While platforms, in the modern, technological sense of the word, provide superefficient ways of accessing and managing assets, the bond comes into its own in providing the flexibility required to manage clients’ increasingly complex lives by maximising the benefits of a life assurance structure around a fund platform.
This is particularly true for the internationally mobile individual.
The product structure that underpins the typical bond provides exceptional flexibility, allowing providers and advisers to address the specific needs of their clients.
The multiple underlying cluster policies provide easy gifting options and, as a bond is a non-income producing asset, it is the perfect bedfellow for a trust, opening up a wealth of additional planning benefits.
A bond is also a familiar tool for advisers who wish to put in place legitimate tax planning for clients, such as allowing assets to roll-up virtually free of tax until the gains are realised in many jurisdictions, and eliminating the need to report gains or pay tax on gains when assets are bought and sold within the bond wrapper.
There can also be jurisdictional-specific tax-planning benefits for expatriates or globally mobile clients invested in bonds, such as time-apportioned relief and tax-deferred withdrawals for the UK expatriate.
The former allows the UK resident planholder to reduce the chargeable gain on a bond withdrawal by the proportion of time they were non-UK resident while owning the bond.
For instance, if the planholder purchased a bond 10 years prior to surrendering the plan, but was only UK-resident for five of those years, they would only have to pay tax on half of the chargeable gain.
The 5% cumulative allowance allows the client to withdraw 5% of the premium invested in a bond each year for 20 years without an immediate tax liability.
For example, if £1m was initially invested, the client could withdraw £50,000 per annum without any immediate tax liability.
