Offshore Bond vs Global Investment Platform

If you have worked in the UK, you might have built up a pension pot through your employer. You have now moved abroad and you have started hearing or reading about offshore bonds or offshore bonds used with SIPP or QROPS UK pension transfers. You are considering moving your UK pension scheme into an offshore bond. While there is a range of benefits in doing so, it might not necessarily be the right choice for you. There are several things to consider. It would be wise to ask a qualified independent financial adviser for guidance. A qualified adviser will explain the differences between an Offshore Bond vs Global Investment Platform so you can decide which solution is best suited.

What is an Offshore Bond?

An offshore bond is a life assurance product. It can also be a tax-efficient investment wrapper. With the correct advice, you can invest your money tax efficiently as it offers tax-deferred income. It is a solution for the medium to long term only. If you require immediate access to your funds then this solution might not be right for you. Offshore bonds can be located in different jurisdictions. The most popular ones are Cayman Islands, Malta, Jersey, Gibraltar, Isle of Man and Guernsey. However, the underlying investments that you can choose will depend on which jurisdiction your bond will be located in. You will be able to hold shares, mutual funds, and even structured notes.

You will see offshore bonds used with pensions. This can be with a Qualified Recognised Overseas Pension Scheme (QROPS) or with a Self Invested Personal Pension (SIPP). Offshore bonds can also be used with direct investments with no trustee involvement.

What is an Investment platform?

It is an online wealth management platform. This vehicle enables financial advisers to invest efficiently in a vast range of listed investments on behalf of their clients.

A UK FCA platform offers security, openness, and transparency as all fees are disclosed. The EU Directive,  Markets in Financial Instruments Directive II ( MiFID II) is a legislative framework for the EU.  It will focus on investor protection and ensuring financial markets are efficient and more transparent. This includes disclosure of fees. MiFID II will not apply to the offshore bonds in the previously mentioned jurisdictions. This means that not all financial advisers disclose all applicable fees. 

The vast fund choice will give you the flexibility you require in order to invest efficiently in the chosen sectors and investments. This includes Societe d’Investissement a Capital Variable (SICAVs), Undertakings for Collective Investment in Transferable Securities (UCITS), Exchange Traded Funds (ETFs), alternative investments and direct investment in equities and bonds. You can invest in using a range of currencies. A great feature of investment platforms is the use of DFM. 

Platforms enable easy access to leading Discretionary Fund Managers ( DFM). They are specialists in actively managed funds and portfolios using strategies and expertise to buy and sell out of different funds at the right time. 

At Harrison Brook, we offer transparency as all fees are disclosed and through your online access you can have access to your investments at any time. Moreover, we work similarly to the UK model.

Fee structure

The UK Financial Conduct Authority does not regulate offshore bonds. In a lot of cases, you will not be aware of the full spectrum of fees and commissions. Commissions paid to advisers are based on the initial investment and they can still receive payments from providers in the form of commission. However, not all offshore financial advisers take commissions and some will work on the UK  transparent fee model. If you try and move your bond to a different solution or provider you might notice that there are large exit penalties and charges. The purpose of offshore bonds is to save for retirement or for the future for the medium to long term. If you decide to transfer out after a short period of time, providers will have high exit charges. On the other side, high exit penalties could also mean that the financial adviser took a commission from the provider.

Is an offshore investment bond the right option for you?

An offshore investment bond might not be the right solution you are looking for. Some of the products can be complex. You need to ensure that you find the right adviser to fully explain this product to you. Under the right circumstances, an offshore bond can provide the tax benefits the investor is looking for. Before you sign up for this solution, make sure you read all the information and articles available online and take advice from a professional financial adviser. Contact different advisers in order to make sure they answer all your questions and you are comfortable with this product. Make sure you ask your adviser to give you a comparison between an offshore bond vs global investment platform that they recommend.

How Harrison Brook can assist?

If you are looking at Offshore Bond vs Global Investment Platform as possible solutions make sure you get professional financial advice. Before you choose an adviser, make sure you understand their fee model. It is important to keep in mind that if sound advice will help you out of a complex situation that will also help your financial situation over the years to come and even affect your beneficiaries, then it will be money well spent. In conclusion, offshore bonds can turn out to be an expensive solution in some cases but with financial advice, you will make the right decision based on your own circumstances.