About International Investments
Overview
Legal & General International is a subsidiary of Legal & General Group Plc and builds on the heritage of its business, providing quality investment products backed by efficient administration and superior fund management expertise. You can have confidence that Legal & General’s high standards are reflected in all of our international activities, making Legal & General International a company you can count on from the start.
Your client’s (current and future) tax status
One of the key benefits of the Legal & General International Portfolio Bond is its ability to grow virtually tax-free (apart from some irrecoverable withholding tax which may be payable on certain investments). The investor’s potential tax liability only arises when a chargeable event occurs, such as on surrender.
By contrast, a UK bond suffers tax on the fund up to 20% per annum which will constrain fund growth. The ‘gross roll-up’ is one of the key selling points for an international Portfolio Bond, particularly for higher rate taxpayers.
Control over when tax is paid
Your client can control when (and where) tax is paid. Known as tax deferral, a higher rate taxpayer can delay surrendering the bond until they move to a basic or nil rate tax band, while benefiting from gross roll-up meanwhile.
If the investor intends to move to a jurisdiction with a more favourable tax regime, they can delay surrendering the bond until they are no longer a UK resident, making it a tax-efficient way to save for future plans, such as retirement abroad. (You will need to be aware of tax implications in the country of destination before recommending this course of action.)
Ease of self-assessment
International bonds are not classed as income producing assets, so they do not need to be included on a self-assessment tax return until a chargeable event occurs. This ease of administration can be attractive to many clients, particularly when compared to a portfolio of collective investments.
A matter of trust
If the bond is written in trust, similar options apply: an International Portfolio Bond may be appropriate if the chargeable individual will be a non-taxpayer when the chargeable event occurs, or if the chargeable individual will be non-UK resident at that time. (You will need to be aware of tax implications in the country of destination before recommending this course of action.)
Broad investment choice
An international Portfolio Bond is a tax-efficient means of switching investment funds during the term of the holding. Switches between funds within the wrapper do not incur capital gains tax liability on any gains made in the outgoing fund.
This is true of both UK and International Portfolio Bond wrappers; however, there may be circumstances in which the International Portfolio Bond is more suitable. Both individuals and trustees may require a broad range of funds and particular investment portfolio options, and the Legal & General International Portfolio Bond offers a wider fund choice than you will find in many UK bonds.
Inheritance tax planning
After tax deferral through gross roll-up, Inheritance Tax (IHT) planning is the most common reason for considering an International Portfolio Bond.
For effective IHT planning the Legal & General International Portfolio Bond should be combined with a suitable trust, such as our International Discounted Gift Trust.
Other things to consider
Despite having complex financial planning needs, some clients are reluctant to contemplate an international investment. The Legal & General International Portfolio Bond is a secure and competitive way to access the tax advantages and investment versatility the international life market can offer.
Charges
The international investment industry has grown significantly in recent years and increasing competition has put downward pressure on charges, bringing international portfolio bonds roughly into line with UK bonds. The effect of gross roll-up compensates for any small variation in establishment or annual management charges, provided the bond is held for the medium to long term, of at least five years, ideally longer.
