Building wealth with investment bonds


Building wealth is a key priority for financial advisers and investors, especially after the GFC and as people live longer in retirement. The 2015 Intergenerational Report showed that a 70-year-old retiree today can expect to live another 17 years for a man and 19 more for a woman. Many people ignore the fact that their retirement savings are potentially expected to last up to 90 years or beyond and along the way, many are faced with how best to minimize tax payments and tax options. transfer of assets to dependents.

The retirement pension plays an important role in retirement savings. However, there are a range of other wealth building strategies that have not received the attention the superannuation has received over the past decade, yet offer valuable options.

An investment bond, also known as an insurance bond, can help with wealth creation and in tax matters this form of investment stands out from the crowd.

Tax advantages

An investment bond is a “tax paid” investment where tax on investment income up to the corporate tax rate is paid by the life insurance company. Investment income from the investment obligation generally does not have to be reported in the investor’s income tax return, unless a withdrawal within the first 10 years of holding the contract[1] is made. Profits on additional contributions, which satisfy the 125% rule[2] do not need to be invested for the full 10 years to acquire taxpayer status.

Investors can withdraw all or part of their funds at any time. If they have already reached their super contribution limits, an investment bond can be an interesting alternative. Unlike super, there is no contribution limit to manage, which allows investors to increase their investment in an investment bond at any time.

Flexibility is the way to go

Aside from tax benefits, investment bonds can also be structured in a number of ways to address estate planning issues. An investor can designate more than one beneficiary and specify the percentage that each will receive. When a beneficiary is named, the proceeds will not be subject to investor estate disputes, as it will not be part of the assets of the estate (except in New South Wales).

A unique feature of the award-winning[3] CommInsure Investment Growth Bond (IGB) is that it offers a death benefit guarantee that provides certainty on the minimum amount that will be paid on the death of the last surviving insured, which can be especially important in times of market uncertainty. The death benefits paid are tax-free in the hands of the beneficiaries. With super, death benefits paid to non-dependents risk paying a death benefit tax on the taxable component of 17% or up to 32% if the death benefit is partially or fully derived from the proceeds. insurance.

An IGB CommInsure can also provide estate transfer benefits and can be set up as a child advancement policy, and ownership can be automatically transferred to the child at a specified age, with no earnings tax consequences. in capital.

In addition, the CommInsure IGB has a simple and transparent fee structure with management fees ranging from 0.85% to 1.50% per annum depending on the investment option selected and no stamp duty is applied for initial and ongoing investments.

Case Study – Strategies Using a CommInsure IGB

Heather is 72 and a self-funded retiree with six grandchildren aged 8 to 18. Heather has three grown children and fears there may be disputes over her estate when she passes away. She would like to constitute an inheritance for each grandchild safe from any family disagreement on his will. Heather can implement childhood promotion policies for her grandchildren under the age of 16 by investing in a CommInsure Investment Growth Bond.

In this structure, each grandchild would be a life insured and Heather would be the owner of the policy. Heather would designate an acquisition age (between 10 and 25), at which point the grandchild would automatically assume full ownership and control of the police.

Until then, Heather would retain full control of the investment, including the ability to make withdrawals and transfers. If Heather died before the vesting age, she could leave instructions in her will for the trustee of her estate to be the policy holder of the investment, until the grandchildren have reached the age of acquisition.

An allocation to an investment bond can also be used as a strategy to maximize pension payments calculated according to the Centrelink income test and can help enable an investor to receive old age pension when held in a trust. .

A CommInsure IGB structure can also be complementary to an investor’s retirement funding strategy. Investors can choose from nine Lonsec rated[4] investment options and for those seeking security, four of these options have capital guarantees. The nature of the guarantees differs for cash, global fixed interest, conservative and diversified investment options.

There is no doubt that there is a range of benefits for people looking for wealth building strategies, tax savings, flexibility, and an alternative to retirement investing. When considering wealth creation, sometimes it helps to think about alternatives.

Invest in a CommInsure IGB

Anyone 10 years or older can invest in a CommInsure IGB with a minimum investment of $ 1,000. For more information, please visit

The CommInsure Investment Growth Bond is issued by Colonial Mutual Life Assurance Society Limited ABN 12 004 021 809 AFSL 235035 (CMLA, acting as CommInsure). Tax considerations are general and based on applicable tax laws and may be subject to change. You should seek independent and professional tax advice before making a decision based on this information. CommInsure is also not a registered tax (financial) advisor under the Tax Agent Services Act 2009 and you should seek advice from a registered tax agent or a registered tax (financial) advisor if you have the intention to rely on such information to satisfy any debts or obligations or claims rights that arise, or may result, from a tax law.

[1] For more information, please refer to CommInsure’s Investment Growth Bond (PDS) product disclosure statement.

[2] CommInsure (IGB) has a 125% rule, which means that each year a client can contribute up to 125% of the previous year’s contribution to continue to meet the 10-year rule.

[3] The CommInsure IGB has won the Association of Financial Advisers (AFA) / Plan for Life (PFL) Investment Bond of the Year award for 7 consecutive years.

[4] Lonsec rating, February 2016: NC Cash – Recommended; NC International Shares – Investment Grade; Australian Equities NC – Investment Grade; NC Global Fixed Interest – Recommended; NC Global Property – Investment Grade; NC Conservative, NC Diversified, NC Balanced, NC Growth – Investment Grade.

Building wealth with investment bonds

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Last updated: March 02, 2016

Posted: 29 February 2016


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