of risk you’re happy with. You can alter the amount of risk by holding different assets, like an emerging markets fund, which is regarded as higher risk than a fixed interest fund. Some investment products will expose you to higher levels of risk, like Venture Capital Trusts with fledgling company investment objectives and you could also increase the risk by investing in the shares of just one or two companies, rather than spreading.

How much time you have is important when investing. Investments such as index trackers offer you instant diversification and the security that they’re performing as well as the market. Other investments will require you to keep a close eye on how they’re performing.

The investment strategy

Creating a well-diversified portfolio will help you manage risk and achieve the returns you expect.

To create this diversification and build a portfolio that suits your adversity to risk, spread your money across different asset classes such as equities, property, fixed interest (such as Government and corporate bonds)and cash.

Each asset class has its own performance characteristics. For example, with the four main asset classes, equities are regarded as the most volatile and therefore the riskiest, followed by property, fixed interest and cash.

There are also differences in the level of income you can expect from these different asset classes. While you can select shares that deliver a healthy stream of dividend income, fixed interest is much more focused on producing a regular and predictable income.

Asset allocation

A balanced portfolio should have a mix of different asset classes and how you design your portfolio will be dependent on your appetite for risk and income. If you are comfortable taking risks, then with a long timeframe and not being dependent on the money, you could hold as much as 80-100 per cent in equities. Conversely, if you were cautious, more of your portfolio could be in investment-grade bonds and cash with your equity allocation much lower to 20 per cent or less.

Where income is important, you might look to increase your fixed interest holdings, going for a greater weighting in high-yield bonds over investment-grade bonds if you were happy with the additional risk.

If you already have a well-structured portfolio in place, you might want to keep the existing asset allocation and top each element up or you might want to add a new form of investment to liven up your portfolio.

Tax planning

Making your money as tax-efficient as possible can affect the level of return you receive. Payments into your pension receive 20 per cent tax relief from the Government, effectively giving you an instant 25 per cent uplift in your investment as well as giving you tax-free gains.

An ISA (Individual Savings Account) will also provide tax free returns. Venture capital trusts are also very tax-efficient with the opportunity to secure an income tax rebate as well as tax-free growth and gains. Some ISAs, pension and Venture Capital Trusts also have Capital gains tax (CGT) exemptions.

CGT is payable at the rate of 18 per cent or 28 per cent, depending on taxable income, on any profits you make in excess of the annual allowance (£10,000 in 2014/15).

Although you can take advantage of a spouse’s allowance as well as your own, plan when you will take the money and be prepared to stagger taking it to avoid a large tax bill.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it..

Fraser Brydon - Money Matters

Offshore Bonds

Sunday, 30 March 2014 09:00
Offshore Bonds are not only for the wealthiest of investors. With a few well-advised decisions you could broaden your wealth and investment portfolio.

Offshore bonds provide an opportunity for your assets to grow in a tax-free environment, they also allow you to choose when any tax liability becomes payable.

Many investors know that investing in an Individual Savings Account (ISA) or pension can help reduce their tax bill, but fewer are aware of the advantages of offshore bonds. Like pensions and ISAs, offshore bonds are effectively ‘wrappers’ into which you place your investments, like funds or cash. They are offered by life insurance companies operating from international finance centres.

The major tax advantage of investing in an offshore bond is “gross roll-up”. This is where the underlying investment gains are not subject to tax at source, apart from an element of withholding tax. With an onshore bond, life fund tax is payable on income or gains made by the underlying investment. This means your offshore investment has the potential to grow faster than if it were in a taxed fund.

Providing investments are held within the offshore bond wrapper, you don’t pay any income tax or capital gains tax on them and you can switch between different funds tax-free.

While you do have to pay tax on any gains when you withdraw assets, there are a number of ways you can potentially reduce the amount you pay.

You can withdraw up to 5 per cent of your initial investment every year, until it is all gone, and defer paying tax until a later date. You may be a higher-rate taxpayer now but will expect to become a basic rate taxpayer when you retire, then you can defer cashing in your assets until retirement and possibly pay half the tax due on any gain realised. You can transfer ownership (assign) an offshore bond, or parts of it, as a gift without the recipient incurring any income or capital gains tax, although this may mean an Inheritance Tax (IHT) liability if you were to die within seven years. All future tax on withdrawals will be charged at the new owner’s tax rate.

Putting an offshore bond in a trust could help your family reduce or avoid IHT, provided you live for seven years after setting it up. Offshore bonds are complex investment structures; please contact your professional financial adviser if you are considering investing in this area.

For advice contact me on 01896 757734 or email This email address is being protected from spambots. You need JavaScript enabled to view it.

Fraser Brydon - Money Matters

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