Investment bonds can be an effective tool for long-term financial planning, especially for individuals seeking a flexible and tax-efficient investment solution. The Quilter Onshore Bond stands out as a popular choice among UK investors who prefer to invest through an insurance-based wrapper. It is designed to offer a range of investment options along with features that support tax planning, estate planning, and controlled access to capital. Understanding the key features of the Quilter Onshore Bond is essential for anyone considering this type of investment strategy.
What is the Quilter Onshore Bond?
The Quilter Onshore Bond is a single premium, whole of life investment bond offered by Quilter. It allows investors to allocate their funds across a broad range of collective investment funds and structured products. Being an onshore bond, it is subject to UK taxation but comes with advantages that make it attractive for medium- to long-term planning.
This bond is structured as a life insurance policy, which brings certain tax benefits and estate planning advantages. It is particularly useful for financial advisers looking to create tailored solutions for their clients using a wrapper that offers administrative efficiency and tax deferral.
Key Features of the Quilter Onshore Bond
Wide Investment Choice
One of the most compelling features of the Quilter Onshore Bond is the access it provides to a broad range of investment options. Investors can choose from:
- Over 500 collective investment funds
- Discretionary managed portfolios
- Model portfolios from leading fund managers
- Structured products (subject to availability)
This flexibility allows investors and their advisers to create diversified portfolios that align with specific risk tolerances and financial goals. Portfolios can be adjusted over time without immediate tax consequences, making it easier to respond to market conditions or life events.
Tax-Deferred Growth
The Quilter Onshore Bond allows for tax-deferred investment growth. Investors are not immediately taxed on any gains made within the bond. Instead, taxation is only triggered when withdrawals exceed the cumulative 5% tax-deferred allowance or when the bond is fully or partially surrendered.
This tax deferral feature can be beneficial for individuals who expect to be in a lower tax bracket in the future or who want to control the timing of tax liabilities.
5% Annual Withdrawal Allowance
The bond allows investors to withdraw up to 5% of the original investment each policy year without triggering an immediate income tax charge. This 5% cumulative allowance can be rolled over if not used in a particular year, up to a maximum of 100% of the original investment.
This feature provides a tax-efficient way to access capital while preserving the underlying investment for long-term growth. Withdrawals are treated as a return of capital rather than income until the 5% limit is exceeded.
Top-Ups and Additional Contributions
Policyholders can make additional contributions (top-ups) to the Quilter Onshore Bond, subject to the provider’s terms. Each new contribution is treated as a new segment for tax purposes, which can provide further flexibility in managing future withdrawals and tax liabilities.
Segmented Policy Structure
The Quilter Onshore Bond is issued as a series of individual policy segments. This structure enables more efficient tax planning and flexibility when making partial withdrawals or assigning segments to beneficiaries or trusts.
When surrendering part of the bond, specific segments can be encashed instead of making a proportional withdrawal, often leading to more favourable tax outcomes.
Trust Planning and Gifting
This investment bond can be written under a range of trust structures, allowing it to be used for estate planning and inheritance tax mitigation. Common trust types include discretionary trusts, absolute (bare) trusts, and loan trusts.
Assigning the bond to a trust can help reduce the value of an estate for inheritance tax purposes, while still allowing the original investor to retain control or access to income, depending on the trust type used.
Joint and Multiple Lives Assured
The bond can be set up on either a single or multiple lives assured basis. Using multiple lives assured extends the life of the bond until the last life assured dies, which can be useful for deferring tax or ensuring continuation of the investment during a spouse’s lifetime.
Flexible Access and Withdrawals
Investors have the freedom to take one-off or regular withdrawals from the Quilter Onshore Bond. Withdrawals can be tailored to meet changing income needs, making the bond suitable for retirees or individuals looking for flexible income solutions.
Regular withdrawals can be set up monthly, quarterly, half-yearly, or annually and can be adjusted or stopped at any time. Withdrawals above the 5% allowance may trigger an income tax charge, based on the investor’s current tax band.
Death Benefit
In the event of death, the Quilter Onshore Bond pays out 100.1% of the bond’s value if set up on a single life assured basis. If written on a joint life basis, the payment is made on the death of the last surviving life assured.
When held in trust, the proceeds are paid directly to the trustees, potentially avoiding probate delays and reducing the value of the deceased’s estate for inheritance tax purposes.
Charges and Costs
As with all investment products, the Quilter Onshore Bond involves certain charges, which can impact overall returns. These may include:
- Initial adviser charges
- Ongoing adviser fees
- Annual management charges from selected funds
- Bond administration fees
It is important for investors to review the total cost of ownership, including platform and investment charges, to ensure they align with the expected benefits of the bond structure.
Suitability and Ideal Use Cases
The Quilter Onshore Bond is particularly suitable for UK residents who:
- Seek medium- to long-term investment growth with tax deferral
- Are planning for retirement or future income needs
- Want to structure their estate and reduce inheritance tax
- Prefer to access investment options through an insurance wrapper
- Need a flexible product to fit into a broader financial strategy
It is often used by financial advisers as part of a comprehensive plan, especially when clients have used up their ISA and pension allowances or want to invest in a more tax-managed way.
The Quilter Onshore Bond provides a flexible and tax-efficient investment solution that can support a range of financial goals. With access to a wide choice of investments, tax-deferred growth, and trust planning options, it is a useful tool for long-term planning. However, as with any financial product, it is essential to understand the fees, tax implications, and suitability for individual circumstances. Consulting with a qualified financial adviser can help determine whether this investment bond aligns with your broader financial objectives and personal situation.