Life Assurance Bonds

EdInvestor

LauraR123 wrote: »

Yes, it is an IFA recommended to them by a solicitor. I think there is an 8% charge on the bond he recommended plus £100 per year?

Typical and shocking :mad: This is what we often see with these bonds, particularly when they are being sold to people who have no real idea what they are doing..

jem16

LauraR123 wrote: »

Yes, it is an IFA recommended to them by a solicitor. I think there is an 8% charge on the bond he recommended plus £100 per year?

If the charge really is 8% then I would run a mile from this IFA as he/she is being extremely greedy.

As to the £100 per year, is that a fixed amount or is it a percentage?

Can you tell us a bit more about your parents and we could perhaps give you an idea as to whether an Investment Bond should even be considered.

For example;

1. Age
2. If retired is their income close to £21,000pa? If still working is either a higher rate taxpayer?
3. What amount were they being advised to put in an Investment Bond?

They are just trying to secure their savings and home as they have worked all their lives and saved hard and therefore don't want to have to give up their money to pay for care should they need it.

Tenants in Common(if in England or Wales, Scotland is different) is the way to go for the house.

Savings is a different matter. Would it not be better for your parents to use this money to help them have a better retirement whether in their own home or a care home?

The Investment Bond is the only way to protect their savings but how is the IFA going to do this in his recommendation? What are his/her reasons for choosing a bond over all other investments? He/She can't write "to avoid care home fees".

Errata

LauraR123 wrote: »

Thank you for your prompt replies. Do you know what the best way would be to protect their savings from the local government should my parents have to go into care??? Also they have been advised by a solicitor to "gift" their house to myself and my brother to protect it from being used towards paying for any care in the future. Is this correct?

Information here http://www.firststopcareadvice.org.uk/
on paying for care and etc. (thanks Ed)

sloughflint

LauraR123 wrote: »

Also they have been advised by a solicitor to "gift" their house to myself and my brother to protect it from being used towards paying for any care in the future. Is this correct?

Another example of absolutely disgraceful advice from a solicitor!

Check out this thread ( in particular post 10) on how to protect a home from fees.
http://forums.moneysavingexpert.com/showthread.html?p=11117643

LauraR123

Thank you for all your replies, its certainly very confusing and seems they have been given some "duff" information. I will check out the websites you have suggested and pass on the information to my parents.

In reply to your questions Jem 16:

1. Ages - 68 & 64
2. Both retired joint pensions approx £18,00 pa
3. They have 80,000 to invest.

The investment bond which was suggested to them would cost 8% and 1% each year on what profit was made. Does that make sense?

jem16

LauraR123 wrote: »

In reply to your questions Jem 16:

1. Ages - 68 & 64
2. Both retired joint pensions approx £18,00 pa

I don't know what the individual pension for each is but at most one is a basic rate taxpayer and the other a non-taxpayer. Possibly from next year and both receiving the higher personal allowances maybe both non-taxpayers.

3. They have 80,000 to invest.

Best amount for an Investment Bond to be worthwhile is at least £100,000 as initial allocations are usually better.

The investment bond which was suggested to them would cost 8% and 1% each year on what profit was made. Does that make sense?

It does make sense and is, quite frankly, atrocious!

For the IFA to take the full 8% commission AND 1% each year is daylight robbery. 1% per year is twice the normal trail commission taken by IFAs (0.5% is the natural trail commission paid to IFAs by the bond provider) and the FSA would take a dim view of this unless there was a very good reason. What is he/she doing to earn this over and above what he/she should be doing?

Are you sure the full 8% commission is being taken by this IFA? Have you seen the Key Facts document?

If your parents really feel the need to protect their savings by using an Investment Bond they should find a different IFA. On my Investment Bond I paid 1% commission initially and 0.5% each year. As my IFA received 8.5% commission but only took 1%, 7.5% was rebated back into the investment. At the time I was a higher rate taxpayer looking to reduce IHT so the bond suited my circumstances.

EdInvestor

The 80k amounts to 40k each.So even if one of them ends up in care, only 20k would have to be spent on care costs (if it hadn't already been spent on other things) as each person can have 20k in savings/assets.

MUCH more important to sort out the ownership of their property so that is plit 50/50 with the tust attached.

jem16

EdInvestor wrote: »

The 80k amounts to 40k each.So even if one of them ends up in care, only 20k would have to be spent on care costs (if it hadn't already been spent on other things) as each person can have 20k in savings/assets.

The £80k is to be invested. We don't know if there are any other savings or not.

dunstonh

The average commission taken by IFAs on collectives is 1.8% plus 0.5% p.a. So, this one is damned expensive.

That said, there are a handful of bonds where taking full up front is actually cheaper than taking a much smaller amount up front plus 0.5%p.a. Clerical Medical is one example that comes to mind.

As Jem says, bonds tend to be very good options when arranged on a low cost basis and when the amounts are over £100k. 50k is really the absolute minimum it must be low cost.

jem16

dunstonh wrote: »

The average commission taken by IFAs on collectives is 1.8% plus 0.5% p.a. So, this one is damned expensive.

That's if the IFA is actually taking the whole 8% which I'm not entirely sure is what is happening. Although the 1%pa is expensive.