Investment bonds have many virtues and, of course, some regulatory limitations. In fact, the underlying assets in an investment bond are usually restricted to cash deposits and collective investments, irrespective of whether the bond holds collectives, platforms, or a discretionary investment manager.
The restrictions are due to The Personal Portfolio Bonds (Tax) Regulations 1999 which effectively limit the type of asset that can be held under an investment bond. The assets permissible under these regulations broadly include insured life funds available from the bond provider, unit trusts and OEICs, approved investment trusts and cash deposits. Other investments such as some ETFs are also allowable, but notably direct investments in shares and corporate bonds cannot be held.
Is there another way? Yes - in fact, there is an option that effectively removes the restrictions imposed by regulations on the underlying assets. We look closely at how, by removing or distancing the client and their adviser from the investment management, the usual rules do not apply. An investment manager can be nominated and appointed with a broad mandate agreed with the investor; any ongoing communications must go through the provider and not direct to the investor or their adviser and they must not be allowed to influence the underlying asset selection.
Using this method, ultimately the underlying investments that can be held are only limited by what a life assurance provider can invest in.
Tapered Annual Allowance – the calculations advisers need to know
What is the tapered annual allowance (TAA)? This restricts pension tax relief through the introduction of a tapered reduction in the amount of annual allowance for those with an adjusted income over £150,000 and a threshold income over £110,000. The TAA can significantly reduce an individual’s ability to make pension contributions, with those with adjusted income in excess of £210,000 having an annual allowance of only £10,000 per tax year. But how does the tapered annual allowance work?
Our new article looks at the underlying calculations advisers and paraplanners should understand when it comes to the Tapered Annual Allowance. It examines the types of income that need to be included and what deductions if any can be made, which is vital to determining whether or not any tapering will apply and at what level. The article also looks at what individuals need to do if they are subject to both the tapered annual allowance and the MPAA.
Is there a solution for clients faced with the tapered annual allowance? As our article explains, clients could consider using their personal pension contributions to bring total income below the threshold limit, making use of any carry forward of unused annual allowance, and considering alternatives to pensions where restrictions apply.
It’s also possible for people to be subject to both the tapered annual allowance and the money purchase annual allowance (MPAA).