Insurance Bonds

dunstonh

What about basic rate taxpayers who are concerned about care costs?

If an investment is written as one or more life assurance policies that contain cashing-in rights by way of options for total or partial surrender, then the value of those rights has to be disregarded as a capital asset in the financial assessment for residential accomodation.

So, making use of investment bonds well ahead of any need for nursing care can see you having them disregarded by the local authority in their means test. Something that wouldnt happen with unit trusts/oeics.

If you know that residential nursing care fees are going to be required then its too late as that is seen as evasion.

So, basic rate taxpayers concerned about that could see the benefits of life assurance bonds being important.

EdInvestor

If an investment is written as one or more life assurance policies that contain cashing-in rights by way of options for total or partial surrender, then the value of those rights has to be disregarded as a capital asset in the financial assessment for residential accomodation.

I'd have thought any basic rate taxpayers who had money stashed away in investment bonds would be better advised to use the money to get themselves an "immediate needs annuity", so the local authority doesn't need to get involved in the first place and they end up in a much nicer, more upmarket, nursing home.

You're grasping at straws here, dh.

dunstonh

An immediate needs annuity is a different beast and has its own drawbacks. It is usually more suitable for those that havent been able to plan in advance. Plus the capital is lost. Although you can protect the capital, at a cost, and upto a certain level, any income paid to the nursing home is deducted. So whilst the annuity may last for life, the capital gradually vanishes to nothing over time.

Also immediate needs annuities are medically underwritten and you may not be able to get one. Or you may find you dont get enough for you money.

The investment bond cant be touched by the authorites and the capital can continue to grow.

Some will prefer that option.

You're grasping at straws here, dh.

No, but unlike you I see that different product groups suit people with different needs. You prefer to have everyone using exactly the same products regardless of their requirements and circumstances.

Peter-Pan_5

if you have an Investment Bond with a life insurance element,does that mean it is not "counted" towards the means test if you were claiming benefits

EdInvestor

dunstonh wrote:

You prefer to have everyone using exactly the same products regardless of their requirements and circumstances.

Not at all.I'm just trying to highlight issues so people can get informed and ask the right questions, so they don't get mis-sold inappropriate products
like this 80-year-old lady. :mad:

It's quite obvious that some advisors have no scruples about ripping off the elderly with these complex bonds ( cunningly given the same name as a savings bond so they will not notice the difference).

The advisors and their employers (the banks) know full well that elderly people are a)often trusting and poorly informed, and b)unlikely to pursue a misselling claim.

So they shamelessly take their money.This kind of behaviour is totally unethical and beneath contempt IMHO.

dunstonh

Not at all.I'm just trying to highlight issues so people can get informed and ask the right questions, so they don't get mis-sold inappropriate products
like this 80-year-old lady. :mad:

It's quite obvious that some advisors have no scruples about ripping off the elderly with these complex bonds ( cunningly given the same name as a savings bond so they will not notice the difference).

That had nothing to do with the tax wrapper but the attitude to investment risk.

I would say that too many guaranteed equity bond ISAs are being sold to inappropriate people so does that mean we tell everyone to avoid ISAs?

You do not "crucify" a product because of the actions of a few individuals of unrelated issues.

lestamunda

What about tax planning/trust planning etc etc - you can use with bonds?

also, assign segments to family, use nil rate band allowance.

also, go offshore and plan/time your tax. time apportionate relief if living abroad.

this is a huge field that covers too many to discuss in type format. a quality ifa should know/cover all areas.

Peter-Pan_5

can any of you experts answer my query please,or will I stick on a horse,lol

dunstonh

Investment bonds are currently not included for residential care purposes and pension credit. I forgot to mention pension credit earlier. Any benefits which include savings and investments in a means test would have existing investment bonds disregarded. Same would go for endowment policies.

If you have invested the money into an investment bond prior to making any claim for pension credit (such as before you are retired) then the value of the investment within the investment bond willl not be included for pension credit purposes. However, if you surrender or cash in the investment, then it goes into your account and account balances would be included for means testing.

So, those coming up to retirement and suspect that they will get pension credit based on income but have capital that would exempt them could invest into investment bonds as a way to reduce their capital.

It is important that we are talking about investment bonds in their proper sense and not bonds which are incorrectly named by maketing depts of some bank and building societies. The investment bond must be segmented and contain some life assurance (even 0.1% of the value).

However, if you are already in receipt of the benefits, then it is too late to invest it into a bond as you cannot do it after the event.

Peter-Pan_5

dunstonh,thanks for your reply i am 61 and dont claim pension credit as i thought I would not get it,what about if I were to claim Housing benefit or Council tax benefit,would an Investment Bond get round these rules as well