Insurance bonds (otherwise known as investment bonds), offered through insurance companies and friendly societies, have existed for many years and offer a tax paid investment that enable investors to save for significant life events.

Once you make an initial investment, your money is invested for your specified purpose until a maturity date, usually 10 years.

Key features

  • Enable you to make ad-hoc or regular contributions to the fund and the funds are invested into the market. 
  • Bonds are usually invested in a range of managed funds, offering varied investment options from cash to shares to suit different risk profiles.
  • Earnings on the bond are taxed within the bond, generally at a rate of 30 per cent, and you do not need to show the earnings as part of your own assessable income. 
  • You are not required to pay capital gains tax on the bonds when you redeem your investment.  For those on a higher tax bracket, an insurance bond can reduce the amount of tax that you pay on your investment earnings, a key benefit for those on higher tax brackets.
  • You can access your investment at any time, however there are certain tax benefits available to you if you retain the bond for 10 years or more. 
  • You can use the proceeds of the bond however you wish with no implications on the amount you get back. 
  • Unlike education savings plans you do not get the tax paid within the fund back if you use the proceeds for education purposes. This can represent a sizeable amount so if you are saving for education then education savings plans offer a unique advantage.
  • Establishment and ongoing costs apply.

Seek financial advice if you want to invest in this option to ensure that it is suitable for your needs. 

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