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Guaranteed Growth Bond: Award Winning Investment Advice 

Factfile: Guaranteed Growth Bonds (normally fixed term bonds with a guaranteed growth rate)

Lump sum investments: Yes

Regular premiums allowed: No

Flexible payments allowed (stop/start/additional/increase/decrease): No

Investment Risk Profiles Available:

• No Risk funds available
• Low Risk funds available
• Medium Risk funds available

Changing funds and risk profile allowed: No

Moving to another company allowed: Yes, if before end of term penalties may apply

Life Insurance Included: Yes (if Insurance Company Bond)

Personal Tax Benefits:

• Capital guaranteed at maturity
• Guaranteed growth at maturity 
• Fund taxed at source 20% before you receive returns
• No personal liability to taxes for basic rate tax payers and non tax payers
• At maturity, any gain is added to normal income to see if this takes you into the higher rate tax bracket and if so marginal taxes become due
• Withdrawals do not affect or reduce enhanced tax allowances for pensioners

Can be held inside Trust: Yes

Suitable For:

• Adults
• Basic Rate Tax Payers
• High Rate Taxpayers

Insolvency Compensation Limits:

• If Bank and Building Society Accounts - maximum compensation for insolvency £35,000, this was increased from £31,700 following the Northern Rock debacle in the Autumn of 2007 - Do not invest more than £35,000 with any one company.
• If Insurance Company Funds - 90% of total funds invested. No Limit.

Brief Description:

Guaranteed Growth Bonds are investments where a single, one off amount of money is paid, in return for a particular capital sum after a number of years.  No income is paid during the term and they can be suitable for both basic and higher rate taxpayers. It is usual for these types of investment to run between one and five years although longer periods are available. At the end of the selected term the investor will receive a guaranteed increase to their original capital and may have the opportunity to reinvest the proceeds into a similar investment. Tax Issues - The difference between the investor's original lump sum and the maturity amount is not chargeable to capital gains tax or income tax at the basic rate.  However, this is only the case if the investor is a basic rate taxpayer when the investment matures and the gains on the investment have been taken into account. The funds within the investment are taxed at 20% on income from savings and certain other sources. This means that both basic and higher rate taxpayers benefit from lower than normal rates of tax in the fund.

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