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Julian Gibbs

I have been taken to task by Scottish Life International for not pointing out the advantages of offshore life company guaranteed stockmarket-linked bonds. The rates of tax are higher on offshore life company bonds than Dublin-based ones but they do have some worthwhile advantages.

SLI&#39s bond has a very high headline rate of 11.2 per cent and its returns are linked to three top indices, the FTSE 100, EuroStoxx 50 and S&P 500. At current stockmarket levels, these indices should certainly be higher in three years time. Even if they are not higher, SLI bonds are written as whole-of-life policies so, at the end of the investment period, they can be rolled over into new bonds. This means that no losses need be crystallised, unlike fixed-term bonds.

Another advantage is that 5 per cent a year can be withdrawn without any tax consequences and Isle of Man bonds have special inheritance tax advantages, too.

Under SLI&#39s bond, losses can be offset against income tax liabilities whereas, with Dublin-based bonds, losses are offset against capital gains tax liabilities.

The tax position is fairly complicated but SLI has produced an excellent aide memoire on its website at, which is well worth reading as it gives some excellent examples of how taxation works.

Offshore life company bonds cannot be used for Isas or Pep transfers whereas Dublin-based ones can. It is certainly worth looking at both bonds as they suit different people.

The net return on the SLI bond gives a slight advantage to the Dublin-based bonds. At current rates of return, however, both types of bond are excellent value for money, especially with interest rates likely to fall further.


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