What is a Tracker Bond?
Many people ask me what is a Tracker Bond and a Tracker Bond is a savings in either a Life Assurance company or a bank that tracks a certain stock market index with a guarantee of capital and only provide capital growth not interest. What this means in simple terms is that you can invest in a Tracker Bond and recieve possibly a good return similar to the stock market without risking your capital.
Tracker Bond chareteristics
- There is usually a minimum return at maturity with a possibility of a bonus related to performance of various stock market indices or individual shares.
- Maximum return may be capped.
- Tracker Bonds are subject to market risks as bonus payable at the end of the term is related to growth in stocks or indexes. If a bonus is not paid, then your capital did not keep with inflation.
- The issuer of the tracker bond could default.
- Tracker Bonds are for a fixed term 5 years is the usual term.
- A death exit tax is incurred from the day before the death of the insured. There is no USC or PRSI at this time.
- If the Tracker Bond is in a Bank deposit product, it is usually subject to DIRT. Gross interest is liable to PRSI and USC.
- Early access to funds prior to the end of the term is subject to penalties.
- There are no explicit charges; charges are built into the Tracker Bond structure.
- You can invest in a Traker Bond inside our out of your pension and if the Tracker Bond is in a Life Assurance investment, exit tax applies on gains.
Tracker Bonds are for investors who want to participate in equity markets but with little to no risk. A Tracker Bond may be for you but it must fit in your overall financial goals. Make an appointment with us today and see if a Traker Bond is for you.