Investment Bonds Overlooked by Advisors


Investment bonds, which are sometimes overlooked as investment tools, offer a number of benefits that advisors should consider when planning their clients’ long-term financial goals, according to Foresters Financial.

Benefits would include the ability to supplement retirement savings, assist with estate planning and intergenerational wealth transfer, as well as investing on behalf of children or making investments in a tax-efficient manner.

According to the company’s managing director, Emma Sakellaris, investment bonds also offered a wide range of investment strategies and assets.

“Indeed, if you were to ask someone to develop, from scratch, a simple, tax-efficient financial product that would help Australians build wealth outside of their superannuation and enable a smooth transition from wealth from one generation to the next, they would probably find something very similar to an investment bond,” she said.

Additionally, for people who have reached their pension contribution limits but have additional funds they would like to save for retirement, investment bonds offered a very flexible, tax-efficient approach.

Investment bonds have a maximum tax rate of 30% on income from the bond, so for people at a higher personal tax rate, it’s very tax efficient. Additionally, investors do not have to pay personal tax on the money invested or on interest as long as the funds remain invested,” Sakellaris said.

“If the bond is held for 10 years or more, any withdrawals from investment bonds after that period are not subject to personal income tax and need not be included in returns income.”

Investment bonds could complement a will to allow for a smooth transition of wealth from one generation to the next, with many people finding that setting up legal structures in a will, such as testamentary trusts, is a complex and sometimes conflicting process.

“However, setting up an investment bond as a means of leaving a lump sum to beneficiaries is much simpler and also has the important advantage that it cannot be reversed or changed by a challenge from a will,” the firm said. mentioned.

“The investment bond is simply subscribed in the name of the benefactor, and ownership passes to the beneficiary – for example, a grandchild – when the benefactor dies or when the child reaches a certain age.”

On top of that, investment bonds were also an option for those looking to invest for their children, as they allowed for the simple transfer of wealth to the children, again tax-free.

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