‘I want to buy bonds for my grandkids, but can I access the money if I need to?’

Q. I would like to put some money into insurance bonds for my six grandchildren, who are all aged over 23. As such, I’d require six separate bonds, with the money to be received by them after I die. Will I be able to withdraw money from the bonds if I need to, however? Can you recommend any specific types of bonds I should invest in?

A. An insurance bond is similar in some ways to superannuation. The bond fund pays tax on your behalf at 30 per cent per annum on its earnings (with superannuation, it is 15 per cent) and the performance of the bond will depend on the mix of assets that the bond invests in. This is why it is important to seek the advice of an advisor when choosing a bond – they can help you choose one that fits your risk profile and goals.

You would normally set the bond up in your name, with the child named as beneficiary on your death. If it’s done that way, you could make withdrawals if you needed to. Just be aware that there may be an exit tax if the bond is redeemed before 10 years have passed, but if you are on a low income, this may be a benefit because early redemptions are taxed at your marginal rate less a 30 per cent tax rebate. In your case, this could well mean that they can be cashed in at any stage tax-free.

If you have a question for Starts at 60’s money experts, email it to [email protected].

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.