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To wrap or not to wrap - that is the question

97 min watch 27 Oct 21

Session: Thursday 21 October 2021

In days gone by, choosing between bonds and Open Ended Investment Companies (OEICs)was often seen as an investment decision. And to this day there are some investments that cannot be held as an OEIC and instead need to be held within a tax wrapper. But in this modern world of open architecture, OEICs can be held directly by the individual or indirectly through a tax wrapper.  

On this virtual seminar, Les Cameron, Head of Technical at Prudential, Graeme Robb, Senior Technical Manager and Vince Smith-Hughes, Director of Specialist Business Support, explore and debate the pros and cons of holding OEICs either directly, or indirectly through an insurance bond tax wrapper through a series of case studies.

Learning Outcome – to demonstrate an understanding of:

  • Taxation of insurance bonds
  • Taxation of OEICs 
  • Advantages and disadvantages of using OEICs within an insurance bond tax wrapper 

Write down your answers to each of the following questions and check your answers when you click through to claim your CPD certificate on the link below.

Test your knowledge

To claim your CPD certificate, test your knowledge with the questions below.

1. From an ongoing tax perspective the key difference between OEICs and bonds is:

a) OEICs produce income, bonds produce gains.

b) OEICs produce capital gains, bonds produce income

c) OEICs produce income, bonds are non income producing

d) both OEICs and bonds are non-income producing

 

2. The rate of capital gains tax suffered within an OEIC is: 

a) 10%

b) 0%

c) 20%

d) 15%

 

3. Bob and Bill both invested £10,000 in an onshore and offshore bond wrapper respectively.  They both bought the same OEIC portfolio and suffered the same charges. They received £1,000 of dividends, £0 of interest and their portfolios had £0 capital gains.


Whose bond will have the highest value? 

a) it's the same

b) Bob

c) Bill 

d) there won't be any growth.

 

4. The 5% tax deferred allowance is available to:

a) Individuals only

b) Individuals and Trustees only

c)  Individuals, Trustees and Corporates

d)  Individuals and Corporates only

Claim your CPD certificate