Advice on Offshore or Portfolio Bonds

hongkers97

I am a UK expat living in Asia. My financial advisor is pushing me to establish a Portfolio Bond or Offshore bond (e.g Friends Provident Reserve Bond). He has three arguements in favour:

1) tax efficiency in the event that I return to the UK
2) Avoidance of Inheritance tax
3) Vehicle to access various funds etc that would only normally be accessible to institutional investors.

the downside is the additional charges. For Reserve bond it appeas to be total 8% of money invested (ie prior to any profits) taken oiver 5 years.

Does anyone have any experience of these types of Bonds who can give me advice please?

Thanks

Reaper

8% :eek:!

That's before annual charges presumably. It includes life cover. Did you want life cover?

I don't know enough about offshore investing to be able to comment, and don't know enough about your circumsatnces to know if it is suitable, but I can't help wondering if the amount of commission may have influenced the advice.

Check if you want life cover. If not consider straightforward fund investments instead. Even if you do go ahead you should negotiate down the commission. A random Google found you could get 6.5% refunded going via a discount broker. I think you should see some of that.

dunstonh

by 8% are you talking the total annual managment charge? or an initial charge or an implicit commission payment (meaning thats that the adviser is getting but its not an explict charge against your investment)?

It is possible that if you are not using a UK IFA that you are subject to charges that would just be extreme by UK standards. That said, tax efficiency is a key benefit of offshore bonds for ex pats and they do tend to have access to institutional investments and deposits. They are effectively just a wrapper.

Charges on them can be very cheap adding around 0.2-0.3% p.a. to the reduction in yield of the investments you place inside. Also remember that institutional investments tend to be cheaper than retail investments.

rhys1969

Hongkers 97, it sounds like you have been talking to Devere & Partners. I think every single ex-pat I know has had this product marketed to them over the past three months, irrespective of individual circumstances. I am trying to find out more about this product, but 8% charges seem very high. You were recommended to take this product out for what length of time? I was marketed this as a 5-year investment, which strikes me as a little short for equity based.

Cook_County

Where is your IFA qualified & regulated? What country's tax regime are you subject to?

EdInvestor

If you just want to invest in mutual funds and don't need advice, then have a look at https://www.internaxx.lu

This offshore broker will be cheaper than using any kind of insurance bond flogged by an expat IFA and is properly regulated.

whiteflag_3

Cook_County wrote: »

Where is your IFA qualified & regulated? What country's tax regime are you subject to?

What IFA? Dont see IFA mentioned by the OP.

shaun_from_Africa

1) tax efficiency in the event that I return to the UK
2) Avoidance of Inheritance tax


If you do return to the UK and become resident for tax purposes, you will be expected to declare any income from offshore based accounts, and this money will also be accountable for inheritance tax calculations.

whiteflag_3

shaun_from_Africa wrote: »

1) tax efficiency in the event that I return to the UK
2) Avoidance of Inheritance tax


If you do return to the UK and become resident for tax purposes, you will be expected to declare any income from offshore based accountsQUOTE]

yes , but not from offshore bonds , if you accumalate it within the bond .

shaun_from_Africa

yes , but not from offshore bonds , if you accumalate it within the bond .

True, the interest is free of UK tax whilst held or re-invested into the bond, but any interest paid when the bond is cashed in becomes liable for tax if the holder is a UK tax payer.
In effect you are not avoiding paying tax on the interest, but mearly delaying the payment.

hongkers97

My Financial Advisor is De Vere & Partners, they have been pushing it for over a year....

it is a total charge of 8% (spread over 5 years I think) on the amount invested. there is then no on going chare. the selling point is:
1) tax efficiency on my return to UK (see below) - I have been non resident for 13 years but may go back at some point.
2) Access to institutional investment

The tax position was stated as follows:

1) 5% allowance - UK Inland Revenue allows 5% of orignal capital to be moved back to uk as an allowance each year
2) time apportionment relief
GROSS GAIN x No days onshore/no of days since policy inception = NET GAIN

tax is paid on NET GAIN

3) top slicing relief. (calculation based on not being higher rate tax payer in UK0.

My question is
A) In the event that I move back to the UK is this better than investing in a standard Unit trust or increasing regualr savings in my skandia/Friends provident etc scheme
What is the benefit of accessing institutional funds - De Vere seems to be indicatng that it basic access as I would not be able to access the funds otherwise (such as a DB Alpha fund)....no mention was made of lower costs

Any thoughts most welcome