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Popularity of insurance bonds cools

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Almost half of all advisers with clients who have insurance bonds are considering reviewing their policies with a view to switching them into mutual funds, according to Fidelity.

The findings, based on responses from 230 advisers across the UK, revealed that over 40% of advisers are already preparing to review clients with insurance bonds, with a view to switching to mutual funds where this is appropriate.

A further 26% remain uncertain at this stage whether to review, whereas 33% said they will not review. Only 1% of advisers said that they believed an insurance bond would continue to be the best home for all of their clients.

Paul Kennedy, head of trusts & tax planning solutions at Fidelity FundsNetwork, said: “As the research shows, advisers are already considering the benefits of mutual funds as an alternative to insurance bonds. It was encouraging to see the survey reveal that 90% of advisers understood that the decision whether to use a life bond or a mutual fund can have a substantial impact on the investor’s ultimate return.

“Almost all of those surveyed recognised the value that this tax planning adds to their investment service and not a single respondent thought tax considerations were irrelevant.

“Recent changes to Capital Gains Tax haven’t fundamentally changed the taxation of bonds and mutual funds, but they have acted as a catalyst to re-focus minds on the appropriate use of mutual funds.

“There remains a place for both wrappers. It is only proper that advisers continually review existing investment and where the case merits, make relevant switches, whether assets or tax wrappers. There are many things that will need to be considered and I’m sure that advisers will only recommend a switch from a bond to a mutual fund where it is in the genuine interest of the client.”


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