Ethical Investment Bond

Investment bonds are single-premium life insurance policies. A lump sum is invested in a variety of available funds with the potential for medium to long-term growth.

Available funds include ethically screened funds and portfolios to make yours an ethical investment bond.

Bonds can be a useful tax planning tool because they allow withdrawals of up to 5% of the initial investment each year without triggering any immediate tax liability.

The tax becomes payable when the bond is cashed in or matures which, is particularly helpful to higher rate taxpayers who want to delay paying tax until they fall into a lower tax band, such as in retirement.

Both off-shore and on-shore bonds are available depending on your requirements.

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Ethical Investment Bond

Bond, Ethical Bond.

Most investments can now be made ethical, either by selecting pre-existing ethical funds and model portfolios to make up the underlying investment or for larger investments, a completely bespoke portfolio can be created.

A considerable number of pre-existing ethical funds and portfolios exist developed using a variety of ‘screening’ techniques to either exclude certain industry sectors and companies or include industries and businesses with a focus on sustainability, good governance and environmental factors.

By working with you to ascertain your ethical preferences and desired outcome, both in terms of environmental impact and performance, we can help you choose suitable investments for the savings in your ethical investment bond.

Off-shore vs On-shore Bonds

On-shore bonds are subject to corporation tax on most of their income at the rate of 20%. Rent and some other forms of income are taxed at 22%, as are capital gains.

Most off-shore bonds are based in tax havens and consequently any income and gains will normally be free of tax. In the absence of tax they are considered to have the potential for better growth.

In the hands of the policyholder, chargeable gains from on-shore bonds receive a credit equivalent to the basic rate of income tax due to the tax on the underlying fund. Therefore, only higher rate taxpayers are liable for further tax.

Off-shore bond gains are liable to tax at the policyholder’s highest rate of income tax. They are liable to basic rate tax as well as higher rate to compensate for the lack of UK corporation tax suffered by the underlying fund.