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Advisers predict life offices will have to change business model

Half of advisers believe life companies will have to change their business models as sales of insurance bonds fall, research by Fidelity FundsNetwork reveals.

The survey of more than 230 advisers found 85 per cent believe sales of insurance bonds will decline while 86 per cent believe sales of mutual funds will increase.

FundsNetwork says that in 2007, unit-linked insurance bond sales reached £15.9bn, so a considerable swing in favour of mutual fund sales would present something of a cross roads for life companies who have built a large part of their business around insurance bonds.

The survey found that 48 per cent of advisers believe that life companies will have to change their business models as a result of this.

Fidelity FundsNetwork head of trusts and tax planning Paul Kennedy says: “It cannot be said that the recent changes to Capital Gains Tax have made vast differences to the way that insurance bonds and collectives are taxed, but what is indisputable is that the recent changes appear to have acted as a catalyst.

“Advisers are now looking far more closely at the tax efficiency of wrappers and inevitably recognising that Insurance Bonds do not fit all and collectives (indeed as they always did) have a bigger part to play.”

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