Common features of Collective Investments

Collective investments share several common features that are of appeal to trustees, including:

• A simple and convenient way of gaining access to equities
• Full-time professional management performed on a day-to-day basis
• A broad spread of investments to provide excellent prospects for long-term growth’ whilst at the same time minimising downside risk
• A comprehensive range of funds to cater for different investment objectives and risk strategy;
• Access to overseas markets and other specialist sectors
• Easy for the trustees to value and monitor with prices being published daily and statements being produced on a regular basis or via the net
• Tax efficiency
• Less administration. The tedious paperwork associated with owning a portfolio of shares (e.g. dealing with rights issues and scrip dividends, takeover bids as well as the need to maintain exacting records for CGT) is largely eliminated.
• The completion of self-assessment tax returns is greatly simplified, an important factor in helping trustees to fulfil their obligations to keep administration cost to a minimum wherever feasible
• Highly competitive charges. Asset class portfolios offer very low total expense ratios.

Trusted Advisor will, where appropriate, use an Offshore Bond Wrapper which has the following added benefits for trustees:

• Unlike unit trusts OEICs and investment trusts, bonds are non-income producing assets and are not liable to CGT in the hands of trustees; consequently their use can provide trustees with many valuable tax efficient investment opportunities in addition to greatly simplifying self assessment and reducing administration costs.

• The favorable internal treatment of a bond has always made it a very worthwhile investment on tax grounds alone; the most suitable trusts are discretionary and A&M trusts, whose income and chargeable gains would otherwise suffer higher rates.

• If trustees wish to exercise the power to advance capital rather than distributing trust income, trustees can take advantage of the 5% per annum cumulative allowance to partially surrender the bond and make capital payments to beneficiaries without triggering any immediate charge to tax within the trust.

• Bonds issued by life companies based overseas offer trustees the opportunity to benefit from near gross roll up of income and capital gains and not to create a UK tax liability until the chargeable event occurs.

• By effecting the bond as a cluster of small policies this provides trustees with the maximum flexibility and tax efficiency especially when the beneficiary becomes absolutely entitled to trust capital

• The facility to switch easily and inexpensively between the various funds without any tax considerations can be very useful

Professional Trustee Tour: Benefits of using Asset Class funds