Bond

Investment bonds are medium- to long-term investments that are designed to produce capital growth and income. You pay a lump sum to a life insurance company. They invest the money for you, usually in a range of funds, until you either cash it in or die.

You can withdraw 5% of the invested amount tax free. The amount can be carried forward if you do not avail the facility. For example, if you have invested £10,000 and have not withdrawn at all, in the third year you can withdraw £1,500 without any tax liability.

Normally, one would exhaust the maximum permissible limits under ISA before considering investing in Bond.