EUROPEAN WEALTH BOND. Product Brochure

Transcription

1 EUROPEAN WEALTH BOND A safe home for your investments Product Brochure

2 Contents The European Wealth Bond is provided by Old Mutual International Ireland dac (Old Mutual International Ireland), which is based in Dublin, Ireland, an established international finance centre with a stable and independent legal, political and regulatory framework. This means your investment is held in a secure offshore environment. For further information about Old Mutual International Ireland see page 11. the intelligent investment solution 3 THE INVESTMENT THAT CHANGES WITH YOUR LIFE 5 TAX BENEFITS FOR UK-RESIDENT INVESTORS 6 LIVING ABROAD 7 SETTING UP AND RUNNING YOUR EUROPEAN WEALTH BOND 8 TAKING MONEY FROM YOUR EUROPEAN WEALTH BOND 9 FEES AND CHARGES FOR YOUR EUROPEAN WEALTH BOND 10 about us 11 The European Wealth Bond could be right for you if you: want all the investment decisions to be made by a discretionary asset manager would like to benefit from investment in a wider choice of assets than is normally permitted within an offshore bond in the UK, including direct equities want to invest, individually or jointly, a minimum of 100,000 or currency equivalent over the medium- to long-term, with the aim of achieving growth, bearing in mind that growth is not guaranteed are either a UK resident individual aged between 18 and 90, or a company or trust want to use the bond as part of your tax planning want the option of taking regular withdrawals The European Wealth Bond might not be right for you if you: want to keep control and decide how your money is invested have no other savings or investments need access to your capital in the short-term are not willing and able to accept the risk of potential investment losses Please remember the value of assets can fluctuate and you may not get back the full amount of your original investment. This brochure explains how the European Wealth Bond can benefit individual investors resident in the UK. Many of these benefits equally apply to trustees and companies wishing to invest. Please speak to your financial adviser, who will be able to explain any important differences. Please refer to the policy terms for full details of the European Wealth Bond. The European Wealth Bond has been designed to be managed by a Discretionary Asset Manager on a full discretionary basis, it is not suitable for clients that wish to select or, either directly or indirectly, influence the selection of assets linked to the bond. 2

3 the intelligent investment solution With good financial planning, you can invest in ways that will help you reduce your inheritance tax liability, and mitigate the tax you have to pay on your wealth. This is where the European Wealth Bond can help. WHAT IS THE EUROPEAN WEALTH BOND? The European Wealth Bond is an offshore, single premium life assurance bond issued by Old Mutual International Ireland. It is specifically designed to be tax efficient for UK resident investors, allowing them to take maximum advantage of potential offshore tax benefits. Your wealth has plenty of opportunities to grow too, thanks to the wide range of assets on offer, many of which are not available through onshore bonds. The European Wealth Bond can help you create the financial future you want. You can also use it with a trust for estate planning purposes, ensuring that as much of your wealth as possible is passed on to future generations. It should be viewed as a medium-to long-term investment (meaning five years or more), but the European Wealth Bond is flexible enough to adapt as your life unfolds. You can pay in additional premiums,* change your investment objectives up to three times in any 12 month period, take withdrawals whatever suits your evolving lifestyle. * subject to our acceptance What is a life assurance bond? A life assurance bond is a contract of insurance based on a single life, or multiple lives assured. In the case of this bond, the contract ends on the death of the last or sole life assured and the proceeds are paid out to any surviving policyholders or, if there are none, to the policyholder s personal representatives. 3

4 the intelligent investment solution (continued) IS THE EUROPEAN WEALTH BOND RIGHT FOR YOU? The European Wealth Bond allows you to have the peace of mind that your investment strategy is being managed by experts. It is designed to be flexible because we know that your circumstances can change over time and you need an investment that can adapt to meet your financial goals throughout your lifetime. The European Wealth Bond could be the right investment if you: want the value of your bond to be linked to assets managed by a professional Discretionary Asset Manager don t want the responsibility and administrative burden of monitoring and managing the assets linked to your bond value are seeking potential growth, which can be accessed at a time to suit your needs want to benefit from an investment strategy which invests in a range of assets which may include investing in assets wider than those normally allowable under a conventional offshore bond want to combine the requirement for a regular income for example to supplement your pension or for school/university fees and your need to accumulate a capital sum. Delegating the management of assets in the bond For the European Wealth Bond to be taxed in the same way as any other offshore bonds, one of the key criteria is that the policyholder (or a person connected to the policyholder) cannot select, or influence, either directly or indirectly, the selection of the bonds assets. In practice this means that the European Wealth Bond is only suitable for you if you are happy to have your investment wholly managed by a Discretionary Asset Manager on a full discretionary basis. You can request at outset who you want to be your Discretionary Asset Manager. If we agree to appoint them they must demonstrate that they have the appropriate controls in place so that you as the policyholder or anyone acting on your behalf cannot select or have influence over the selection of the underlying assets. WHY DO YOU HAVE TO USE A DISCRETIONARY ASSET MANAGER? This product is specifically designed for use with a Discretionary Asset Manager. For the bond to remain a tax-efficient vehicle it must not be viewed by HM Revenue and Customs (HMRC) as a highly personalised bond. The regulations set by HMRC stipulate that a bond will be considered to be personalised and thus be a Personal Portfolio Bond (PPB) if it meets both the following conditions: (a) the policyholder links their bond to assets which are deemed non permissible under the regulations, for example stocks and shares and (b) the policy provisions give the policyholder the ability to select those linked assets. The European Wealth Bond does not allow you or anyone acting on your behalf to select or influence the selection of the investments linked to the bond, the Discretionary Asset Manager is able to invest in a much wider range of assets compared to other conventional offshore bonds. These assets include equities and bonds. Each Investment Mandate you provide must be broad enough to enable the Discretionary Asset Manager to independently manage the account; and you especially must not refer to any specific assets or asset types within the Investment Mandate. 4

5 THE INVESTMENT THAT CHANGES WITH YOUR LIFE Your investment objectives will change regularly as your life evolves. That s why the European Wealth Bond is designed to be so flexible. Your investment objectives can change as your life changes, to reflect a need for more security or greater potential for growth, for example. The European Wealth Bond allows you to advise Old Mutual International Ireland of this change of objective. We currently allow you to change your investment objective up to three times in any 12 month period. There is no legal restriction on how much you can pay into your bond, so you can invest as much as you wish (subject to our acceptance). A WIDE RANGE OF INVESTMENTS The European Wealth Bond allows the Discretionary Asset Manager to build a portfolio of assets to match your mediumto long-term objectives and your current attitude to risk. Only one Discretionary Asset Manager at a time can be appointed to your bond, but they can choose from an extensive selection of assets, including: external collective investment funds and unit trusts most investment trusts and exchange traded funds traded funds bank deposits structured deposits and notes Stocks and shares Fixed Interest securities and bonds. SHARING YOUR WEALTH You may decide that you want someone else to benefit from your investment maybe a child (of 18 years or more) who is starting university, or another dependant. The European Wealth Bond allows you to do this by assigning parts of it (called policies or segments ) to another person. By assigning some of your European Wealth Bond, you only keep ownership of, and have access to details for, those policies of your European Wealth Bond that are not assigned. On assignment the existing Discretionary Asset Manager or newly appointed Discretionary Asset Manager will continue to manage all policies. The assignee then has control of these policies and can manage them independently. So, they can choose when they want to make withdrawals and so on. They can even, in turn, decide to assign some of their bond policies to another person. IN-DEPTH SUPPORT AND SERVICE As a European Wealth Bond policyholder, you can take advantage of our experience, excellent customer service and specialist administration team. Your financial adviser can also contact us for technical support, from tax information to administrative issues. These are, however, all subject to our investment restrictions. 5

6 TAX BENEFITS FOR UK-RESIDENT INVESTORS TAX PLANNING The European Wealth Bond allows you to manage when (if any) tax is paid by timing any withdrawals carefully. This is because, as a life assurance bond, it is considered a non income producing asset for UK tax purposes. As long as the bond is not sold, it is not liable for UK capital gains tax, so the Discretionary Asset Manager has the freedom to buy and sell different assets without creating any immediate personal tax liability for you. IRELAND TAX BENEFITS Old Mutual International Ireland is based in Dublin, Ireland, a tax-efficient environment, and is not currently liable to income tax, capital gains tax or corporation tax on assets linked to policies. This means that your investment will be able to grow virtually tax free. It s possible that withholding tax may be deducted from some of the dividends at their country of origin; however, once inside your bond they can accumulate tax free*. This tax-neutral environment means you can make the best use of your own personal tax allowances. Switching between funds and assets will also be tax-free in Ireland (see page 11 for more information about Old Mutual International Ireland and the regulatory protection for your investment). * You may have to pay some tax, either on the growth of the investment or when money is paid out, depending on the taxation in the country in which you reside. TAKING ADVANTAGE OF VAT EXEMPTION When you request that we appoint a Discretionary Asset Manager (subject to our agreement) to manage the assets held within a European Wealth Bond you can benefit from a VAT exemption. The contract is between Old Mutual International Ireland as a legal owner of the assets and the Discretionary Asset Manager. Old Mutual International Ireland benefits from VAT exemption and there is currently no VAT payable on the Discretionary Asset Managers services, even if the Discretionary Asset Manager is a UK company. So, not only does the European Wealth Bond have the usual offshore tax advantage of gross roll-up but, thanks to its Irish location, it is also exempt of VAT on Discretionary Asset Manager fees. TAX-EFFICIENT WAYS OF WITHDRAWING YOUR MONEY Partial surrenders and regular withdrawals (including advice fees) You can withdraw up to 5% of your initial premium each policy year (plus any additional premiums from the policy year when they are added) without any immediate UK tax charge until you have withdrawn the original value of the premiums paid. So, for example, you could withdraw 5% each policy year for 20 years, or 4% each policy year for 25 years without incurring a tax charge. This is known as the tax deferred withdrawal allowance. Please note, if you are taking withdrawals from your European Wealth Bond to pay advice fees, they will count as part of your annual 5% allowance. (See page 10 for more details on paying your adviser.) Total surrenders of individual policies The European Wealth Bond is split into a number of policies to give you greater flexibility. You can withdraw money either by a partial surrender across all policies, or by the total surrender of one or more individual policies. This second option may be more tax efficient in some circumstances, as the amount liable to tax is based on the true investment growth plus any previous partial surrenders or regular withdrawals. So be sure to consult your financial adviser before requesting a withdrawal. If you do not specify how you wish to take your withdrawal, we will process your request as a partial surrender across all policies. This is in line with the policy terms. Ways to reduce your tax liability. If you are worried about having to pay tax on the proceeds of your bond, talk to your financial adviser to find out how you can reduce your liability. Ask them about top slicing or gift assignment they can help you decide if a trust is appropriate and which would be best for your individual circumstances. 6

7 LIVING ABROAD Maximising tax relief If after taking out the bond you live outside the UK for a period and then return to the UK before cashing it in, your UK tax liability will be reduced in proportion to the amount of time you ve spent abroad. For example, if you decide to cash in your bond after ten years but you have lived abroad for seven years during that time, you would only be taxed on 30% of the gains generated by your bond. This can help you avoid higher or additional rate UK income tax on very large taxable gains. If you ve made additional payments into your bond throughout the term, these will be counted as though you made them when you opened your bond. So, you would benefit from the maximum period of tax relief on all your payments. If you move abroad and need to cash in your European Wealth Bond, the tax regulations of your new country of residence will apply. Safeguarding your investment with a trust Your financial adviser may suggest that you help to safeguard your investment by placing your European Wealth Bond in trust. This can ensure your wealth is used as you intended during your lifetime and after you die, and may offer some advantages in the future if, for example, there s a change in your circumstances. A trust can also benefit your family or beneficiaries after your death, by helping to avoid complicated probate issues. Another important benefit is that you can reduce or even eliminate UK inheritance tax when transferring your wealth. Assets which are not held in trust and are above the nil-rate band threshold which inheritance tax applies, (currently 325,000*) could be liable to 40% inheritance tax. Old Mutual International Ireland offers a comprehensive range of trusts that could be suitable for you if you are investing in a European Wealth Bond. If you want to find out more about trusts, we have a range of literature available which explains them in more detail. Your financial adviser will be able to give you copies and advise you whether a trust would have advantages for you, and which one would suit your needs. * Tax year 2016/

8 SETTING UP AND RUNNING YOUR EUROPEAN WEALTH BOND REQUESTING A DISCRETIONARY ASSET MANAGER The assets your European Wealth Bond are linked to must be managed by a Discretionary Asset Manager on a full discretionary basis, meaning they make all the investment decisions. All Discretionary Asset Managers must prevent you, as the policyholder, from selecting or influencing, either directly or indirectly, the selection of assets. The appointment of the Discretionary Asset Manager is subject to our agreement. We have a selection of Discretionary Asset Manager s that are available for the European Wealth Bond and you can request that we appoint one of these. Please speak to your financial adviser who will be able to provide you with the list of Discretionary Asset Managers. CHOOSING YOUR INVESTMENT OBJECTIVES AND ATTITUDE TO RISK Choosing your investment objective and agreeing your attitude to risk are important decisions, as we will ask the Discretionary Asset Manager to use them as a guide for their investment strategy. We recommend you discuss this with your financial adviser before completing our application form and the Investment Mandate. Whilst you can express your views to us about your broad investment direction or strategy, you cannot select any assets or influence the investment decisions made by the Discretionary Asset Manager. Please be aware that to protect the tax treatment of the product, all policyholders must not send any instruction or change of investment objective directly to the Discretionary Asset Manager. All instructions or changes must be sent to us. CAN I CHANGE THE INVESTMENTS LINKED TO MY BOND? When considering the management of your European Wealth Bond it is important for you to understand that you own the policy, but the assets that are held within the policy are not owned by you. Instead the assets are owned by Old Mutual International Ireland and they are used to determine the value of your policy. Because the assets are owned by Old Mutual International Ireland it is they who actually appoint the Discretionary Asset Manager. Only the Discretionary Asset Manager may therefore change the investments linked to your policy, but this must take account of the agreed investment objectives and attitude to risk. However, we do understand that over time your personal circumstances can change and your original investment objective and/ or risk profile may no longer meet your needs. The European Wealth Bond provides you with flexibility to change your investment objective and/or risk profile for the bond, up to three times in any 12 month period. WHAT WOULD HAPPEN IF I INFLUENCE OR SELECT ASSETS? Due to the structure of the European Wealth Bond, assets can only be selected by the appointed Discretionary Asset Manager. Under no circumstances can you select or, either directly or indirectly, influence the selection of assets, because to do so would mean that the policy will be regarded as a Personal Portfolio Bond, the Personal Portfolio Bond legislation will then impose a tax charge on an artificial deemed gain on the policy. Further information on this tax charge is available from your financial adviser. A SELECTION OF CURRENCIES When you open your bond, you choose a currency for it, which can be any one of a number of major currencies listed in your Key Features Document. However, that does not mean you have to make your payments in that currency, or that you are limited to assets based on that currency. AWARD-WINNING PERFORMANCE At Old Mutual International, we pride ourselves on our customer service, support to financial advisers and the quality of our products. Our commitment is rewarded time and again by experts in the financial industry and over the years we have gathered an enviable collection of industry awards. Best International Life Group, Best Overall Product Range and Best Porfolio Bond are just some of the accolades we have been given in recent years. Full details of our awards can be found on our website 8

9 TAKING MONEY FROM YOUR EUROPEAN WEALTH BOND EASY ACCESS TO YOUR CAPITAL The European Wealth Bond gives you flexible access to your capital subject to a minimum withdrawal amount of 400/ 600 (or other currency equivalent), and provided that the amount in your bond can sustain both the withdrawals and the charges involved. Any withdrawals made to pay for advice fees are exempt from this monetary limit (see page 10). You can withdraw up to 5% of your total investment each policy year without any immediate UK tax liability up to 20 years. This allowance will be reduced by the amount of any partial withdrawals made to pay fees to your financial adviser. If you don t use this allowance in a specific policy year, it can be carried over to the next policy year, so you could withdraw 10% tax deferred for example, and so on. REGULAR WITHDRAWALS You can use your policy to create a regular income stream; either yearly, half-yearly, every four months, quarterly, every two months or monthly. These withdrawals will be deducted from the transaction account for your policy. ONE-OFF WITHDRAWALS (PART SURRENDERS) As long as you leave the minimum amount in your bond, you can normally withdraw any amount you want at any stage, subject to a minimum of 400/ 600, by making a request to us. However, please remember that the European Wealth Bond is designed for medium to long-term investment, so taking money out of your bond in the early years can dramatically reduce its potential for growth. All withdrawals will be free of policy encashment charges. If the value of your bond falls below the minimum value for maintaining a policy (currently 10,000), we can decide to surrender it unless you agree to make a further premium to top up your investment. 9

10 FEES AND CHARGES FOR YOUR EUROPEAN WEALTH BOND There are four possible types of deduction from your bond, other than the withdrawals we pay to you: 1) withdrawals to pay for advice fees 2) Old Mutual International Ireland s portfolio fund charges 3) third-party and other charges 4) Discretionary Asset Management charge. Full details of the charges that will apply will be covered in your Key Features Document and in the Charges Schedule you receive when your policy starts. 1. ADVICE FEES You can pay your adviser a fee in a number of ways. You can pay it directly to your adviser, for example by cheque, keeping it completely separate from your policy. Alternatively, you can ask Old Mutual International Ireland to pay a withdrawal from the policy that s equivalent to the fee, which will then be paid to your adviser. We will also confirm to you any fees for which you ask us to arrange payment to your financial adviser. If you decide on this route, there are a number of options which can be used on their own or in combination with each other: Financial adviser advice fees: Initial fee from your payment before it is invested as a premium in the policy: you can ask Old Mutual International to pay a fixed monetary amount or a percentage of the initial investment we receive from you to pay to your financial adviser. initial fee taken as a withdrawal from your policy once we have accepted your application for the policy: you can ask Old Mutual International Ireland to make a one off withdrawal from your policy. This can be a fixed monetary amount or a percentage of the premium invested in the policy. These initial fees can also apply to advice for top ups where the fee can be paid either before or after the top up is accepted by us. If you ask us to pay a fee after the policy or top up is accepted, we will treat this as a withdrawal. Ongoing service fee: you can also ask Old Mutual International Ireland to make a regular withdrawal of a fixed monetary amount or an annual percentage of the value of the portfolio fund linked to your policy to pay a regular fee to your financial adviser for ongoing advice. This regular withdrawal for ongoing fees is payable quarterly in arrears. Ad hoc fee: you can also ask Old Mutual International Ireland to pay a one off withdrawal to your financial adviser to pay an ad hoc fee. This must be a monetary amount. 2. PORTFOLIO FUND CHARGES There are a number of charges that we may deduct from your policy, for example to cover administration and management of your policy and the portfolio fund. 3. THIRD PARTY AND OTHER CHARGES You may incur some additional charges due to the nature of this investment, such as bank charges, and telegraphic transfer charges. Your financial adviser will provide details and explanations of all the charges. Any funds that the Discretionary Asset Manager invests in will also charge an annual management charge. The cost of this varies from fund to fund. 4. DISCRETIONARY ASSET MANAGEMENT CHARGE We will make a Portfolio Fund Charge to reflect the fees we pay to the Discretionary Asset Manager for providing discretionary fund management services to us. HELPING YOU MANAGE THE PAYMENT OF CHARGES Old Mutual International Ireland s Portfolio Fund charges will be listed for you in a charges schedule and your illustration. We will also confirm to you any fees for which you ask us to arrange payment to your financial adviser. You can amend ongoing service fees at any time. Please note that advice fees, with the exception of the initial fee before you invest, are treated as withdrawals from your bond and count against your tax deferred withdrawal allowance. For further information please see page 9. 10

11 about us Old Mutual International Ireland dac is one of the companies that make up Old Mutual International. Old Mutual International is part of Quilter, a leader in wealth management in the UK and selected offshore markets, providing advice-led investment solutions and investment platforms. Quilter plc oversees billion in customer investments (as at 31 March 2018). Their offering includes platform-based investments and protection, asset management solutions and discretionary management, as well as financial advice services in the UK and Singapore. As part of Quilter, our aim is to help create prosperity for the generations of today and tomorrow. Old Mutual International Ireland dac is regulated by the Central Bank of Ireland. All life assurance companies licensed in Ireland are subject to the country s regulatory system, which complies with EU standards. As a full member of the European Union, Ireland also has strict anti money laundering legislation. REGULATORY PROTECTION FOR YOUR INVESTMENT Ireland is a full member of the European Union and has strict money laundering legislation which complies with the EU standards. Ireland has a well-established and rigorous life insurance company regulatory system, which has enabled life insurance companies to be well positioned to operate even in turbulent economic times. Old Mutual International Ireland is regulated by the Central Bank of Ireland, which has direct responsibility for the life insurance industry. All life insurance companies licensed in Ireland are subject to Irish Prudential Regulation which complies with EU standards. Ireland has comprehensive data protection legislation in place, based on EU directives which require that client information is securely held Old Mutual International Ireland dac was formed in 2003 to provide cross-border solutions for European investors, so you can be confident that you are investing with a company that understands the needs of investors. Old Mutual International is part of Quilter, a leader in wealth management in the UK and selected offshore markets, providing advice-led investment solutions and investment platforms. Quilter plc oversees billion in customer investments (as at 31 March 2018). Old Mutual International is the collective name for the offshore and cross-border providers of investment solutions within Quilter. Quilter Cheviot One of the UK s largest discretionary investment management companies; also part of Quilter, with 17.8 billion funds under management. 11

12 This document was last updated in September Please confirm with your financial adviser that this is the most up-to-date document for your product or servicing needs. The value of your bond can rise or fall over time and there is no guarantee that your capital will be returned to you. You should view your investment in the bond as a long-term commitment; if you cash in your bond in the early years the amount you receive may be less than the premiums you ve paid. You and your financial adviser should satisfy yourselves that the bond is suitable based on your needs, objectives and attitude to risk. You should also familiarise yourself with any particular risks associated with the assets the Discretionary Asset Manager may choose in your bond. There may be currency risks if assets are denominated in another currency, or liquidity and valuation risks for property funds, for example. The value of the assets linked to the bond determines the value of the policy and can fall as well as rise. This brochure should be read in conjunction with the policy terms and where appropriate, any additional disclosure information. Calls may be monitored and recorded for training purposes and to avoid misunderstandings. Old Mutual International Ireland dac is regulated by the Central Bank of Ireland. Registered No Administration Centre for correspondence: King Edward Bay House, King Edward Road, Onchan, Isle of Man, IM99 1NU Tel: +353(0) Fax: +353(0) Registered and Head Office Address: Hambleden House, Lower Pembroke Street, Dublin 2, Ireland. VAT number for Old Mutual International Ireland dac is S. Old Mutual International is registered in Ireland as a business name of Old Mutual International Ireland dac. SK11700/INT /September 2018