Issues with Life Assurance Bonds

Square Mile Financial Services are watching ongoing developments regarding Life Assurance Bonds with interest.

Some financial institutions are currently expressing concern over the number of customers who appear to be stuck with expensive life assurance bonds.

These bonds are typically held by older customers who purchased them years ago when the tax system was different. These products can attract large tax charges on withdrawal so in effect customers appear to be trapped with these expensive products as if they transfer out they will be taxed at a rate between 20-45%. The products themselves are expensive with typical charges coming in at between 1-2%. There are currently four chargeable events where customers can withdraw money: death, assignment for money or money's worth, taking more than 5% under partial encashment  or full encashment. 

The problem appears to be that some institutions are in favour of lobbying the FCA to look at this situation, which they perceive to be unfair, with a view to applying its own stated principle of 'treating customers fairly' to the issue. However, on the other side of the argument are institutions who believe that rules cannot be amended retrospectively and that when customers purchased these products they did so in the full knowledge that tax would have to be paid on withdrawal and that the extra promised growth (as opposed to ISAs or Pensions) was worth it. For the present it appears that these investors are stuck between a rock and a hard place.

Whatever the outcome of this argument it is clear that investors should seek competent, reliable financial advice as offered by Square Mile Financial Services before purchasing any financial product. Square Mile Financial Services are a pan-European network of financial planning professionals and as a member of the Federation of European Independent Financial Advisors (FEIFA) you can rest assured that you will be in safe professional hands.