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Hartford bond offers 'protection from market fluctuations'
Dublin-based lump sum investment looks to gain from tax benefits
The international investment bond from Hartford will "change the shape of the market", according to Andy Marks, managing director of sales of Hartford.
The Hartford Diamond International Investment Bond is a Dublin-based lump sum investment that enables clients to take advantage of certain tax benefits, according to the insurance company.
Mr Marks said there are many benefits to this bond including protection from fluctuating markets. He added: "We protect from the worse positions in the markets. It is about having confidence in the markets and at some point the markets will turn. We guarantee the income from this product for either 20 years or life."
Danny Cox, pensions development manager for Hargreaves Lansdown, said the problems with guarantees is that people do not believe that word 'guarantee' anymore. He said: "I always find it very difficult to recommend a product with the word 'guarantee' at the moment. Clients do not always believe the guarantees they are presented with at the moment.
"The problem with these types of product is that they say they will guarantee the investment, the trouble is the guarantee is almost not worth having. Hartford said that it will guarantee to pay a 5 per cent income over 20 years. If you invest money into fixed interest and equity funds you would expect that you would get more than 5 per cent over 20 year period.
"The charges for the product are complicated. I think I know what the charges are, but I am not sure. So if you take an Invesco Perpetual fund – 1.69 per cent of the fees for the fund, 0.8 yearly management charge for the bond and then pay 0.50 per cent for the guarantee. So I am paying 3 per cent to guarantee me 5 per cent. My fund has to deliver more than 8 per cent to get my guarantees."
Cliff Husband, head of research for AWD Chase de Vere, said an offshore bond is an obvious next step for the insurer. He said: "Hartford has been in the UK for a while and they have had some very innovative products on the market. It is likely to be run similarly to their onshore bonds. It is a good thing to do if people are looking for offshore products because they have roll up on tax."
