Sanity checking that an "investment bond" is sensible?

dunstonh

The so-called tax benefit on investment bonds  - "you can apparently withdraw up to 5% of your original investment a year for 20 years, with all tax deferred?" - sounds altogether unappealing to me.  Isn't that just saying that you won't get a tax bill for taking out the same money you put in, providing you do so extremely slowly?  If so, it seems more like a millstone than a benefit.  It sounds to me like a sales-driven opaque product, possibly with an associated commission structure: perhaps more financially worthwhile for the "adviser" than for the investing client.

Commission does not exist on investments.
The tax deferral of an investment bond can be highly beneficial in the right circumstances.   A higher rate taxpayer or additional rate taxpayer who will be basic rate later on can avoid higher rate/additional rate by deferring the tax calculation until basic rate or lower and therefore not pay that tax.

The SJP investment bond will be a product.  However, a platform based investment bond will be a tax wrapper, just like an ISA or pension.

That said, a certain distribution channel does appear, anecdotally, to be doing an awful lot of these and cynics may say that it's because it's difficult or impossible for them to be closed or moved away from that distribution channel by IFAs.  Therefore, committing that investor to that distribution

HappyHarry

As above posters have said, I do not see the advantage of an Investment bond over standard ISAs, Pensions and General investment accounts. Certainly, the tax bill further down the line could be unnecessarily significant. 

I do recommend Investment bonds occasionally, but usually either to those investing £500k or more with other significant assets, or those looking for a simple gift to trust for IHT planning. Certainly not for the situation you are describing.

I agree with many posters above, go and see an IFA rather than a tied sales force FA.

investmentisscary

I just wanted to say thanks again to everyone who pitched in with thoughts on this thread. I held off doing the investment bond, and decided instead to put it into unit trust of some form (still TBD). I haven't made a final decision yet, but am leaning towards having hand-holding rather than DIY. I had lengthy conversations with 2 different IFAs, one local that I found via unbiased.com, and one recommended by my friend's (rich!) boyfriend, who has looked after his affairs for 15+ years.  In the end if I go with an IFA it will be with the latter for the comfort of having the personal reference. So thank you all for saving me from a big mistake