Offshore Investment Bonds

Quilter International Collective Investment Bond (formerly Old Mutual International)

An independent review of the Quilter International Collective Investment Bond by our team of experts

Summary

The Quilter International Collective Investment Bond, formerly the Old Mutual International Collective Investment Bond, is a whole-of-life offshore investment bond issued by Quilter International Isle of Man Limited, with a death benefit of 101% of the surrender value. Quilter International is part of Quilter plc, which is listed on the London and Johannesburg stock exchanges and managed around £107.4 billion of investments as at June 2020.

The bond offers an extensive choice of Quilter and external collective funds, unit trusts, Eurobonds and currency deposits, allows existing holdings to be transferred in and consolidated, and is available in 13 currencies from a £50,000 lump sum (additional contributions from £2,500) to investors aged 18 to 89 outside the UK, USA and Australia.

As a typical offshore bond it does not hold highly personalised assets, which helps UK residents and returning expatriates avoid the Personal Portfolio Bond tax charge, provided the bond is endorsed on return to the UK. Its charges vary considerably depending on the commission taken by the selling adviser, and early encashment carries a surrender charge fixed at outset.

Pros

Popular, widely used expat investment bond
Strong, listed parent brand (Quilter plc)
Wide fund choice; can transfer in and consolidate existing holdings
Does not hold personalised assets (helps UK residents and returnees avoid the Personal Portfolio Bond tax trap)

Cons

Risk of hidden commission
Commonly mis-used
Potentially inflexible
Variable, commission-linked charging (same bond, very different costs) and a fixed early-surrender penalty

Our verdict

The Quilter International Collective Investment Bond, formerly the Old Mutual International Collective Investment Bond, is, when used correctly, a good offshore bond that stands up well against its competition. Quilter International is part of the LSE-listed Quilter plc and carries a strong brand, the fund choice is wide, existing holdings can be consolidated into it, and it is available in thirteen currencies from a £50,000 lump sum.

It also has a genuine technical advantage worth understanding. Unlike a fully personalised portfolio bond, the Collective Investment Bond does not permit highly personalised assets, which is actually good news for UK residents and returning expatriates: it sidesteps the Personal Portfolio Bond tax trap, where a UK resident can be charged income tax on a deemed gain of 15% of the original investment each year regardless of actual performance, provided the bond is endorsed on return to the UK.

The reservation is cost, and it is the same reservation that applies to the whole category. Quilter offers a flexible charging structure, which in practice means the same bond can carry wildly different costs depending on how much commission the selling adviser takes, and AES has seen advisers take the maximum. The initial charging term is fixed at outset and cannot be changed, so early encashment triggers a surrender penalty that exists largely to recover that commission. A good product sold expensively becomes a poor one.

The fix is simple and non-negotiable: only take the Collective Investment Bond on a cleanly priced basis, with no establishment charge and no exit penalty, and only after advice from a fully regulated planner. If you already hold one, a no-obligation Second Opinion will show exactly what you are paying, what your adviser has been paid, and whether the bond is genuinely serving you.

FAQs

What happens to the Collective Investment Bond if I move back to the UK?
- In the UK the bond is treated as a portfolio bond, and once you become UK tax resident it is subject to possible ‘chargeable events’, including full surrender, assignment for consideration, and withdrawals above the 5% tax-deferred annual allowance. Because it does not hold highly personalised assets, it can avoid the Personal Portfolio Bond deemed-gain charge if it is endorsed on your return, but you should take fiduciary advice before becoming UK resident.
How are the charges and commission on the Collective Investment Bond worked out?
- They vary by plan and are largely driven by the commission or fees taken by the selling adviser, so the same bond can cost very different amounts. Charges cover Quilter’s set-up and management, the underlying fund managers’ costs and your adviser’s fees, with a £15 dealing charge per transaction (a fund switch is usually two transactions). Full or partial encashment can trigger an early-withdrawal charge that reflects the set-up cost, including commission paid to the adviser. Insist on a cleanly priced option and ask for a full charges schedule.