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Trusts don’t need a bond

I am afraid a little belatedly I have just read the letter from Malcolm Robinson suggesting that investment bonds still have their place.

Using bonds for estate planning is nothing far short of laziness. The life companies have lovely trust arrangements set up but there is nothing to stop anyone writing a similar trust arrangement around any investment. They do not need to have to be in a bond.

Retaining age allowance is a hardy annual. I have seen hundreds of thousands of pounds stuffed in bonds to save age allowance. It hardly makes sense when the bond is being more highly taxed than the elderly person would be taxed even after losing their age allowance. I think a minuscule portion of the population is just in that marginal area that would benefit from bonds to save age allowance but with lowering interest rates they are gaining age allowance automatically.

I don’t understand why an onshore bond is better for somebody who might reside overseas one day. You are paying tax in the bond while you are still here until you sell it. If you are invested in a growth unit trust investment, when you get overseas you can sell the growth investment and incur no capital gains tax whatsoever – not even the 18 per cent.

Mr Robinson has missed the fourth good reason for selling investment bonds – luscious 6 per cent commission. Now that is a good reason. I can’t argue with that one.

Peter Hargreaves

Hargreaves Lansdown

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