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WHY OFFSHORE BONDS FOR TRUSTEE INVESTORS Gavin Jobson-Wood Investment Development Manager. For financial adviser use only. Agenda. Who’d be a trustee in 2009?. How can offshore investment bonds help?. How can we help?. Increase in taxation. - PowerPoint PPT Presentation
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As part of the Lloyds TSB Group, Scottish Widows is proud to be an Official Provider of the London 2012 Olympic and Paralympic Games
WHY OFFSHORE BONDS FOR TRUSTEE INVESTORS
Gavin Jobson-Wood
Investment Development Manager
For financial adviser use only
Agenda
Who’d be a trustee in 2009?
How can offshore investment bonds help?
How can we help?
Increase in taxation
• From 6th April 2010, trust income tax rates will increase from:
32.5% to 42.5% for dividend income
40% to 50% for all other income
Affected trusts will not benefit from the £150,000 income limit applying to individuals. (But £1000 basic rate band remains)
The trustee investor faces unique challenges
Greateraccountability
Increase in taxation
Falling interest
rates
Market
volatility
Trustee Act 2000
Trustee duties
• Wide investment power
• Standard investment criteria
• Investment advice
Standard investment criteria
• Suitability to the trust
• The need for diversification
• Review trust investments from time to time and consider if they should be varied.
Consider ‘proper’ investment advice
• Proper advice is advice of a person who is reasonably believed by the trustee to be qualified to give it by ability and practical experience of financial and other matters relating to the proposed investment.
Every trust with an appointed adviser must have a written investment policy statement
• Overall level of return and yield
• Income and capital requirements• Ability to distribute capital in place of income• Nature and timing of liabilities• Liquidity requirements• Time horizons of the trust• Base currency
Who’d be a trustee in 2009?
Every trust with an appointed adviser must have a written investment policy statement
• Time horizon of performance• Residency and tax status of the trust• Residency and tax status of the beneficiaries• Social responsibilities• Tax and/or legal restraints
Who’d be a trustee in 2009?
Trustee Investment – Benefits of bonds as trust investments
Trust
Offshore Bond
OEICSInv
Trusts
Bank A/C
No CGT on switching assets
Limited tax administration
Tax deferral possible
Trustee investment
Trust
Bond
SegmentSegment
Segment
Segment
Segment
Segment Beneficiary
Beneficiary encashes at their tax rate
CMI Global Investor
Online quotes
& valuations
Discretionary
Management
Institutional
terms
Open
architecture
Superior
service
Gross interest
payments
Discounted
fund terms
SIPP &
SSAS
Gross returns – the benefit
Source: Lipper Hindsight, Returns: sterling returns; Tax basis - net for IP Corporate Bond Acc and sector, gross for IP
Corporate Bond Gross Acc; Total return, no initial charges.
The value of an investment can go up and down as a result of market movements. You may get back less than you invested. Past performance is not a reliable indicator of future performance.
Invesco Perpetual Corporate Bond Acc (MF)Invesco Perpetual Corporate Bond Gross Acc (MF)
IMA £ Corporate Bond (IN:IN)
Percentage Growth Total Return, Tax Default, In LC
70 Months From 30/09/2003 To 31/07/2009
Perc
en
tag
e G
row
th
-10
-5
0
5
10
15
20
25
30
01/2004 07/2004 01/2005 07/2005 01/2006 07/2006 01/2007 07/2007 01/2008 07/2008 01/2009
29.4
22.1
4.7
• Guide to trustee investment
• Standard investment criteria guide
• Statement of investment principles guide
• Portfolio Architect
• Offshore bonds v OEICs calculator
Marketing support
Offshore bonds v OEICs calculator
Offshore bonds v OEICs (example figures)
OEIC Offshore bond
TermHigher rate tax
payerHigher rate tax
payer
5 £550,670 £564,640
10 £606,480 £643,220
20 £735,630 £854,810
£500,000 investment,100% into fixed interest
Assumptions
Charges have been set to be equal so this is a direct comparison for tax. In reality, the total charges will vary from product to product. All products have 1% AMC (plus 0.02% assumed dealing costs) only. Investor's tax status remains the same throughout. For OEIC only one assumed CGT allowance is used at the end of the term. OEIC Charges are paid from income. Higher rate tax payments on the income from the OEIC are taken from the fund. CGT allowance grows with inflation of 2.5%.
• Email enquiry service*: [email protected]
• Fax: 0117 376 4005 *
*PIN number required.
Technical support
CMI
www.clericalmedical.co.uk
CMI Insurance Company Limited, Clerical Medical House, Victoria Road, Douglas, Isle of Man IM99
1LT, British Isles. Registered No. 33520, Isle of Man. Telephone: +44 (0)1624 638888. Fax: +44 (0)1624 625900.
Approved by Clerical Medical Financial Services Limited, 33 Old Broad Street, London EC2N 1HZ. Registered No.
2114901, England.
Clerical Medical Financial Services Limited is authorised and regulated by the Financial Services Authority.
Financial Services Authority rules are made under the Financial Services and Markets Act 2000 for the protection of
investors and apply to investment business conducted in or from the UK. Holders of policies issued by the company
will not be protected by the Financial Services Compensation Scheme if the company becomes unable to meet its
liabilities to them. CMI Insurance Company Limited is supervised by the Isle of Man Insurance and Pensions Authority
and its policyholders receive the protection of the Life Assurance (Compensation of Policyholders) Regulations 1991.
This presentation is aimed at financial adviser only. If you reproduce any part of this information to use with retail
clients, you must ensure it conforms to the Financial Promotions rules. In addition, if used to advise retail clients, you
are subject to the advising and selling rules. This information is based on our understanding of current legislation and
Revenue practice, which is subject to change. Full details are available from CMI Insurance Company Ltd on request.
Sept 2009