What is an investment bond?

[shaz_mum_of _2]

We have been going through my recently widowed MIL's finances (under power of attorney as she is unfit)

We have found a certificate of investment in her name but with my hubby and his brothers name on as "lives assured" what does this mean ....and who does the money belong to??

the bond seems to be split into 3 different types of managed fund one of which is property

Its worth quite a lot of money and she has no clue what it is (neither do we )

Any ideas for a finance novice ..................

Thanks

Shaz

[Lokolo]

Who is it with?

[shaz_mum_of _2]

St James Place

have looked at their website

Clear as mud to me !!

Shaz

[dunstonh]

Investment bonds are a tax wrapper. A container for investments. Just like ISAs or pensions.

The policy is technically a single premium life assurance plan (either a whole of life one or fixed period of no less than 10 years. Although fixed period ones are unsual nowadays).

You will have policy owners and lives assured. They can often be written on single life basis or joint life basis. The joint life can be on first death or last death. The lives assured do not have to be policy owners.

The provider should be given a death certificate and if the executor is known, then given their details. You could ask for details on the policy at the same time. Or get the original adviser to supply that information (hopefully the papers show who it is).

[Lokolo]

It is like one of those things where you put in £10 a week until you die things from daytime TV adverts?

(you usually get a free pen or something when you sign up!)

[dunstonh]

It is like one of those things where you put in £10 a week until you die things from daytime TV adverts?


No.

its just like unit trusts but held under a life assurance contract (often the life assurance is just 1% or even 0.1% just to get it to qualify for life assurance taxation.

Think of unit trusts being put in an ISA. You can put them in an investment bond as well.

[shaz_mum_of _2]

Thanks i think i understand.............

So can the owner cash it in it ?

the initial investment/value is 50k the latest statement says the fund is valued at just under 60 is that its real value ?

Thanks

Shaz

[Stavros]

Thanks i think i understand.............

So can the owner cash it in it ?

the initial investment/value is 50k the latest statement says the fund is valued at just under 60 is that its real value ?

Thanks

Shaz

60 What ??, pence, pounds, Thousand pounds, you need to elaborate

[a7man]

60 What ??, pence, pounds, Thousand pounds, you need to elaborate


just being awkward....

[a7man]

Thanks i think i understand.............

So can the owner cash it in it ?

the initial investment/value is 50k the latest statement says the fund is valued at just under 60 is that its real value ?

Thanks

Shaz

You are allowed to deduct 5% tax free each year. This can be rolled up so if its been in force for 10 years you will be able to cash in 50% of the initial investment (£25k).

These are mainly used for high rate tax payers to benefit from this release of tax free cash while leaving funds to build up in the wrapper.

You can cash it in early but it will usually have penalties, especially high if its a fairly new investment.

[whiteflag]

60 What ??, pence, pounds, Thousand pounds, you need to elaborate

Easy!!! stavros are you saying was worth 50K now worth 60p, now I know things are bad and its a St James Place bond but thats a bit over the top.

Shaz, you can cash it in, but the reason for having your other half as a life assured would have been to allow the bond to continue after the MILs death. Might not be the best time to cash it in at the moment, best to get professional advice before deciding. Might cost you but could save you money in the long run.

[shaz_mum_of _2]

Thanks Guys

I think its been up and running since 1994 and last years statement was much higher so possibly a long term investment as you say for hubby and his brother.

She doesn't need it at the moment so let sleeping dogs lie i think ,am i right in thinking it is protected should she need nursing care in the future ?

Shaz

[jem16]

She doesn't need it at the moment so let sleeping dogs lie i think ,am i right in thinking it is protected should she need nursing care in the future ?

Shaz

As it's been up and running for so long then yes it's protected as there is no way you could have been seeing to do it to prevent being used for care 15 years ago.

[whiteflag]

As it's been up and running for so long then yes it's protected as there is no way you could have been seeing to do it to prevent being used for care 15 years ago.

time doesnt matter, investment bonds are not taken into consideration when assessing benefits for long term care.

[jem16]

time doesnt matter, investment bonds are not taken into consideration when assessing benefits for long term care.

They can be if it seems like they were taken out purely to prevent funds being used for care costs. It's called deprivation of assets.

[Stavros]

Easy!!! stavros are you saying was worth 50K now worth 60p, now I know things are bad and its a St James Place bond but thats a bit over the top.


Apologies, but the posting wasn't clear soz

[whiteflag]

They can be if it seems like they were taken out purely to prevent funds being used for care costs. It's called deprivation of assets.

apparently they are not , they are treated as insurance policies

[jem16]

apparently they are not , they are treated as insurance policies

Apparently they are;


Deprivation of assets
It is important that individuals understand the powers that local authorities have to include in the means testing assessment assets that they consider to have been subject to ‘deliberate deprivation’. A definition used by Age Concern is that “deliberate deprivation occurs when a resident transfers an asset out of his or her possession in order to put him or herself in a better position to obtain assistance”. The Department of Health’s Charging for Residential Accommodation Guide (CRAG) gives the following examples of deprivation:

• a lump sum payment such as a gift or to pay off a debt;

• transferring the title deeds of a property to someone else;

• putting money into a trust that cannot be revoked;

• converting money into another form that has to be disregarded from the means test, e.g. personal possessions, investment bonds with life insurance;

• reducing capital through substantial expenditure on items such as expensive holidays or by extravagant living.

[Myrmidon_J]

Apparently they are...

• converting money into another form that has to be disregarded from the means test, e.g. personal possessions, investment bonds with life insurance;


I can confirm (from experience) that Jem16 is correct. A client of ours (I work for an IFA) was caught out in this manner - the council in question quoted the above and didn't hurry to return any further mail.

You might (might) be able to argue your case, but the chances of success are probably limited just now. However, in the OP's case - as the bond was taken out so long ago - there should be no "case" to answer.

[whiteflag]

Apparently they are;


Deprivation of assets
It is important that individuals understand the powers that local authorities have to include in the means testing assessment assets that they consider to have been subject to ‘deliberate deprivation’. A definition used by Age Concern is that “deliberate deprivation occurs when a resident transfers an asset out of his or her possession in order to put him or herself in a better position to obtain assistance”. The Department of Health’s Charging for Residential Accommodation Guide (CRAG) gives the following examples of deprivation:

• a lump sum payment such as a gift or to pay off a debt;

• transferring the title deeds of a property to someone else;

• putting money into a trust that cannot be revoked;

• converting money into another form that has to be disregarded from the means test, e.g. personal possessions, investment bonds with life insurance;

• reducing capital through substantial expenditure on items such as expensive holidays or by extravagant living.

yes, although i think we are not taking about the same thing here. You are taking about deliberate deprivation and theres no doubt that if long term care was looking like a possibility and all your more was put in an investment bond it would be veiwed as deliberate deprivation as discribed above.

However my understanding is if someone has held an investment bond through the normal course of organising their financial affairs then they are not taken into account if long term care is required.

[whiteflag]

They can be if it seems like they were taken out purely to prevent funds being used for care costs. It's called deprivation of assets.
sorry Jem i should have read this properly the first time. looks like we are on a similar wave length.

[jem16]

sorry Jem i should have read this properly the first time. looks like we are on a similar wave length.

Yes we are which was why I mentioned time-frame being important. With the OP having the Investment Bond for 15 years there is no way it could be argued that it was to avoid care costs.

If it were to have been taken out in the last year and care looked a distinct possibility then it would have been seen as deprivation of assets.