View more on these topics

Phil Wickenden: Why bonds are still relevant


Things that are emotionally charged often lead to irrational perspectives and unhelpful behaviours. Let’s take the Scottish vote on independence: Andy Murray tweeted that “the No campaign negativity totally swayed [his] view” signing off with the rallying cry “Let’s do this”. Liam Gallagher, never the most objective of fellows, responded “Ur opinion is irrelevant as you live in England so U don’t get to vote”, followed by the invitation: “But feel free to toddle off back to Scotland u boring person”. (Note the words ‘toddle’ and ‘person’ were not used in Liam’s tweet).

We have a tendency to think in extremes. There is something in our cultural make-up which makes it difficult to think about minor corrections as we default to massive swings.

We have seen similar swings concerning the consideration and use of bonds over the last few years. Once a mainstay of the financial services suite the onshore bond in particular has been somewhat beleaguered and chronic levels of misuse and abuse in the past have certainly not helped their image. Half of financial advisers we contacted this month to discuss the use of bonds (on and offshore) in financial planning told us they are not relevant to their business. Now clearly there are a number of advisers who really just didn’t fancy talking to us, but there is a growing sense from many that the bond is a thing of the past.

Despite the huge swing to collectives (very possibly because “unwrapped” portfolios are the default option on most platforms and wraps), there are some very good reasons, articulated by far cleverer people than I (thanks Dad & Co!), why bonds (should) remain just as relevant. Briefly:

  • Tax deferral
  • Assignment to minimise the tax on “exit”. If tax is potentially payable following a chargeable event, another option is to unconditionally assign segment(s) of the bond to another individual who is on a lower or nil tax rate
  • Investment bonds are classed as non-income producing assets; particularly useful where the portfolio growth is driven by reinvested income
  • 5 per cent tax deferred allowance; a potentially very tax efficient and simple way to access funds from the investment to supplement or replace income
  • Long-term care – the value of any bond should be excluded from any capital means test where it is invested in more than six months before any claim for benefit is made and claiming benefit was not a reason for investment – the dreaded “deliberate deprecation” test.

Phil Wickenden is managing director of So Here’s The Plan




Lloyds Banking Group makes senior wealth management hires

Lloyds Banking Group has made two senior appointments to its wealth and mass affluent division. The bank has appointed Simon Kenyon as managing director for wealth and mass affluent and Markus Stadlmann as chief investment officer. Kenyon will report to group director for retail Alison Brittain. He takes on responsibility for wealth and mass affluent […]


Lloyds sacks eight staff for Libor rigging

Lloyds Banking Group has dismissed eight members of staff for their roles in manipulating Libor and fraudulently reducing the cost of access to the Government’s Special Liquidity Scheme. The bank has also withheld £3m in bonus payments to the individuals. Lloyds chairman Lord Blackwell described the actions of the employees as “completely unacceptable”. Four more […]

Tax year-end planning with the family

From the Technical team at Prudential Let’s face it, many aspects of financial planning involve a lot of technical detail. At our face-to-face events, we’ve had great success bringing these technical topics to life through the use of practical case studies. Meet the family Prudential’s Planning Matters hub brings together a fictional family and explores […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm