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Guaranteed income bonds

The ITTOIA05/S504(7) definition of ’guaranteed income bond contract� adopts the regulatory definition of classes of insurance business � life and annuity business and linked long term business, excluding annuity contracts and pension business.

Guaranteed income bonds can be made up in a number of ways. They may comprise a single life assurance policy or several, and these may be combined with a life annuity.

Payments by an insurer are treated as ‘income payments� under a guaranteed income bond contract if the following conditions apply:

• the payment would, but for the guaranteed income bonds provision at ITTOIA05/S504(6), be treated as interest or an annual payment
• the payment is a sum paid, or payable, under provisions of the contract that are of a life insurance character
• the payment does not constitute late payment interest.

Such ‘income payments� are treated as arising from part surrenders of rights, unless the payment is the final benefit paid under the contract in which case it is treated as arising from a full surrender. See IPTM3400.

Late payment interest means interest on a sum payable under the contract which is paid from the date the sum was payable and ending when the sum is paid.