Money's 2024 Investment Bond Provider of the Year
By Money Team
Generation Life has been named Money's 2024 Investment Bond Provider of the Year as part of the Consumer Finance Awards.
There are only a few tax-effective investments on offer in Australia and one of these is investment bonds.
Winning for the third year, Generation Life manages $3.2 billion of investment bonds and offers features such as 69 different investment options across all the major asset classes including diversified funds and single sector funds.
While Generation Life has popular investment bonds to save for funerals and children's milestone expenses, such as education, it is the estate planning and tax-optimised features of its LifeBuilder investment bonds that are catching the attention of financial planners and families.
Grant Hackett, chief executive of Generation Life, points out that an investment bond can be structured as a non-estate asset, so it doesn't have to be a part of a person's estate or included in a will.
Hackett describes it as a "really cost-effective testamentary trust where you can control distributions and vesting periods when people receive money from the bond".
Investment bonds are attractive for families who have built up several assets, such as a house, superannuation and other investments, who don't want their hard-earned assets ending up in the marital pool that can be split if the relationship between their kids and their partners break up.
"It's great for situations around high-conflict families or blended families or kids from a previous relationship, particularly when there is a lot of money that they could fight one another over," says Hackett.
Hackett says families can set up investment bonds so that the distributions are managed even when the parents or grandparents die.
"So, you can design it and distribute those funds with certainty, what we call from the grave."
Hackett says the tax-optimised investment bonds are Generation Life's "big ticket item". Investors purchase investment bonds, which are a single premium life insurance policy that were once called insurance bonds, with after-tax money.
The life insurance company pays tax on the investment earnings. The tax rate is 30%, a decent saving for investors on high marginal tax rates of 45% or even 37%.
The 30% tax rate on 26 of the growth options can be brought down to 12-15% by offsetting capital losses against income as well as franking credits.
In order for investors to receive the maximum tax benefits, it is best to hold an investment bond for 10 years, which makes it a long-term investment.
Order your copy of the Consumer Finance Awards special issue
Get stories like this in our newsletters.