Guaranteed investment bond help

Mandygirl

I have a guaranteed investment bond with Met Life, and would like some feedback on this product.. I am trying to find out if this a worthy product in todays financial climate. Most of the funds are invested with fidelity corporate bonds, the smaller portion with blackjack global growth fund. My plan was to leave the funds in for another 11 years but I am concerned that this product is too low risk and will give me a good return.

I'm really confused. Can anyone help? Should I stay with it or get out ?

Malthusian

I'm guessing this is one of those bonds that guarantees to return at least your original investment if you die or at a specified future date (sometimes with gains "locked in")?

Generally the charges on these products are extremely high (2.0 - 2.5% per annum is typical with no advice charge included, compared to around 0.5% for a DIY portfolio of tracker funds) and they are restricted to investing in portfolios with a low equity content, with the aim of restricting the cost of insurance for the provider rather than making money for the policyholder. Investment bonds are also usually tax inefficient (unless you have very specific circumstances).

So if you are comfortable with investment risk it is likely to make sense to encash it - if you can do so without a further tax liability - and reinvest in a diversified portfolio of tracker funds using your ISA allowance.

However, the taxation of cashing in an investment bond is complicated so you should either know exactly what you are doing, or take advice from an IFA.

It's BlackRock, by the way (probably).

Reaper

Even if you feel it is not ideal cashing them in before the end of the term can have disadvantages in terms of tax and/or charges.

This type of product is likely to have been sold to you by a Financial Advisor or IFA rather than direct, so they may be a good place to start for advice.

By the way Met Life has stopped selling these, though that doesn't affect existing customers such as yourself.