The Collective Investment Bond does not permit the holding of highly personalised assets, which is good for both UK residents and returning UK residents.
This is largely because when a UK expatriate returns to the UK, it is essential to “endorse” the offshore bond so that they can continue to benefit from tax deferred gains.
If you fail to endorse the offshore bond you could find yourself paying income tax on annual deemed gains of 15% of the original sum invested, regardless of whether the investment bond produced any gains.
By instructing the offshore investment bond provider to endorse the policy if you return to the UK, you restrict the invested assets to those which are permissible down to those within a product such as the Collective Investment Bond.
The CIB bond is issued in the form of a single policy or a number of separate polices known as a “cluster of polices”.
The initial charging term is fixed (based upon the commission and charging structure agreed) at the time of the policy activation and this cannot be varied or waived; therefore, early encashment of the policy results in a “surrender charge” or “early withdrawal charge”.
Old Mutual Collective Investment Bond (CIB) Key Features
Extensive choice of old mutual international and external collective investment funds and unit trusts, eurobonds and currency deposits
SelfSelect offers a choice of more than 1,300 funds from over 100 fund management groups, spanning a broad range of asset classes, sectors and markets. This enables you and you and your adviser the freedom and flexibility to build a bespoke portfolio from a market-wide selection of funds.
WealthSelect offers a choice of around 60 fully-researched funds from some of the UK’s best-known investment houses, together with packaged Old Mutual Global Investors funds.
Minimums - Lump sum minimum of £10,000. You can make additional lump-sum payments into your policy at any time with a minimum of £2,500. However your will pay any initial fund charges on all contributions.
Currency - The Old Mutual International Collective Investment Bond can be set up a policy in 1 of 3 currencies including Pound sterling (GBP), Euro (EUR), United States dollar (USD).
Eligibility - The Old Mutual International Collective Investment Bond is a regular premium, whole of life, life assurance contract issued by Old Mutual International (OMI). It is available to most international investors outside of the main regulated territories such as the UK, the USA and Australia.
Choice of external custodian - The structure of a bond means that you need a custodian to hold, on Old Mutual international’s behalf, the assets that you decide to link to your bond. You can choose your own custodian, which is likely to be the financial institution you currently have a relationship and who are advising you.
If you don’t have your own custodian, then Old Mutual international will use its own appointed custodian to play this important role for you.
Charges - will depend on the type of plan you take out from Old Mutual International as they offer different charging structures largely linked to the amount of commission or earnings being taken by the third party salesman or adviser. They should, but may not always be the case provide you with a charges schedule, which will detail:
- The costs Old Mutual international levy for setting up and managing your bond
- The administrative costs of the fund managers
- Fees charged by your financial adviser.
Early surrender - A full encashment will result in exit penalties being applied in the early years through surrender charges linked to the term of the policy. The amount of this charge reflects the cost of Old Mutual Internationals set up fee, including any payments (such as commission) made by Old Mutual International to your financial adviser. This charge may also apply if you cash in part of your bond and the amount remaining is less than either 25% of your total investment, or £10,000/US$15,000/€15 000 (or another currency equivalent).
Old Mutual International has a great reputation but, in the pursuit of offering flexibility of charging structure to all types of advisers they have created a product that has the same name but completely different costs.
Those costs are dictated by the adviser and we have seen evidence to suggest that some advisers and adviser companies take the maximum commissions.