Offshore Bonds for Retirement Planning

Retirement planning does not have to mean taking out a traditional pension scheme. Although pension schemes are an essential element of retirement planning, they are not always the most suitable solution.

There are many individuals for whom traditional pension planning is too restrictive and something more is needed. Such individuals may include a self employed expatriate who cannot commit to saving smaller amounts every month but can contribute larger sums on an ad-hoc basis, someone near retirement age looking to consolidate their various life-long savings and investments in one place, or an expatriate employee whose company contributes to a UK pension on their behalf but they wish to contribute extra to a more flexible alternative.

In these scenarios, an offshore bond can be a useful retirement planning vehicle, supplementing, or even replacing, traditional pension arrangements.

Offshore Bonds
An offshore bond is an investment vehicle through which a wide variety of cash, bond, fixed interest, property, managed equity, market specific and commodity funds can be held. These funds can often be purchased at institutional rates and the policyholder can switch between funds as market conditions or their objectives change.

Offshore bonds can be established with a one off investment of as little as US$ 15,000 (or currency equivalent) and there is no compulsion to make additional contributions. However, the policyholder can make ad-hoc additional investments at any time; usually from US$ 2,500 per investment.

Offshore Bonds vs Onshore Pensions

An offshore bond is taxed ’internally’ in exactly the same way as most onshore pensions. However, unlike a pension scheme there is no requirement to purchase an annuity or enter into ’draw down’ arrangements (which are in effect quasi annuities). As such, the policyholder will only pay local taxes, if any, on their retirement income. For those planning to retire in the UK, the availability of top-slicing relief and time apportionment relief could significantly reduce the tax on any chargeable event. Additionally, the availability of 5% tax-deferred withdrawals compares favourably with current (taxed) annuity rates.

Other benefits of saving towards retirement through an offshore bond include:

* The policyholder can access the entire fund at any time.

* On the policyholder’s death the bond will pass via the Will to the family – the value is not

   lost as in the case of pension annuities.

* A bond will be in the policyholder’s estate for inheritance tax purposes. However the impact

   of inheritance tax could be reduced by the use of a suitable trust arrangement.

The ’access and retention of family capital’ arguments will appeal to many. The arguments in favour of an offshore bond can be strengthened further by the inclusion of capital protected funds within the investment profile of the bond allowing those nearing retirement to consolidate their gains and ensure their hard earned savings are safe at a time they cannot afford to make a loss.

How can Candour Consultancy help?

Candour Consultancy advises on a range of international pension plans and offshore bonds from some of the worlds leading financial institutions.

To speak with one of our fully qualified financial planners regarding offshore bonds or retirement planning, just click here to provide us with your preferred contact details. With Candour Consultancy there is no charge for our advice, no obligation and no hard sell.