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Investment bond |
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Investment bondA unit linked single premium whole life assurance policy. Part of the premium gives life cover whilst the balance is invested in unitised funds. Under certain circumstances, since the bond is a life policy, certain tax advantages may be enjoyed. For example if the capital and annual interest are reinvested in full, there is no immediate liability to higher rate tax. If the proceeds of the bond are subsequently taken when a former higher rate taxpayer has become a basic rate payer, there is no higher rate tax liability.Similar MatchesInvestment managerInvestment managerThe individual who manages a portfolio of investments. Also called a portfolio manager or a money manager. Investment incomeInvestment incomeIncome, paid from an investment, such as dividends and interest. Split capital investment trustSplit capital investment trustAn investment trust with a limited life, in which the equity capital is divided into two classes - income shares and capital shares.Holders of income shares receive the majority of the trust's income throughout its life and a specified capital amount on liquidationHolders of capital shares receive virtually no income during the trust's life but on liquidation receive all the assets after repayment of capital to holders of income shares. In other words they get the benefit of most of the capital growth.The raison d'etre of split capital investment trusts is that a single trust can accommodate the requirements of two types of investor in one fund, and provide better performance for both than they would be able to achieve if they invested in separate funds.It works like this:Ian Illingworth has £10,000 to invest and wants to get maximum income from it. He buys 'Income Shares' in the Split.Colin Casey has £10,000 to invest and wants to get maximum capital growth from it. He buys 'Capital Growth Shares' in the Split.The Split invests their pooled money and during the lifetime of the trust pays out all the income to Ian. At the end of the Split's life, when the capital value of the fund has risen to, say, £60,000, it pays Ian back his £10,000, and pays £50,000 to Colin.How have Ian and Colin benefited?Ian has benefited because for 7 years he has received the income on £20,000 even though he only invested £10,000.Colin has benefited because he has received the capital growth on £20,000 even though he only invested £10,000 and, being a higher-rate taxpayer, it has suited him very well not to have received any income on his £10,000 in that time.Basically, it is as if Ian said to Colin 'You have the capital growth on my £10,000' and Colin said to Ian 'Fine, I'll give you the income on my £10,000 in return.'There are many other classes of share within splits, and the thinking behind them gets progressively more complex. It is also important to note that Splits are geared investments (they can borrow money) which, depending on performance, can either be beneficial or detrimental to investors. If you are interested in what they have to offer it is essential to get specialist advice. Income investment companyIncome investment companyA management company focused on managing a mutual fund whose primary purpose is income generation, typically investing in bonds and high dividend yielding stocks. Trade-related investment measureTrade-related investment measureAny policy applied to foreign direct investment that has an impact on international trade, such as an export requirement. The Uruguay Round included negotiations on TRIMs. Further SuggestionsInvestment softwareCommunity Reinvestment Act (CRA) Foreign investment risk matrix (FIRM) Trade and investment Portfolio investment Investment Advisers Act Investment Risk Investment philosophy Bank Investment Contract (BIC) Leveraged investment company Mutually exclusive investment decisions Legal investments Temporary investment Overinvestment Foreign direct investment (FDI) Association of Private Client Investment Managers and Stockbrokers Investment Monthly investment plan Future investment opportunities Alternative Investment Market Reinvestment risk Return on investment (ROI) Undertakings for Collective Investment in Tradable Securities protected investment products Reinvestment |
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