Legal & General distribution bond

soulwally

Is this bond a good bet for growth? I'm thinking of investing £5,000

dunstonh

I assume you mean the L&G investment bond investing the L&G distribution fund?

Any reason you want to use the life fund tax wrapper?

soulwally

sorry! what's a trust fund wrapper? we have been advised this by a F /A and are just double checking that it is our best option.

turbobob

Its a life assurance bond, which means the fund is taxed internally. They are not as tax efficient as a stocks and shares ISA, for example. Also they tend to have early encashment penalties (not that this type of thing should ever be considered for a short term investment anyway). You could certainly find a fund which would be similar to the L&G distribution fund which you could invest in through an ISA. There may be specific reasons why a bond has been recommended to you though, thats just general info..

dunstonh

we have been advised this by a F /A and are just double checking that it is our best option.

Not a legal and general tied insurance agent by any chance?

If you havent used your stocks and shares ISA allowance then this is an easy mis-sale. Even if you have used the stocks and shares ISA allowance you then typically have unit trusts as the next best option unless you are a higher rate taxpayer.

soulwally

I posted this on behalf of my sister, who had received the advice from a (trusted) financial adviser, who she previously, and a friend of mine, have used and found the advice sound.
I was checking on her behalf. Basically she wants to put the money where it will grow, and hopefully draw a monthly income from it too. is such a bond the best place? Or if not, a pretty safe bet?

dunstonh

Its as simple as this. If she hasnt used her Stocks and shares ISA allowance then the sale of this bond is a mis-sale. If she has used the stocks and shares ISA allowance and is a basic rate tax payer or non tax payer then the sale of this bond is a mis-sale as the unit trust option would be better.

is such a bond the best place?

Not unless she is a higher rate taxpayer who will be a basic rate taxpayer in the future.

Or if not, a pretty safe bet?

The distribution fund is a low/medium risk investment. How that fits with pretty safe would depend on your definition of pretty safe.

who had received the advice from a (trusted) financial adviser, who she previously, and a friend of mine, have used and found the advice sound.

With respect, based on very little information and a few assumptions, the advice seems bad. It looks like a typical insurance agent sale. L&G do still operate a tied salesforce and have a very poor reputation. If you are getting your "advice" this way then you really should reconsider. Indeed, the FSA have proposed that from 2009 tied agents will not be able to use the title adviser or market their product sales as advice. They will be clearly identified as insurance salesmen.

soulwally

Dunston: Thanks for your advice. I will pass it on.

purch

distribution bond

..........as in 'the Profit is Distributed' (not all of it to the Bond holder :eek: )

dunstonh

No purch, L&G have a unit linked distribution fund. Its available in both unit trusts and life funds (and can be put in an ISA).

The investment bond is just the tax wrapper for the fund although L&G do sometimes market the 100% into distribution fund as a distribution bond. An old term that not many use nowadays as bonds have moved on a long way since then.

If that fund was desirable then it can be bought in ISA, unit trust or life fund and that is the pecking order unless higher rate taxpayer.

Fairwinds

My In Laws invested in this product ( £20k ) in 2002 - well it's called L&G Distribution bond ( income profile).

Can you explain a bit more about it and where I can find details of its performance. They have invested most of their money into it to but are becoming increasingly anxious about its dropping value although the don't actually know what it is worth.
I am trying to convince them not to panic and sell at the bottom ( near bottom) of the market.

Any info appreciated