Name
Address
Address
Address
Address
date
Dear Name
Following our recent discussions I am writing to detail the recommendation that I feel is appropriate to your current circumstances. The recommendation is aimed at meeting your objective of investing monies currently held .
Offshore Bond
I have recommended that you invest £Amount into your existing Offshore Bond [no.]with Product Provider. There are a number of excellent reasons for investing into this Single Premium Offshore Investment Bond, some of which are detailed in the previously-provided brochures. It would be inappropriate for me to repeat all of these in this letter but I would like to highlight a few points, which have particular relevance to your circumstances: -
1)Gross roll up of funds.
2)Access to a wide range of specialist funds.
3)Minimal administration.
4)Tax deferral until year of encashment.
In determining the suitability of this Bond I have compared the other options available, as follows: -
1)Banks/ Building Society accounts are dependent on interest rates and are unlikely to outperform the Offshore Bond over the long term. However, as always, I do recommend that you retain an adequate amount of cash on deposit in easily accessible form which can be used as an emergency fund.
2)Share portfolios/Unit Trusts/Investment Trusts. These do not match your investment criteria/risk profile as your current objective is a co-ordinated build-up funds with a Manager-of-Managers.
3)ISAs. You have already used the maximum ISA allowance for this tax year.
4)Onshore Insurance Bonds. . These do not have the tax-deferral advantages of offshore bonds.
I recommend that £should be invested in the Offshore Bond as this will leave you with sufficient emergency funds.
In selecting the company with whom this bond should be effected I have considered a number of factors. Of these, the most important were to ensure that the contract contained the right features for your requirements. In this respect, and in view of your current circumstances, I confirm that I believe a top-up to your current offshore bond is the most suitable course of action.
Financial strength and administrative support have also been taken into account in deciding to recommend Product Provider International.
The fund within this single premium bond, will match your investment risk profile which you stated was cautious / balanced / speculative.
To fully benefit from the product terms, you should view this as a five-year plus investment. Unit Linked bonds are not short-term alternatives to cash deposits and are best viewed as five year plus investments. Past performance should not be treated as a guide to future returns and, for unit linked investments, the price of units can fall as well as rise.
(If appropriate to funds recommended include following paragraphs)
We discussed your wishes to have potential for modest growth compared to the low returns from Cash currently. However, as discussed, you should be aware that the future returns of Gilt and Bond funds will be sensitive to increases in both UK interest rates & inflation. If prevailing interest rates increase this is likely to have a negative effect on returns from Gilt & Fixed Interest funds, and may well cause reduction in capital values.
(If Corporate Bonds include following paragraph)
Additionally as regards Corporate Bond funds, although the fund manager will seek to spread risk, the value of the fund will be affected in the event of the failure or downgrading of any underlying companies issuing the bonds.
I would stress that when UK interest rates or inflation increase markedly, then a switch out of these funds may be necessary, and you should monitor this aspect. You are able to arrange such a switch with/without penalty/charge (if with penalty/charge confirm what) and I would be pleased to assist you with any switch instruction at your request.
Personal Taxation
The taxation of offshore policies on encashment is more stringent then for a similar onshore product. The chargeable gain on these types of Bonds is subject to your highest marginal rate of income tax. Any period HMRC determine that you have been non-resident for tax purposes, you will be given tax relief for the period of non-residency. Withdrawals of up to 5% of the original investment may be taken for twenty years without immediate tax liability. If the 5% allowance is not used in one tax year it can be carried forward to the next. Any ongoing annual fees paid to an adviser to provide ongoing advice is treated as part of the 5% cumulative tax deferred allowance.(IF SERVICED CLIENT: Please note, that the annual service fee payable would be counted towards the overall figure as a withdrawal and therefore may reduce the 5% per annum allowance to X%)
We have discussed the amendments to the Capital Gains Tax regime, specifically the CGT rates applicable to basic rate and higher rate taxpayers.This would make Unit Trusts more tax efficient than Investment Bonds, but the latter has been recommended because REASON. From our discussion you are satisfied that you have understood the implications regarding your Bond that arises from these changes.
The previously-provided 'key features documents' provide a great deal of information concerning the terms under which the policy will be issued. For our advice and setting up your bond, we have agreed a fee amounting to £Amount /as shown on your personalised illustration as we have already discussed. This sum will be deducted from your fund by Product Provider and paid to us/ You are paying our fee directly to us.
Total Charges
The table below shows the charges for your plans over the next 12 months. Where relevant, we have used weighted averages for some of the charges:-
Plan Details / ChargesPlatform charges
Product Charges
Fund/Investment Charges
DFM Charges
Adviser Initial Charge
Ongoing Annual Service Charge / %
X
X
X
X
X
X / £
X
X
X
X
X
X
Total / % / £
Please note, for certain investments, there may be the possibility that other costs may arise, including taxes.
You should read these documents carefully and contact me if you have any queries concerning them. I would like to draw your particular attention to the sections on charges, exit penalties during the first five years and cancellation and in particular the section on the market value adjuster.
Yours sincerely
Adviser’s Name
Title
…………………………
Client’s Name