London Pacific Assurance is boosting its presence in the UK with the Guaranteed US Dollar Bond.
This offshore bond guarantees a return of the original capital and a yield of 7.25 per cent over the five-year term. There is also a free withdrawal facility of up to 7.5 per cent a year.
It will invest mainly in investment-grade US corporate bonds. Unlike some guaranteed bonds, it is not linked to a benchmark index which works in its favour. When benchmarks are used, the guarantee tends to be limited to how well it performs.
The bond is registered in Jersey and denominated in US dollars. It is likely to appeal to UK investors who are worried about the weakness of other currencies like the Euro, which recently failed to win public support in Denmarks referendum. The bond is also attractive to UK expatriates and foreign nationals because of the tax advantages that offshore investments provide.
It could face some competition from offshore deposit accounts and with-profits bonds, but generally, these products would not guarantee the same level of return.