The collapse of the stock market in 2008 and the rise of major websites such as prudentplus.com has led many investors to look elsewhere for safe places to put their money. While they can certainly store it in a savings account and accumulate interest, those who want to invest for the long term are rapidly turning to investment bonds. These bonds, also known as "insurance bonds," are ideal for someone looking to leave money for the next generation. These bonds were specifically invented to exploit quirks in the UK tax code, and while changes in the code have left many to switch to Unit Trusts and OEICs instead, investment bonds are still popular and widely regarded as a very secure investment. They are still one of the most popular ways for those with large savings to pass that money on to their children and grandchildren, especially as they occupy a unique space in the tax code.
Investment bonds are offered by insurance companies as a way to allow
individual investors the ability to circumvent much of the capital gains
and inheritance taxes. This ensures that the maximum amount of their
investment is passed on to the next generation, and that the money is as
safe as possible. Investment bonds are backed up both by the issuer and
the government, and since they are explicitly designed to be passed on
only to the investor's heirs, they tend to have very favorable rates of
interest. After all, if the money will not be used for at least fifteen or
twenty years, an insurance company is able to invest it in long-term,
high-yield products like infrastructure or starter capital for new
business ventures. This diversity is, in fact, one of the main draws for
investment bonds, since it allows investors to put their money where they
find their personal preferences or political beliefs lie.
Copyright Dan Daley 2008 All Rights Reserved