Why investment bonds make for attractive solutions

Investing can be a challenge, but options such as investment bonds make it a little bit easier.

08:38 23 December 2013

If you are wondering about the types of investments that are available to you, you should consider investment bonds. Investment bonds are purchased from and insurance company with one lump sum payment. The insurance company will then invest the money for you, although you may be able to select some of the options.

These types of investments are attractive for a number of reasons:

• Investment bonds allow up to 5% to be withdrawn per year, free of any personal income tax as long as you pay the basic tax rate and the withdrawal does not put you into a higher rate. Make sure the withdrawal will not negatively affect your tax burden before taking the allowed amount.

 

• No income tax is due right away, but you may be responsible for some, such as the difference between the basic and higher rates if applicable, after about 20 years.

 

• Allowable withdrawals do not impact age allowance, which makes this form of investment especially attractive to retirees.

 

• You have the ability to set up automatic withdrawals, up to the allowed 5%, so that you will not have to initiate a request each time you want a withdrawal if you decide to take them on a regular basis.

 

• Investment bonds are not typically considered an asset and should not impact your eligibility for long-term care as determined by the Local Authority.

 

• Funds are usually pooled with other people’s funds to minimise the risk to individuals.

 

 

• You have the ability to select certain types of funds that you would like your funds to be invested in. This gives individuals a greater degree of control over their funds and potential returns.

 

• Although income cannot be guaranteed, you may find a company that holds back some of the returns on their investments so you still have payments during lean economies.