Several factors contributed to the increase, life industry experts said, including the UK Government’s decision to cap at £50,000 annually the amount people may contribute to their pensions without incurring tax.
The gain also occurred in spite of concerns that the UK tax authorities were considering cracking down on the products and closing loopholes.
Total new premiums for all UK-distributed single-premium offshore business rose to £6.4bn in 2010 from £4.6bn the previous year, according to new figures released by the Association of British Insurers.
This represents around half the size of the stocks and shares Isa market, which was worth £12bn in the tax year 2009/2010.
Life industry experts say the rebound seen in 2010 is expected to continue this year, and are planning their businesses accordingly. Some providers have set sales targets 20% or more above last year’s level, although others are understood to be attempting to focus more on profitability than sales.
In the first three months of this year, total offshore bond sales in the UK market were 3.4% above the same period in 2010, at £1.55bn, the ABI data shows.
Said Alan Morgan-Moodie, chairman of the Association of International Life Offices: “Most of the big players are looking at a bumper 2011.”
Richard Leeson, AXA Wealth International’s sales and marketing director, noted that in addition to such incentives as the recent change in the UK pension contribution cap, the growth in offshore bond sales has also been helped by "continued interest in income producing assets, such as fixed interest funds, as IFAs choose tax-deferred products for their clients".
Also increasingly important, Leeson said, will be such features as open-architecture, discretionary management and online valuations, as life companies compete for business.
Stark contrast
The full-year 2010 figures for UK-distributed offshore bond products contrast starkly with those of the previous four years. Total premiums fell off a cliff in 2009, plunging 41% from the previous year, after rising slightly in 2008 and 2007, by 2.4% and 6.2% respectively.
Morgan-Moodie said the boost in last year’s sales reflected renewed interest in offshore products from UK retail investors.
“The offshore market represents highly competitive products and the days of offshore bonds being very expensive are long gone,” he added.
“They have now become mainstream and are very well-priced.”
Pooled personal bonds
Within the four offshore bond segments measured, pooled personal bonds experienced the largest inflows, rising to £5.7bn in 2010 from £3.9bn in 2009. Other single premium policies also rose, to £223m from £127m.
Investment bonds fell to £386m in 2010 from £516m in 2009, while personalised personal bonds dropped to £83m from £90m.
| Year | total new premiums, in £bn |
| 2005 | 4.8 |
| 2006 | 7.15 |
| 2007 | 7.6 |
| 2008 | 7.78 |
| 2009 | 4.63 |
| 2010 | 6.4 |
| 2011 (first quarter only) | 1.55 |
