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Baht/$ 34.57/62 (Bid/Ask)
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GOLD |
13,100
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NETWorth
ANDREW WOOD
Last week we discussed how certain investment vehicles could afford you valuable opportunities to allow your beneficiaries access to their inheritance quickly in the event of your untimely demise. This can be achieved without the need for obtaining costly and time-consuming grants of probate. Such vehicles also offer other investment advantages that make them very attractive.
These vehicles are available to investors who wish to structure a single investment amount or for those of you who save on a regular basis in building up a capital sum toward your retirement or other financial goals.
If you are a lump-sum investor the vehicle is an offshore personal portfolio bond (OPPB). This is a single vehicle that will house all your liquid investments, including cash, bonds, shares and funds. It centralises investments with a single custodian or investment house. Once you have structured such a bond and transferred your assets into it, they can be managed and changed as you wish.
Various investments in bank deposits, independently held shares and other securities such as funds, all need to be managed and monitored separately. They will also all be subject to various charges depending on each type of investment. Shares will attract stockbroking fees and possible withholding taxes. Fund managers willlikely impose a bid/offer spread. The offer price is the purchase price when you purchase units in a fund and the bid price is the price at which you sell when you exit. This spread commonly ranges from 5% to 7%. There will also be various management charges imposed on your investments depending on their nature, where they are held and who is actually managing them. There could also be withholding taxes imposed on capital gains.
As was also discussed last week, if you pass away your beneficiaries may have difficulty gaining access to the assets because of the lengthy time it takes to obtain grants of probate from the various jurisdictions where the assets are held. If you have not made a will this will be magnified and could take a great deal of time, as well as being very costly, for those left behind.
When you structure an OPPB you are assured of a set of fixed charges relating to the management and dealing of the assets within the bond. If you also structure the bond in an appropriate tax haven there will be no withholding taxes on accruals and no capital gains taxes. Your independent financial adviser will be able to recommend the right investment house to offer reduced costs. Some of the major custodial institutions invest substantial sums in funds and can reduce bid/offer spreads to nil or very minimal charges. Management charges will be fixed from the start so that you know exactly what they are.
Even if you have not made a will you can be assured that if you complete a beneficiary nomination form for your OPPB, if you pass away unexpectedly those you have nominated will be paid their share of the value of the assets without deduction of inheritance or other capital gains taxes. OPPBs are structured as life-assurance policies, which allow these benefits to be offered. The insured sum if you pass away will be 101% of the value of your investment.
It is common for an independent investment adviser to assist you with the set up and structure of your bond and to manage the assets within the bond on your behalf. In practice he will discuss your risk profile with you in detail and then make recommendations for investments. He will also manage the investments on an ongoing basis so that the bond becomes a safe vehicle in times such as the current bear market conditions. You will also have the opportunity to be involved in the management of the investments depending on your attitude.
The OPPB is also a perfect vehicle for pension drawdowns. Regular and ad hoc withdrawals or a combination of both can be made from these bonds. You have the advantage of having all your investments under one roof. They can be changed and managed to flex with moving markets and your pension income can be drawn from them on a regular basis.
Similar vehicles are available for the investor who wishes to start a regular savings plan. If you would like to build an investment pot toward your pension or as a supplement to your existing pension, these vehicles are appropriate. They are very flexible, allowing you to stop almost whenever you wish. They also allow you stop and start contributions and make withdrawals should you encounter difficult times. As with OPPBs, such vehicles are structured as life assurance policies and benefits will be paid to your nominated beneficiaries. Talk to your independent financial adviser about the options available for you.
Questions to the author can be directed to Barclay Spencer International on 0-2653-1971 or e-mail to info@barclayspencer.com
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