The new product, which is distributed through Axa Wealth International’s Dublin jurisdiction, is called Delegation, and offers investors a broader range of investment options than is usually permitted within an offshore bond wrapper.
Simon Willoughby, head of proposition for Axa Wealth International and architect of the new single premium product, explained it is able to offer a wider range of investment options than normally permissible for UK tax purposes, because the investment management is delegated to an external manager, away from the influence of the investor.
By doing this, the discretionary manager, acting on behalf of the client, will be able to invest in assets such as direct equities and bonds, derivatives, government and corporate debt and medium term notes – all assets which are not normally allowed to be held within a standard offshore bond.
However Willoughby, who joined Axa last July, is keen to point out that investors are not allowed to dictate or, either directly or indirectly, influence the selection of assets within their bond.
“The launch of Delegation represents one of the most significant new product developments in the UK offshore market for several years and we believe it signposts the next phase in the evolution of the offshore portfolio bond," said Willoughby.
"In combining the tax deferral benefits of a conventional portfolio bond with access to broader asset choice, Delegation has the potential to open up a much wider client base for the offshore portfolio bond.
“By allowing the bond to be taxed like a usual offshore bond while investing in assets other than mutual funds and deposit accounts, we are giving customers greater asset diversity options managed by investment management experts. The flexible investment structure can adapt to investors changing financial needs, supporting them through different life stages.”
Increased outsourcing
Willoughby added that clients will also benefit from “a favourable VAT position” on discretionary management charges due to the product’s Irish domicile.
Axa said, while the tax legislation making the product possible has been around since 2005, it felt the “time was right” to launch the product now.
The company said it came to this conclusion after attracting an increased amount of business from discretionary managers and noting the rising trend for advisers to outsource investment functions to discretionary managers – in part as a consequence of the Retail Distribution Review.
This view is supported by research from Defaqto published yesterday which found 45% of advisers in the UK now outsource some or all of their client’s investment decisions to a discretionary fund manager.
Axa’s new Delegation offshore bond launched on 30 September.
