EXPLAINING ONSHORE INVESTMENT BOND BENEFITS CAN BOOST ADVISER BUSINESSES
- Nearly two out of three clients don’t know about key onshore investment bond tax benefits despite more than half worrying about tax issues.
Growing demand for onshore bonds is a business opportunity for advisers, but research* from HSBC Life (UK) Limited (“HSBC Life (UK)”) shows too many clients are not making full use of the tax benefits offered by onshore investment bonds despite rising concerns about tax issues.
Research for HSBC Life (UK)’s report, The Three I’s of Investable Capital, in association with consultancy Technical Connection, found two out of five people who have advisers, or have seen one in the past year, hold onshore investment bonds.
But nearly two out of three (64%) say they do not know about the key tax benefits from holding an onshore investment bond.
Only 15% of clients surveyed say they know about, and use, the 5% per annum tax deferred withdrawals. Around 23% who hold an onshore investment bond say they don’t use 5% withdrawals. Around 9% are aware of, and use, top slicing but 20% are aware of, but don’t use, top slicing. Nearly one in five (18%) know about not having to make tax declarations and 25% say they make tax declarations on the bond.
HSBC Life (UK) believes that the low level of awareness and use of key tax benefits offered by inshore bonds, is a major opportunity for advisers to educate clients about bond benefits as taxation is a growing concern. Its study found more than half (51%) of clients are worried about tax, with income tax the biggest concern ahead of Inheritance Tax and Capital Gains Tax.
Mark Lambert, Head of Onshore Bond Distribution, HSBC Life (UK), said: “Growing demand for onshore investment bonds is being driven by reductions in Capital Gains Tax exemptions and dividend allowances as well as general increases in the amount of tax paid which has brought the tax benefits of onshore investment bonds sharply into relief.”
“However, our report shows relatively low levels of knowledge and use of the key tax benefits of bonds among investors who hold them which represents a real opportunity for advisers to engage with their clients and provide important support on issues which are top of the mind for these individuals.”
HSBC Life UK’s report analyses the full range of investable capital assets including equities, collective investments such as unit trusts and OEICs as well as ISAs, onshore and offshore bonds, defined contribution, and defined benefit pensions, VCTs, EIS, SEIS, structured investments, and crypto investments.
It highlights how capital investments can be structured to achieve intergenerational and estate planning, as well as the role of initial and ongoing advice in ensuring an optimal outcome from the investment of capital and the potential future tax treatment of capital investments.
Onshore investment bonds offer zero tax on cash dividends at a policyholder level while non-dividend income is taxed at 20%. Gains within the Bond are subject to UK life fund taxation which means that the policyholder is treated as having paid basic rate tax on these gains. Top slicing relief and 5% p.a. tax deferred rules on withdrawals remain. Lifetime transfers by way of assignment where there is no exchange of money or money’s worth are not taxable events and basic rate tax credit in determining policyholder tax on realised chargeable gains continue.
The HSBC Onshore Investment Bond, a tax effective medium to long term lump sum investment wrapper, can be accessed with a minimum investment of £15,000 providing the potential for capital growth while still allowing clients to make withdrawals from their investment.
It offers clients access to around 3,800 funds via open architecture. HSBC Life (UK) does not replicate funds offered by external fund managers. It enables investment in the funds directly, ensuring that consistency of approach across the investment solutions that advisers recommend to their clients.
Please click here to download the report: https://www.life.hsbc.co.uk/three-i-report/
Ends
Notes to Editors:
* Independent research conducted among a geographically representative sample of 200 advisers across the UK representing 200 companies who were interviewed on the phone. The sample was weighted to be representative for assets under management and number of RIs. Consumer research was conducted online with a sample of 1,000 clients with a minimum of £25,000 investable assets who currently have a financial adviser or saw one within the last three years. The sample was weighted to be geographically representative.
Media enquiries to:
HSBC Life
Ellis Ford +44(0) 738 479 1611 ellis.ford@hsbc.com
Citigate Dewe Rogerson
Seb Zickus +44 (0)20 7025 6494 seb.zickus@citigatedewerogerson.com
About HSBC Life (UK) Limited
HSBC Life (UK) Limited is part of the HSBC Group, one of the world’s largest banking and financial services organisations. HSBC Group serve more than 40 million customers worldwide through a network that covers 64 countries and territories in its geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. We aim to be present where the growth is, enabling businesses to thrive and economies to prosper, and, ultimately, helping people to fulfil their hopes and realise their ambitions.
HSBC Life (UK) Limited was founded in the UK in 1988 and offers insurance services to meet protection and investment management needs. Our services and solutions are available through HSBC banking channels and selected third parties, including advisers and aggregators. For more information on HSBC Life (UK) Limited range of services go to https://www.life.hsbc.co.uk/ and for more information on HSBC please go to https://www.hsbc.com
About HSBC Life
HSBC Life is the insurance business of the HSBC Group. We manufacture life and health insurance products in Hong Kong, mainland China, Singapore, India*, France, UK, Malta, Mexico, and Argentina. HSBC Life offers a range of insurance products to meet the protection, education, retirement, wealth growth and legacy planning needs of our customers. Our services and products are available through HSBC banking channels, selected third parties, including financial advisers and aggregators. *Through our joint venture, Canara HSBC OBC Life Insurance.
HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in 62 countries and territories. With assets of $3,021bn at 30 September 2023, HSBC is one of the world’s largest banking and financial services organisations.