Investment Bonds

What is an Investment Bond?

An investment bond is a life insurance policy with a single premium of a lump sum. Your money will be invested into a variety of different investments funds, offering growth and the possibility to generate an income. They can either run for a fixed term, or some have no set investment term.

Investment bonds usually fall into two categories – onshore and offshore. Onshore investments bonds are subject to UK Corporation tax, while offshore investment bonds are issued from tax havens outside of the UK.

The aim of investment bonds is to produce long-term growth by investing in several different investment funds, which will be managed by professional investment managers.

A benefit of investment bonds appears to be the tax benefits you would receive, however all may not be as it appears at first glance. Typically, gains and interest are taxed at 20%, which will be paid out of the investment bond directly by the investment manager. However, withdrawals can be made of up to 5% a year for 20 years without paying additional tax straight away.

Instead, the tax will be deferred until you cash in the investment bond, or it reaches maturity. This could leave you with a high tax bill at the end of the chosen term.

Who offers Investment Bonds?

Investment bonds are often sold by insurance companies and Banks. They usually offer a wide range of fund options which can include life funds, which can be invested in shares, corporate bonds or property.

While insurance companies offer the investment bond, it will usually be the investor, or their advisor, who has the choice of funds to invest the money into.

However, investment bonds can be costly, and the charging structures are not always clear. Some have large penalties for cancelling the investment bond within the first 5 years, meaning your money could be tied up for a long time.

How were Investment Bonds mis-sold?

Investment Bonds are fairly complex products, and several Banks have admitted, and been fined for, mis-selling them.

When the investment bond was being sold the financial advisor (your own, or the Banks) should have discussed the following information.

  • Whether the product was suitable for your financial and personal needs. They should also take into account whether you have had any previous experience with investments.
  • The potential risks of putting your money into an investment bond should have been fully explained to you.
  • Linking to the above, the financial advisor should also have advised you how your money would be invested, and what it would be invested in.
  • Your attitude towards risk should also have been taken into account and discussed. Consider whether you insisted you wanted low-risk investments.
  • The length of time you would be tied in to the investment bond for should also be discussed. A large number of investment bonds were sold to elderly, unwell investors, who were then tied in for 5 or more years, however, their life expectancy was much lower.
  • The amount you would be charged for the investment bond should also have been made clear to you.

If some, or even none of the above were discussed with you, you may have a potential claim for mis-selling.

What does this mean for me?

When your Investment Bond matures (if it has yet to do so), you may have expected to find that your original capital has grown, however you may also find that you have gained little to no increase on your original capital, in opposition to what you were led to believe when you invested in the Investment Bond.

If you were sold an Investment Bond product by the Bank, and feel it has not performed as you were led to believe it would, then we believe it is paramount that you seek appropriate, professional advice before making a claim. As with many bank-led review schemes, the complaints procedure may appear straight forward, however in our experience it never is.

We have had significant success challenging poor offers and getting significant uplifts for our clients. We have challenged the Banks on a number of occasions for sub-par offers of redress, successfully overturning an offer that a customer was dissatisfied with under the bank-led review. We obtained a £1,150,000 uplift for our client.

However, we have found that if clients had sought specific, professional advice before making a claim themselves, important aspects for the claim could have been raised in the first instance, which in turn could have yielded a better outcome.

How can we help?

Here at Cooper Stern we are experts at advising individuals and businesses on potentially mis-sold complex financial products.

We offer a no-obligation initial review of a potential Investment Bond claim, and advise on the strengths and weaknesses of making a claim. Following this, we work on a no-win no-fee basis meaning we will only take forward claims we believe have a strong chance of succeeding.

If you feel you have been mis-sold an Investment Bond and want us to look into the matter for you please get in touch. You can fill in our simple online enquiry form and one of our expert advisors will call you back to discuss your mis-sold financial product in more detail. Alternatively, you can call us on 01204 328 287 and we will be more than happy to discuss your queries.

how can we help you?

Have any questions? Get in touch with the Cooper Stern team today by submitting an inquiry online.

There are no substantial up-front costs, and our clients like that. The claims we have settled so far have been on a full redress basis. The banks are misbehaving by making offers to businesses, partially repaying what they have paid, and saying they do not need legal advice and making very low offers. I would urge businesses who are affected to get in touch with us before it is too late.

Daniel-Fallows
Dan Fallows
Director, Cooper Stern