What are they?
Investment bonds are sold by Life insurance companies and allow you to invest in a variety of funds managed by professional investment managers. They are normally designed to produce long term capital growth, but can also be used to generate an income as typically 5% of the original investment can be withdrawn each year without incurring an immediate tax liability.

The minimum investment is typically £5,000 or £10,000. When you buy a bond you will be allocated a certain number of units in the funds of your choice. Each fund will hold a portfolio of investments, such as shares or bonds, and the price of your units – in other words the value of your capital – will normally rise and fall in line with the value of these investments.

Technically investment bonds are single premium life insurance policies. This means an element of life insurance is provided. But it is tiny, typically adding an extra 1 per cent or less to the value of your investment, if it is paid out after your death.

The value of the investment can go down as well as up and you may not get back as much as you put in.