Investment Bonds

Investment Bonds are normally lump sum investments that are similar to Unit Trusts and OEICS in that they are diversified. However they are taxed differently. They are free of Capital Gains Tax and income tax to basic rate taxpayers, but higher rate taxpayers may suffer further liability on encashment. Investment Bonds allow regular fixed withdrawals to be made, which can offer advantages for people nearing, or in retirement, as it can provide an additional form of income.

There are many funds to choose from, including UK and overseas shares, small companies, government stocks and property. You may be able to split your money between different funds or switch from one to another if you choose.

You usually need to invest a lump sum of £5,000 or more and for a minimum length of time, normally 5 years. If you cash in early there could be financial penalties. Some of the money you invest pays for a small amount of life assurance, but the emphasis is really on investment.

These are the main types of investment bond:

• Guaranteed Equity Bond. Give a guaranteed level of return over a certain term, with options for growth or income. Other products, called ‘structured products’, link returns to share and other indices (e.g. FTSE 100), and may have a deposit or share structure.
• With Profit Bond. Bonuses are added to these bonds, which normally allows steadier returns to be achieved over the longer term.
• Distribution Bond. An investment bond designed to give you a regular income and / or capital growth, by investing in funds which have a main focus of providing income.
• Managed Bond. An investment bond designed to give you growth from a range of different assets including equities, fixed interest, property and cash.

Call in to any Bradford & Bingley branch to speak to one of Legal & Generals Financial Advisers. They'll be able to see if investment bonds are suitable for you. Also, they can give you guidance to help you invest your funds, and provide you with full information on the range of available products.