Investment bond

cwoodham

I have been advised by my IFA that with £5000+ to invest I should consider an investment bond, e.g. Legal and General Investment Bond or Friends Provident Investment Portfolio Bond. I'm having difficulty finding comparison tables or any article on these re charges, who are the top players, performance, or what people think of them. I cant find anything after searching for info on Discussion boards.

Should I try one of these or just go for an investment trust where there seems to be a lot more info. Any advice gratefully received.

Colin W

dunstonh

The IFA should produce the research to you which shows all that. The IFA would probably use assureweb or exchange to put your details in and out pops the bonds listed in order of the company with the lowest charges. It shows comparative 10 year projections from all the companies using 6% and assuming their default fund.

The information on life funds is just as available as those on IT funds. Is there a reason why you are not looking at ISA funds? I know charges on life funds can be lower than ISAs over a 10 year period but the taxation on life funds is higher and most life funds are a mirror of their unit trust equivalent but with higher tax.

cheerfulcat

Hi,

Please don't even consider those beastly investment so-called bonds. You're paying out an awful lot in charges and they frequently lock you in for three to five years, with massive penalties if you want to take your money out early. In fact, if the markets are looking a bit shaky some of them will apply a penalty even after the initial locked-in period. They are a very very bad investment.

Investment trusts are a far better deal ( if you really want a collective investment ).

HTH

Cheerfulcat

ps found some comparison tables for you;FSA shows charges only, for performance of the funds you could look in the back of Money Management magazine or online at Trustnet

http://www.fsa.gov.uk/tables

http://www.trustnet.co.uk/

dunstonh

Actually, the charges on modern bonds are often lower than an ISA investing in the same fund, over a 10 year period. They are certainly not a very bad investment at all. Indeed, I would estimate that around 50% of my investment business is placed in bonds.

The only funds with potential MVRS, that you mention, are with profits funds. Really, the only two providers I would feel happy with when dealing on With Profits funds are NU and Pru. NU do have a version of their bond without an MVR. Pru have a £2k pa MVR free withdrawal allowance, although they can alter this at any time The unit linked funds in a bond wouldnt have this MVR.

The investment bond is just a wrapper in the same way that an ISA, Unit Trust, OEIC or Investment trust is. It just has a different charging structure and tax status to those products which may or may not be better.

cheerfulcat

Hi, DD,

I have a two year old investment bond ( so, reasonably modern?).There was an initial charge of 5%. The annual charges are around 1.60%, which is a large amount of money over ten years, both in actual cash and in lost potential investment returns. Oh, and there's a 5% bid-offer spread as well.

As to the exit penalties; mine is certainly not a with-profits bond and it states that there is an early encashment charge ( exit penalty ) for the first three years. There is also mention made in the key features document of a withdrawal charge ( exit penalty ) though frustratingly the section where this is explained is non-existent. Edit - found it, it's only £1 :-))) but it's the principle of the thing :-)

I can't agree that Investment Trusts are wrappers; they are after all companies in which one buys shares, rather than products. They are run as companies and crucially, one can sell the shares at any time...


Cheerfulcat

dunstonh

I have a two year old investment bond ( so, reasonably modern?).There was an initial charge of 5%. The annual charges are around 1.60%, which is a large amount of money over ten years, both in actual cash and in lost potential investment returns. Oh, and there's a 5% bid-offer spread as well.

I arranged 5 last week. All had a 1.5% amc dropping to 1.0% after year 5. No initial charge or bid/offer spread and 105% allocation.

When the research is done, there is a wide difference in charges between the top and bottom ones. Yours certainly seems on the very expensive side.

I can't agree that Investment Trusts are wrappers; they are after all companies in which one buys shares, rather than products. They are run as companies and crucially, one can sell the shares at any time...

You are correct. I initially wrote the paragraph differently and then edited it to make it shorter and left ITs in there in error.