You can use an offshore bond as part of your effective retirement planning. Using an offshore bond aims to help you achieve tax efficient growth and income, whilst retaining access to your money with the flexibility to control the tax you pay.

If your pension pot grows to more than your lifetime allowance, you may have a tax bill to pay. For the tax year 2009/2010, most people's lifetime allowance is £1.75m, rising to £1.8m for the tax years 2010/11 to 2015/16, when it will be reviewed again by the Government. Also, at the April 2009 budget, the Government announced that tax relief on pension payments for individuals earning more than £150,000 per year will be limited to payments up to £30,000 per year.

If you have used up your lifetime allowance or are a high earner, investing a lump sum offshore may have tax advantages for you. While invested in an offshore bond, you won’t normally pay tax on any growth. Instead, tax is paid when you take money out of the bond and will be based on your circumstances at that time. And you’ll have the flexibility to take your money out or move your money between a wide choice of investment options.

There may also be withholding tax payable on certain investment funds. This is a tax that some countries deduct from dividends and interest payments to foreign investors. It is not possible to reclaim withholding tax. If you invest in a net fund, where tax is paid on returns within the fund, where possible Standard Life International will reclaim tax within the fund and return this to you. We may not be able to reclaim tax if there are changes in HM Revenue & Customs practice. A charge may also apply for switching investments – please refer to the Key Features Document (IB17) for more information.

Although your pension pot can pay a tax-free lump sum, you'll have to use the remainder to provide a taxable income. With an offshore bond you can take tax deferred withdrawals each year of up to 5% of the total payments made into your bond, up to a maximum of 100% of the total amount paid into the bond. If you do not use your allowance in a particular policy year, you can carry it forward to a future year.

With an offshore bond there are no restrictions on when you can take your money out, unlike a pension plan, where from 6 April 2010 you'll need to be aged 55 or over (currently aged 50) before you may take any tax-free lump sum and use the remainder to provide a taxable income. By using the two products together you may be able to create a tax efficient and flexible retirement plan to meet your needs. For further information you should speak to your financial adviser.

Please remember that with an offshore bond and a pension plan, the value of your investment can go down as well as up and you might get back less than you paid in.

All information on this website relating to taxation is based on our understanding of law and practice in Ireland and the UK at November 2009. The future tax position of the bond or your own tax position may alter. The tax information given only applies if you are resident in the UK for tax purposes. If you are no longer resident in the UK for tax purposes, please contact your financial adviser for more information.