Changes to Pension Rules are increasing the Demand for Offshore Bonds
According to Canada Life over a third of financial planners are expected to recommend offshore bonds. This is mostly driven to changes in pensions which have impacted significantly on financial portfolios and pension funds.
The reduction in lifetime allowances is one of the main drivers.
The Canada Life survey showed that only 3% of financial planners and advisers would be less likely to recommend offshore bonds in wake of the lifetime allowance reduction. This contrasts with 30% of advisers that stated they play an important role in advice they give to clients, with 32% of those surveyed believing that most financial planners do not take into account their significance.
One of the reasons offshore bonds and offshore estate wrappers are being held in regard is that they can be used for retirement income once the allowance has been used.
The survey also shed an interesting fact on clients. Only 1 in 7 currently use offshore bonds and just over that (16%) realised they can make regular payments to offshore bonds. This suggests an all round lack of knowledge and a lack of profile for offshore bonds and estate wrappers.
Offshore Bonds Could Save you Cash
The survey also revealed that offshore bonds are often used by investors and financial planners due to the following reasons:
- Tax benefits (70%)
- Cost of offshore bonds (56%)
- Client investment objectives (54%)
- Inheritance tax (IHT) planning (51%)
- Income tax planning including deferred taxation benefits (48%)
Sean Christian, managing director of Canada Life stated:
“Ever since the chancellor gave his surprise 2014 budget announcing the pension freedoms, there has been a constant tinkering with the pension rules and we have seen substantial cuts to the limits for contributions. All the changes have a big impact on what advisers are recommending to their clients, and the direction of travel has made offshore bonds far more attractive.
“Offshore bonds are often wrongly thought of as appropriate only for the very wealthy, whereas they are increasingly relevant to a much broader range of clients. Lack of knowledge among clients is now the only thing holding back a much more widespread use of offshore bonds for retirement planning, and advisers have a critical role in educating clients on their benefits.
“This April certainly looks to be a key turning point in what is a pivotal year for advisers planning offshore solutions.”
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Source: International Adviser