Investment Bonds - UK - February 2011
Since its 2007 peak, the UK onshore bond market has been in decline, to the point where total sales in 2010 were three fifths down on the volume achieved in 2007. The sub-prime crisis and ensuing economic downturn were partly responsible for this fall, but a more detrimental factor was the change to capital gains tax (CGT) in April 2008, which made rival products, such as unit trusts and OEICs, more favourable in comparison.
- The UK onshore bond market has been in decline over the past few years, having come under greater competition from collective investments, such as unit trusts and OEICs.
- Recovery is in sight, but new business levels over the next few years are unlikely to reach the heights seen in 2006 and 2007. Competition between providers will likely intensify as a result.
- Product charges will also come under increasing pressure from 2013, as new regulation linked to the Retail Distribution Review ensures greater price transparency across the retail investment industry.
- The offshore sector will remain a growth area for providers, albeit with demand still mainly coming from the high net worth.
- The majority of investment bonds are sold with advice and, most often, sales are generated through the traditional IFA channel.
- There is considerable scope to develop new product propositions linked to open-architecture platforms, especially in the onshore market.
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