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Product matters

The Prudence bond is the latest offering from Prudential International, the offshore arm of Prudential. This offshore bond offers lowto medium-risk investors a with-profits fund investment option within the offshore bond wrapper.

The bond also offers a range of unit-linked fund choices from five external fund managers to satisfy clients who want to invest in more adventurous funds.

This looks a shrewd move by Prudential since there are only a handful of providers that offer a with-profits fund choice within an offshore bond. Clients can have the reassurance that the Prudential with-profits fund is AAA risk-rated which, given uncertainty on bond defaults, is positive.

The current reversionary bonus is 4.5 per cent for sterling-denominated with-profits funds. This looks a very competitive rate in today&#39s investment climate. Own-charge projections for the with-profits fund link are low in comparison with other prov-iders, especially for smaller premiums (up to £250,000) or over shorter terms (up to 10 years).

Offshore bonds are generally best suited to higher-rate taxpayers looking for capital growth over the med-ium to long term as they offer this group of inv-estors the most benefit. There is no immediate liability to personal tax, which is deferred until funds are remitted to the UK. Since there is no immediate tax, gross roll-up can be utilised to aggregate the fund faster.

Investors should, look to invest for the medium to longer term to offset the higher charges of offshore fund investment against the tax advantages of gross roll-up.

Matthew Carden is technical director at Inter-Alliance Group

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