However, since the late 1970s the insurers have tried to compete directly with the unit trust market in offering a wide choice of unit-linked investment funds.
A distribution fund is designed to provide a regular rising income for investors.
This is achieved by carefully balancing income generating assets such as corporate bonds and/or property with equities.
The decision of which 'wrapper' to place funds within (i.e. onshore bond, offshore bond or collective) can be complex and is based upon the tax position of the investor, the treatment of each tax wrapper, the likely growth and investment term.
The advantages of Insurance Bonds for tax planning scenarios include the tax deferred status, the ability to write the investment in trust and reduce the inheritance tax liability on an estate, and exclusive access to expensive investment links like guaranteed or protected profits funds.