Lincoln Financial Group is urging investors to focus on the inheritance tax (IHT) and tax-planning benefits of investment bonds following the introduction of a capital gains tax (CGT) flat rate of 18 per cent, and removing taper relief and indexation allowances.

It argues that bonds will remain a significant part of the investment landscape despite claims that the introduction of the flat rate of CGT will limit their use and significantly boost the market for unit trusts.

Research suggests that more bonds are sold for IHT and income tax planning than for CGT mitigation, and Lincoln’s analysis shows that the majority of advisers do not think that the proposed changes in CGT would have a major impact on the volume of new investment bonds.

Ian Noble, head of life sales at Lincoln Financial Group, says, ‘Suggestions from various parties that the CGT changes will dent the appeal of investment bonds tend to ignore many of the reasons investors favour them.

‘Choosing an investment bond over a unit trust is a complex process, and while the tax implications – many of which are still in effect – do play a part, there are other considerations to bear in mind.’