Investment Bonds

Frequently Asked Questions:

• How much can I invest in a Kingston Unity Investment Bond?

  The minimum that you can invest in any one Bond is £1000. The maximum is £100,000. You can take more than one Bond in a year as long as the overall maximum investment in that year does not exceed £100,000.

• Can I invest in joint names?

  Yes the bond can be held in joint names. The bond will be held on a joint life second death basis whereby ownership of the bond will transfer to the surviving individual upon the first death.

• Where is my money invested?

  The premium is invested in the Society`s With-Profits fund. This fund is made up of investments into the four main asset classes; equities, commercial property, fixed interest (eg gilts, corporate bonds, etc) and cash. The purpose of this is to reduce investment risk whilst giving exposure to assets that over a period of time should generate growth and provide a balanced approach with low to medium risk. This makes an appropriate investment for someone who is not averse to a small to medium amount of risk but would like the opportunity to take advantage of potential growth in assets not given by deposit based accounts. The mix of assets will vary from time to time to reflect market conditions.

• How long does the bond have to remain invested?

  The recommended minimum investment period is for 10 years. If you encash your bond within 4 years of commencement then a surrender penalty will apply. If you encash your bond at dates other than the MVR free dates then a MVR may apply.

• What is Market Value Reduction (MVR)?

  The Society reserves the right to apply an MVR on policies being encashed in part or fully during times of adverse investment conditions. This applies to both capital and bonus and is designed to ensure that you receive your fair share of the fund and that withdrawals by members cashing in do not affect the value of your continuing investment.

  The amount of the MVR depends on when you invested, the period over which you have invested and the investment market conditions at this time. An MVR is not applied on death.The level of the MVR will be set by the Society`s board after receiving advice from the Society`s actuary. We will try to smooth the returns of members with Investment Bonds.

  This practice may alter at any time and without notice.

• What happens if I die before I encash my Bond?

  In the event of death before your bond is fully encashed, the Society will pay out the greater of 101% of the sum assured in force, or the sum assured plus attached bonuses.

  For bonds written in joint names, the bond will be transferred to the sole survivor on the first death of either of the policyholders. If the surviving policyholder then dies before encashing the bond the society will pay the greater of 101% of the sum assured in force, or the sum assured plus attached bonuses.

  A market value reduction will not apply on death.

• Are there any guarantees?

  Providing the bond runs for at least 10 years, the society guarantees that you will get back a minimum sum assured of 102% of the initial premium, plus any bonuses allocated to date, if you encash fully on MVR-free dates ( see section What is market value reduction). If you have made any withdrawals from your bond, then you will get back the revised sum assured plus bonuses allocated to date if you encash fully on MVR free dates.

  Partial withdrawals of any amount on MVR-free dates will not be subject to Market Value Reduction.

  Partial withdrawals of less than 5% of the original investment per annum will not be subject to Market Value Reduction.

  If you die at any time when the bond is in force, then a Market Value Reduction will not apply.

  Please note that if you encash the bond fully during the first four years, then the surrender charges will always apply. If you are a higher rate tax-payer then there may also be a tax-liability on any gains made on surrendered plans.

• What are the MVR free dates?

  We guarantee not to apply an MVR if you choose to encash fully your bond on the 10th anniversary and each subsequent 5th anniversary after this. This includes a period of up to 30 days after the relevant anniversaries.

• Can I make withdrawals from the Bond?

  You can take a regular income from your capital or make a one-off withdrawal.

  Regular withdrawals can be between 2 and 5% per annum of the original investment. There will be no taxation on these withdrawals although liability to tax may be deferred and will be dependent on the holder's tax position at the time the Bond is encashed fully.

  Withdrawals of over 5% per annum of the original investment are subject to taxation at the time of the withdrawal.

• Will there be any liability to tax??

  Under current legislation (which may change) if you are a basic rate taxpayer when you encash fully or make partial withdrawals the proceeds will not be subject to further taxation unless they take you into a higher tax band.

  However, if you are a higher rate taxpayer you may be liable for additional tax on your investment gain at the difference between higher and basic rates of tax.

  Total withdrawals in any policy year that are less that 5% of the initial investment will not be subject to taxation at the time. There may be a deferred tax liability on these withdrawals subject to your tax position when the bond is encashed fully.

  Withdrawals in any policy year that are greater than 5% of the initial investment will be subject to tax on the excess over 5% of the initial investment. Tax will be at a taxpayer's highest rate less basic rate tax so a basic rate tax payer will have no further liability unless the withdrawal takes the taxpayer into a higher tax band.

  Any partial withdrawals in the earlier years for which tax was not paid at the time will be added to the encashment value for the purposes of calculating gain.

• What charges are there on the Bond?

  The Society deducts an equivalent charge of 1.5% each year from the With-Profits Bond before the Bonus Rate is calculated.

Where are my premiums invested?

The premiums are invested in the Kingston Unity With-Profits Fund which invests in a mixture of assets such as property, fixed deposits, shares and cash. Find out more »