Offshore Bonds can be a very useful ‘wrapper’ in which to hold your investment funds, as they grow more or less free of U.K. tax, which is known as ‘Gross Roll-up’.

Offshore Bonds are usually offered by the Subsidiaries of UK Life Companies and are typically run from Luxembourg , Isle of Man and the Channel Islands . There may be a small Withholding Tax charged, nevertheless the Gross Roll-Up can offer a significant increase in performance. This means that the fund has the ability to grow faster than its UK counterpart.

You can take out 5% of the initial capital every year for 20 years free of tax, whilst remembering that you will pay tax on the profits of anything you take out beyond that, and that after 20 years you will pay tax on any withdrawals, however small.

Overall, the compounding effect of the Gross Roll-Up over a long time can significantly increase the overall return even taking into account the taxation implications on surrender.

Redemption Bonds

Offshore Bonds can be set up on a Lives Assured basis, similar to Onshore Bonds, or on a Redemption Bond basis. Redemption Bonds are not Life Assurance contracts, they are policies of assurance, that have a term and a minimum maturity value at the end of that term. They have a term of 99 years and do not end on death of the Policyholder, which means that they are excellent vehicles for holding monies on Trust for beneficiaries. At maturity the Redemption Bond value will be at least twice the sum invested less any withdrawals. The bond can be surrendered before maturity.