According to Skandia International, 43.2% of its portfolio bonds went into trusts in 2012, in contrast to 8.2% eight years ago.
Skandia put the increase down to "significant changes to the inheritance tax (IHT) treatment of trusts in 2006", which meant that trusts containing "relevant property" were required to pay IHT on transfers out of the trust and on the trust’s ten year anniversaries.
These trusts were generally the only types of standard trusts available through life offices at that time and the changes took a while to feed through, Skandia International, the offshore business of Old Mutual Wealth, said.
The company added that it had also taken time to educate the market on tax treatments, which changed from Potentially Exempt Transfers to Chargeable Life Time transfers.
Phil Oxenham, head of proposition marketing, Skandia, added that the improved packaging, choice and education around trust options that add value and offer efficient tax savings has seen the use of trusts gain momentum.
“Trusts have become a fundamental part of wealth management and can help advisers demonstrate the real value of the advice they provide to their clients," he said.
“Those investing significant sums in an offshore portfolio bond will be the types of client who are in greatest need of wealth planning, and using trusts can help mitigate tax exposure and protect their assets for their beneficiaries,” he added.
Last month Skandia reported that net sales of offshore bonds had increased 316% in the first half of this year.
These sales were driven by “increased distribution reach in most regions together with the renewed demand for single premium portfolio bond products globally, particularly in South Africa, Europe and Asia”, Skandia said.
Skandia International’s assets under management currently stand at £14.7bn ($23.5bn/ € 17.4bn).
