There is an opportunity for the industry to further support advisers’ understanding of onshore investment bonds, according to new research from Chesnara Life (UK) Ltd.
Research for its Onshore Bond Adviser Sentiment Survey points to advisers’ appetite for ongoing professional development and education, with 71% saying increased training would help them to improve client understanding of the benefits of onshore investment bonds.
The survey, which explores advisers’ use of onshore investment bonds and their views on key market issues, found nearly two out of three (64%) advisers would welcome more positive industry messaging.
Nearly six out of 10 (59%) advisers say they would be open to more support in general from providers, while more than half (54%) would value provider literature they can use directly with clients to explain onshore investment bonds.
The research also highlights a potential growth opportunity for the market. While advisers on average estimate 29% of their clients hold onshore investment bonds, they believe nearly two out of five (39%) would benefit from holding one.
Chesnara Life’s Onshore Bond Adviser Sentiment Survey, which surveyed advisers who advise on onshore investment bonds, also found more than a quarter (26%) had significantly increased their use of onshore investment bonds in the previous tax year.
“Onshore investment bond providers have an opportunity to build on the support already available to advisers through training and wider educational resources. This could help advisers deepen their knowledge, support their client conversations and continue to deliver good outcomes.
Investment bonds are increasingly relevant as part of the financial planning conversations advisers are having with their lump sum investment clients in general and in estate planning in particular. Further education around the role and benefits of investment bonds could help advisers respond to that growing interest.”
Mark Lambert, Head of Onshore Bond Distribution, Chesnara Life (UK) Ltd
Onshore bonds can offer zero tax on cash dividends at a policyholder level, while non-dividend income is taxed at 20%. Capital gains realised within the Bond are subject to UK life fund taxation.
This “fund level” taxation treatment of income and capital gains means a full basic rate income tax credit may be available to the investor when a chargeable event arises.
In effect, the policyholder is treated as having already paid basic rate income tax on these gains. Top-slicing relief and 5% p.a. tax-deferred rules on withdrawals remain. Lifetime transfers by way of assignment without consideration are generally not treated as taxable events.
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