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| Find
your way through the ins and outs of some income-producing
investments with this straightforward guide to what’s
available |
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High
Income Bonds
These are single premium insurance bonds, usually for a period of
three or five years. They differ in that they are linked to one
or more stock markets, which gives you the potential for a steady
higher income but can also make your investment more speculative.
Corporate Bonds
Issued by public companies to raise money. In return for your loan,
the companies pay out a fixed income that is usually higher than
that on comparable gilts. Your rate of income is determined by the
extent to which the company issuing a bond needs to raise capital.
Corporate bonds are rated according to their financial security
and can be held in an ISA or a PEP.
With-profits Bonds
With-profits bonds are lower-risk investments in insurance company
funds. They consist of a variety of assets, such as shares, fixed
interest securities and property. Companies declare an annual bonus
to be paid out to its policyholders – once added, a bonus
cannot be taken away, although rates of future bonuses cannot be
guaranteed. Investors trying to exit a bond early in times of poor
investment performance may be subject to an exit penalty, called
a ‘market value adjuster’. This is intended to protect
those investors who remain in the with-profits fund. Although these
bonds are designed to produce growth over the longer term, they
are often used for income purposes as policyholders can take an
annual withdrawal of up to 5% of the initial investment for a maximum
of 20 years (deemed a return of capital) without any immediate liability
to personal taxation.
Distribution Bonds
These lower-risk bonds pay a quarterly or half yearly distribution
of dividends, in the form of capital, that can be used as income
or rolled up within the bond. Because the bonds invest in a combination
of shares and fixed interest securities, you can generally obtain
better returns than with a traditional deposit account, although
unlike a deposit account the full return of your capital is not
guaranteed.
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If
you would like to review your income portfolio and discuss
how you could generate a bigger income, please contact us
for further information. |
| Levels
and bases of, and reliefs from, taxation are subject to change.
Because these investments may go down in value as well as
up, you may not get back the full amount invested, especially
if you withdraw from it in the early years. |
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