What are Offshore Bonds?


An offshore bond is a tax efficient wrapper which can hold a wide variety of assets, such as shares, bonds, investment funds, and structured products. They are used by expat investors who are seeking a tax efficient way of increasing their long term wealth, and to enable investors to make the most of their tax planning opportunities whilst they are living and working abroad.

There are many advantages of an offshore bond, although it is important to note that the specific benefits and advantages of an offshore portfolio bond will depend on the individual circumstances of the expat, and obtaining specialist expat financial advice is highly recommended.

Tax Advantages

One of the key benefits of an offshore bond is that offshore bonds are not deemed to be income producing, and thus this has the advantage of there being no liability to pay income tax on income on assets within the bond. Funds which are held within the bond can be bought and sold without any liability to capital gains tax (CGT) arising out of any gain on any fund sold. This ‘gross roll-up’ is a key benefit for many investors wishing to seek a tax efficient investment.

Flexibility

Offshore bonds are very flexible investment vehicles, and you can place investment funds, shares, bonds, cash, capital protected funds and structured notes in the bond. In addition, all offshore bond providers will allow the investor to take regular withdrawals from the fund, and it is possible to set up monthly payments into a bank account for living expenses. Some offshore bond providers also provide investors with a cheque book and credit card for additional ease of access to funds and flexibility.

Trusts and Inheritance Tax Planning

There are further significant advantages of an offshore bond if you wrap the portfolio bond in a trust in order to mitigate the effects of inheritance tax when transferring wealth.

Flexible Charging Structure

The charging structure of offshore portfolio bonds enables the cost of the bond to be spread over several years, instead of incurring a sizeable entry fee at the start of the investment period. This has the advantage that more of your money is working for you from day one, and not eaten up by charges. A further advantage is that the offshore bond providers, due to their size, can negotiate significant discounts on fund entry charges and ongoing management fees (sometimes by up to 80% or 90%), and so often the cost of charges is more than made up by the discounts when investing in the funds themselves.

Ease of Administration

An offshore bond also enables an investor to monitor and manage all of their investments from one convenient place. The bond provider will deal with all the administration for you – including dealing with the custody of individual shares and bonds, valuing all assets, providing you with online valuations, and dealing with all changes, transfers within your offshore portfolio bond in an easy and efficient manner.

Safety of Funds

Many of the offshore bond providers are household names, and are offshore arms of UK financial service companies such as Skandia, Axa, Generali and Prudential. These offshore arms are based in highly regulated jurisdictions such as Isle of Man and Guernsey, which provide for financial guarantees for policy holders in the unlikely event of the bankruptcy of the provider.
Invest in an offshore portfolio bond through Offshore Bond Investor and benefit from greatly reduced fees and increased allocations. For more details, please contact us.

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