Portfolio bonds have been around for many years. They are wrapper-style solutions offered by many of the main life assurance companies, banks and financial services providers. Portfolio bond benefits are so broad and almost all encompassing for many expats, so we thought we’d take a closer look at them for you today.
In the past we’ve discussed how a portfolio bond can save you money potentially, however there are perhaps even greater benefits associated with how diverse your included investments can be.
What’s more, there are tax benefits available to some expatriate investors, not to mention flexibility and simplification benefits. Read on to discover whether a portfolio bond could benefit you.
The General Benefits of Portfolio Bonds
Definition: a portfolio bond is a structure within which multiple savings and investment solutions can be housed. They are also referred to as ‘wrappers’ because all your savings and investment solutions are wrapped up inside the one account.
The main benefits of utilising such structures are as follows: -
1. Anti-money laundering and ‘know you customer’ due diligence only has to be done once when you establish the portfolio bond – from then on, whether you choose to invest in a million different ways with a million different companies, this element of bureaucratic red tape is out of the way, saving you time and hassle
2. You can invest into almost anything at all within a portfolio bond structure – from offshore savings accounts to EFTs to oil or gold funds for example – there are almost no limits to what can be included within one of these wrappers
3. This gives you maximum investment choice…
4. And maximum portfolio diversification benefits…
5. Management charges and the fees for making amendments to your underlying holdings can be competitive
6. Your portfolio bond can be totally personally tailored to suit your investment objectives, your risk profile and your financial goals
7. You can use such a structure whether you’re interested in income generation, wealth growth or both
8. There is great administrative simplicity provided through using a portfolio bond
9. And as these wrappers are non-income producing assets in themselves, their administrative fees are generally low
10. You can invest in your portfolio bond for as long as you like, they are not closed or restricted by time in anyway
11. Through investing via a portfolio bond you may avoid some funds’ minimum entry requirements
12. You don’t necessarily have to ‘sell’ an asset to transfer it in
13. You retain maximum control over how your money is managed, saved and invested
14. A simple fax transfer form can see you amending how and where your money is saved or invested, making the movement of money so much easier
15. Switching between assets is therefore quick and efficient
16. There may be corporate discounts on any initial entry charges
Potential Tax Benefits of Portfolio Bonds
You may have heard that there are some capital gains and inheritance tax planning advantages to using a portfolio bond. However, as cautioned by Reuters, you shouldn’t overlook the suitability of a portfolio bond and how it is managed just because there may be some tax benefits available to you.
Explore potential tax benefits with a financial adviser because the tax treatment of your financial affairs depends on your individual circumstances, and may be subject to change in the future.
Understanding How a Portfolio Bond Could Benefit You
As mentioned above, you can invest in one of these wrappers for as long as you like. However, the majority of advisers caution that you should aim to invest for at least five years, ideally longer.
In part this is because the charges you will incur if you withdraw all your money in the short-term are high from many providers of these solutions.
Therefore, if you think you may need access to over 75% of your money before the five-year period is up, portfolio bonds may not be ideal solutions for you.
Furthermore, there are sometimes minimum limits on the amount of money you need to have to save and invest within a portfolio bond. So, if you have less than say £20,000, your adviser may suggest alternative approaches for you.
As the value of your wrapper and any income taken from it can go down as well as up and is not guaranteed, meaning you may not get back all the money you invest, these types of solutions are only suitable for those with a degree of risk tolerance.
As you can therefore see, a personalised approach to choosing whether a wrapper is suitable for you is required. This means that you need to speak to an offshore or expat financial adviser, and have them assess whether you could benefit from a portfolio bond or not.
The benefits are great – but they are not great for everyone. Seek personalised, independent, qualified advice.