The pros

  • Beneficial Portuguese tax regime.
  • 5% of the sum invested can be withdrawn tax-free each year.
  • Capital gains and income are rolled up tax-free inside the bond.
  • Tax is only payable on withdrawals over and above the annual 5% limit.
  • After five years the effective tax rate falls to 22.4% and after eight years 11.2%.
  • Removes the assets from your estate for UK inheritance tax purposes.

The cons

  • Portuguese consumer protection laws governing the sale of these products are weak.
  • The upfront charges and ongoing costs of these products often more than offset any tax benefits.
  • There are often large exit penalties for early surrender of these policies.
  • Products sold in Portugal rarely permit the use of third-party funds or managers, restricting your investment choices.
  • Where your assets are already held in a tax-protected structure there is absolutely no reason to use these products. Recommendations to do so are usually made by advisers who are only permitted to sell insurance products.

Insurance Bonds

What to look for?

  • A so-called open architecture bond, where third-party funds and managers are permitted.
  • A bond with low or no initial or running costs.
  • A bond with no exit penalties.

If you would like to find out more about any of the above please contact us.



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