Guaranteed Income Bond: Award Winning Investment Advice

Factfile: Guaranteed Income Bonds (normally fixed term income bonds)

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

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
Fund taxed at source 20% before you receive returns
No personal liability to taxes for basic rate tax payers and non tax payers, higher rate tax payers will have to pay tax on excess income above 5% per year
If the higher rate taxpayer subsequently becomes a basic rate tax payer or non tax payer any deferred or postponed tax liability is wiped out
Higher withdrawals over and above 5% per year can be taken with no liability to tax 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 Income Bonds are investments where a single, one off amount of money is paid, in return for a guaranteed level of income for a set term. At the end of the term your original lump sum is guaranteed to be repaid. Guaranteed Income Bond investments can be suitable for basic rate taxpayers who require a set regular income and do not wish to risk their capital. 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 their original capital back guaranteed. The funds within the investment are taxed at 20%. This means that both basic and higher rate taxpayers benefit from lower than normal rates of tax in the fund. As long as the investor is still a basic rate taxpayer when the investment matures, there will be no further tax to pay on the income received. Any income received that is more than 5% of the original investment will have to be added to the investors income in the year to see whether or not the basic rate tax band still applies. If the investor has been taken into the higher rate tax bracket, further tax will need to be paid.

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