Lifeplan: Investment bonds are more relevant than ever

BlackRock Investment Institute 2016 Outlook
December 16, 2015
Two Platypus funds upgraded to ‘Recommended’
December 17, 2015

Any financial product supplier looking to design a tax advantaged financial product to help accumulate wealth outside superannuation would probably come up with something very much like an investment bond, says Greg Bird, national business development manager with Lifeplan Funds Management.

“Yet unlike the complexity of most newly manufactured financial products, investment bonds are simple and flexible and can suit a variety of personal circumstances.

“They should be considered much more widely than they are now, in areas as diverse as supplementing retirement savings tax effectively, estate planning, investing on behalf of children, wider retirement income strategies, boosting the efficiency of gearing strategies, and with family investment approaches.

“Today’s investment bonds offer a wide range of investment strategies and assets, and are no longer confined to fixed interest approaches.

“They have a number of substantial benefits in a wide range of circumstances.

“They are particularly relevant to anyone seeking flexible wealth accumulation strategies, yet are rarely even considered as they are incorrectly seen as old-fashioned and irrelevant.

“Indeed for Australians who have reached their superannuation contribution limits but who still plan to accumulate wealth, alternative strategies are very limited.

“Yet for anyone with income in excess of their living needs and who has maxed out their superannuation contributions limits, investment bonds are a very flexible tax advantaged approach.

“Investment bonds not only have a maximum tax rate of 30 per cent on earnings in the bond, but investors do not have any personal tax liability while funds remain invested.

“In addition, when held for 10 years or more, withdrawals from Investment bonds have no personal tax liability and there is even a 30 per cent tax rebate for investors making taxable withdrawals prior to the 10th year.

“Long term savers can still access funds held in an investment bond whenever they wish, unlike funds held in superannuation.”

Mr Bird said that investment bonds benefits are not confined to retirement savings strategies and they have a number of other attractions for wealth accumulators in today’s complex personal finance market.

 “At the other end of the spectrum, young Australians saving for a home loan deposit can find investment bonds an attractive alternative to other saving options, especially as their own income increases.

“For such savers investment bonds also reduce the impact of any capital gains tax that investing in growth assets can attract.”

Mr Bird said those who discount investment bonds as irrelevant, should take another look as they are ignoring a very helpful personal finance tool.



Greg Bird

National Business Development Manager

T: +61 3 8682 4316 M: 0400 401 676