Dallas, TX: ReportsandReports announce Japanese UK Investment Bonds 2010 Market Research Report in its Store. Browse complete UK Investment Bonds Market Report Changes to the Capital Gains Tax regime have queried viability of the investment bond against a backdrop of financial markets emerging out of a recession. Providers are presented with a scenario for success if investors are made aware of clear circumstances where a bond is an advantageous investment. Scope Highlights Economic uncertainty is a key challenge faced by the investment bond market, although a changing regulatory and tax environment continues to bring new challenges to providers, IFAs and retail clients alike. Reasons to Purchase Table Of Contents Overview Catalyst Summary Executive Summary The UK investment bond market declined at a CAGR of 15% over the past five years Providers should make investors aware of clear circumstances in which a bond is an advantageous investment Wrap platforms will shape the distribution of investment bonds Table of Contents Table of figures Table of tables Market Context Introduction to investment bonds Unit-linked bonds offer investors policies with a value that is directly linked to investment performance Clients appreciate the flexibility and transparency of unit-linked bonds With-profits bonds offer a smoothing mechanism, a unique attribute of the product A distribution bond is recognized as a simple product that provides investors with a steady stream of income Guaranteed bonds encompass the guaranteed income, guaranteed growth and guaranteed equity bonds Guaranteed income and guaranteed growth bonds Guaranteed equity bonds Money market bonds are a new category of bonds introduced by the ABI in 2008 Sales of investment bonds in 2009 suffered at the hands of fallen stock markets Unit-linked bonds immediately felt the positive effect of stock market rallies in 2009 The smoothing factor of with-profits bonds are attracting and calming the nervous investor, to generate healthy sales in 2009 With-profits bonds became unpopular after the stock market bubble burst in 2001 Guaranteed bonds were popular in 2008 but new business in 2009 declined heavily Distribution bond sales continued to falter in 2009 Money market bonds lost favor in 2009, a year after being introduced as a new bond category Investment bonds still remain a viable investment product but discerning the suitability of a bond for any individual will be more complex Investors will still question the role of unit-linked bonds in the future as they lack elements of protection against market volatility A with-profits revival will be seen over the next five years, at the expense of distribution bonds Guaranteed bonds will continue to suffer a decline in sales in 2010 Money market bonds will lose their popularity among investors going forward The best investment product depends on individual circumstances but there are three key facts which keep a bond broadly attractive as an investment Only 5% of the population pays CGT The majority of bond holders are basic rate taxpayers at the time of encashment and the changes to CGT make bonds even more attractive for these investors An investment bond is a flexible product that can be adapted as an individual’s circumstances change There are clear circumstances in which a bond is an advantageous investment However, investment bonds are not favorable to all scenarios Market Issues Consumers’ low risk tolerance is affecting the investment bond market Consumers are risk-averse and prefer safer or guaranteed returns Investment bonds need to attract the less affluent consumer who is unwilling to take any risks with their cash Prevailing economic conditions continue to pose a key challenge to investment bonds Recent changes to taxation will impact the investment bond market Changes to CGT announced in the June 2010 emergency budget may prove beneficial to the investment bond market Under the old regime the tax structure gave a clearer advantage to investment bonds A flat rate of 18% CGT was the prior arrangement that impacted the investment bond market The changes to CGT in April 2008 were more far-reaching than their intended target The tax treatment of investment bonds has not changed Investment bonds are taxed within the income tax regime rather than as capital gains An investment bond carries a 5% tax deferred withdrawal allowance A tax charge can arise whenever a chargeable event occurred Technological innovation centering on wraps is helping overcome the challenges of investment bonds There are eight key areas where a wrap platform will help overcome challenges The tax complexity of bonds and income-drawing options will drive growth in distributing investment bonds via wraps Advisors are looking to actively move investment bonds onto wraps over the next 12 months The full advantage of wrap platforms will be realized by placing legacy business such as with-profits bonds on platforms as well as new business Wrap platforms have evolved from the fund supermarkets of the late 1990s The Datamonitor definition of a ‘pure wrap’ has become a market standard The Retail Distribution Review has inevitably affected the way in which investment bonds are sold and distributed The RDR aims to increase consumer access to financial products and services by offering a tiered system of financial sales and advice The RDR will address concerns about poor returns and high exit fees in the investment bond market Poor returns and high exit fees in an underperforming market leave investors in an impossible situation The Treating Customers Fairly initiative has helped to increase investor understanding about investment bond products and prevents the possibility of mis-selling The TCF initiative aims to create a more efficient and effective market The TCF initiative will filter out poorly structured and poorly performing providers to make investors aware of the risks involved in investment bonds Competitor Dynamics Providers should make investors aware of clear circumstances in which a bond is an advantageous investment Investors in mutual funds pay tax on gains and on income, which gives bonds an advantage A higher rate taxpayer can receive income from a bond and defer tax Bonds can be assigned to avoid an income tax charge A bond is an efficient investment for inheritance tax planning Providers are offering product, service and technological innovations to help IFAs and clients understand the complexities of investment choices Scottish Widows and Clerical Medical, with their full suite of online investment planning tools, are forging ahead in the innovation stakes Scottish Widows and Clerical Medical offer online calculators to help IFA clients determine the appropriateness of bonds The increasing importance of the peripheral features on an investment bond offering will emerge in a post-RDR landscape Lloyds Banking Group wrote the highest investment bond new business in 2009 Distribution Dynamics The sale of investment bonds is firmly focused through the IFA channel Fluctuations have taken place in the distribution of unit-linked and non-unit-linked bonds The distribution of unit-linked bonds migrated back to IFAs and whole of market advisors in 2009 after being picked up by non-bancassurance single tie channels in 2007 Non-unit-linked bond distribution through IFAs has grown rapidly and sharply Wrap technology will be a key driver in the distribution of life products Appendix Data Product definitions Life-based savings products Life assurance Single premium life With-profits bond Unit-linked bond Income and growth bonds Guaranteed equity bonds Distribution bonds Purchased life annuities Other bonds Annual premium life Endowment policy Whole of life insurance Term assurance Income protection Critical illness Collective life ISAs Personal pensions Stakeholder pensions Group personal pensions Department for Work and Pensions (DWP) rebate Employer-sponsored stakeholder (ESS) pension Self-invested personal pensions (SIPPs) Free-standing additional voluntary contributions (FSAVCs) ABI definitions of distribution channels Independent financial advisors (IFAs) Direct sales forces Tied agents Multi-tied agents Bancassurance Direct marketing Telesales Other Further reading Ask the analyst Datamonitor consulting Disclaimer Browse complete UK Investment Bonds Market Report Browse all Banking and Financial Market Browse all Datamonitor Market Research Reports Browse all Latest Reports Related Reports: The Future of UK Investment Bonds 2009 The UK Used Car Trade Flow 2010 Alternative Energy Monthly Deal Analysis: M&A and Investments 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Despite changes to CGT, the investment bond is still a viable part of an investment portfolio. The smoothing factor of with-profits bonds offers the nervous investor the opportunity to even out the volatility of returns from the stock market and other underlying investments.
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