Investment bond purchase options

Linton

Surely the key issue is not the relatively small one of an initial charge but rather who takes on the responsibility that the chosen option in a complex area is appropriate.

dunstonh

[Deleted User] said:

dunstonh said:

An investment bond has an initial fee and then has two layers of fees (one for the bond, one for the underlying investments). 

There are no initial charges on investment bonds.

Sorry, I was being loose with my words.  There is typically an initial fee paid for the advice around getting the bond.  This fee is often taken from the initial investment and so it is economically the same as an initial charge.  However, as you could pay the initial fee with your other resources if you wanted to.

Here's a quick example I googled: https://www.sjp.co.uk/individuals/charges/investment-bond-charges

We charge for our initial advice and for our ongoing advice. 4.5% of your initial investment will be used to pay for initial advice and an annual charge of 0.5% will be charged for the ongoing advice and the relationship with your adviser.

 

Understood.  However, picking SJP, the most expensive distribution channel out there, isn't really a fair indication of charges.     And where the client is already an ongoing servicing client, many advisers will move money between wrappers or do top-ups at no initial charge.      If the client chooses no ongoing servicing, then the ongoing charges (platform and funds) could be the same cost as ISA or pension (although some may have a loading, not all do).

Del407

I suppose the bottom line is, without an IFA the money that I can't put into my pension pot or ISAs, I would end up paying basic rate tax on the interest. If the IFA fees are less than the tax man would take then it's an obvious choice. 
So I would need quotes from 3 accredited IFAs, to compare like for like fees and to decide which I could work with long term.

wmb194

Del407 said:

I suppose the bottom line is, without an IFA the money that I can't put into my pension pot or ISAs, I would end up paying basic rate tax on the interest. If the IFA fees are less than the tax man would take then it's an obvious choice. 
So I would need quotes from 3 accredited IFAs, to compare like for like fees and to decide which I could work with long term.

If you're really desperate to avoid tax on interest then there's always low coupon gilts. I'm not sure what your timeframes are but a a quirk of the long Zirp policies is that there are a few to choose from, see in the link below. Capital gains* are tax free and because the coupons are small there isn't much interest. If you buy them directly - not through a fund - and hold them to maturity you can guarantee your return.

*I.e. buy them below the par value of £100/100p.

https://www.yieldgimp.com/