Guide to Essential Money Tools

Expat Money Tools

Why buy an offshore insurance bond?

Skandia

To many people, investing in offshore savings products can seem like adding a layer of complexity to their financial arrangements. But, this concern should not cloud the real benefits these investments can offer.

Companies offering offshore bonds are based in tax efficient locations such as the Isle of Man and the Channel Islands and this allows investments to potentially benefit from greater growth.

The tax rules in these locations mean that investments can grow virtually free of tax because companies do not have to pay income or capital gains tax on policyholders’ funds. This is generally known as gross roll up.

This is not to say offshore investments are tax-free though. How an investor is taxed will depend on the tax rules that apply in the country, where they are resident for tax purposes, when money is withdrawn from the policy. This is an important point as it could be different to where the investor was resident for tax purposes when the initial investment was made.

For people looking to take control of their long-term financial planning, offshore bonds allow considerable investment choice, freedom and simplicity. A good product offers investors access to a wide range of assets all in one place which allows diversification into different types of assets. Furthermore, having the flexibility and freedom to review and change these investment options can be key to maintaining an appropriate portfolio as circumstances and risk attitudes change over time – and being able to do this through one product dispenses with the need for paperwork or tax liabilities each time an asset is sold.

As product options and characteristics vary widely across different providers and as an investor’s tax position will vary depending on where they intend to take money out, it is important to get professional advice before proceeding with any offshore investment.