Do you have a lump sum you're thinking about investing? Whether your money is the result of your hard-earned savings or received as a generous gift, our Investment Bond could be the ideal place to make your funds work harder for you. 

If you’re wondering, “What is an Investment Bond?” You’re in the right place. This guide will provide a straightforward overview of our Investment Bond, its uses, and potential benefits. 

What Is an Investment Bond in the UK? An Overview

This guide will introduce you to our Investment Bond, covering key areas such as:

• What is an Investment Bond?

• The Sheffield Mutual Investment Bond at a Glance

• How Much Can You Invest in Our Investment Bond?

• Who Is the Investment Bond Available To?

• Where Is My Money Invested?

• Potential Risks to Consider

Please Note: This article is a simple introduction. Before proceeding, please read our product brochure and Key Information Document if you'd like to open an Investment Bond.

What is an Investment Bond?

An Investment Bond is a single lump-sum investment to grow your money over the medium to long term (five to ten years or more). It can be an excellent option for saving towards a financial goal, such as a house deposit, retirement, or a once-in-a-lifetime holiday. 

Often, investment bonds will also include an element of life insurance, where upon death, a lump sum will be paid out.

Our Investment Bond

At Sheffield Mutual, our Investment Bond has no fixed term, though it is designed to be held for at least five years. Provided there is no Market Value Reduction (MVR), the amount payable after five years will include the guaranteed sum assured plus potential bonuses. The final value will depend on investment performance, and bonuses are declared annually – though not guaranteed.

Our bond also includes life insurance. If you pass away during the term, your beneficiaries will receive a payout equal to the initial investment plus 5% and any potential bonuses. The death benefit is payable upon the second death for joint life policies.

The Sheffield Mutual Investment Bond at a glance:

• You can invest a lump sum between £1,000 - £150,000.
• It’s a medium to long-term investment.
• After five years, you will receive a guaranteed minimum return on your original investment plus 5%.
• There is potential for growth through annual and final bonuses. (However, bonuses are not guaranteed and depend on the performance of the with-profits fund).
• The 2025 interim bonus rate is 3.75% (not guaranteed and may go up or down before being declared).
• Your money is invested in our managed with-profits fund, which aims to offer higher potential returns than a bank or building society.
• There is no fixed term, but a surrender penalty will apply if you cash in the policy within the first five years.

How Much Can You Invest in Our Investment Bond?

You can invest anywhere from £1,000 to £150,000 in our Investment Bond in a calendar year (January to December). However, you should consider whether you’re comfortable setting aside your money for at least five years. If you decide to surrender the bond within the first five-year period, a surrender penalty will apply, and you may receive less than you originally invested. 

If you’d like to take an income from your investment, our Income Bond may be a more suitable option.

Who Is the Investment Bond Available To?

Anyone can open an Investment Bond, and you're welcome to hold it in joint names!

Children under 13 who wish to open a policy need a proposer to complete the proposal form. This person could be a parent, grandparent, or another trusted guardian. The proposer’s signature will also be required to surrender a bond if the child is under 16 at the time of their request.

Where Is My Money Invested?

Sheffield Mutual specialises in with-profits policies, which aim to provide greater potential returns over the medium to long term (five to ten years or more) than a traditional bank or building society savings. 

To do this, the Society invests in diverse ethical assets that provide a medium-to-low-risk bond. Therefore, this bond could be ideal for individuals who want to see their sum grow but are more cautious about investing. 

The Society also aims to ‘smooth’ returns over the life of the policy by holding back some surplus profit in strong years to maintain bonus rates during less positive years. This process seeks to even out the short-term ups and downs often associated with investing directly in the stock market. As a result, the Society has been able to maintain stable bonus rates even in volatile markets. Please note that the payment of policy bonuses is not guaranteed and depends on the performance of the with-profits fund.

Types of assets we invest in:

Below is an overview of our assets. For more details about the Society’s investment strategy, please refer to section 5 of the Principles and Practices of Financial Management (PPFM).

• Shares of companies: We have exposure to UK-based and overseas companies to provide diversification.
• Fixed-interest investments: This includes government gilts and corporate bonds.
• Property: The Society's property portfolio provides rental income from rentals and potential capital growth.
• Commercial mortgages: This is a small portfolio offering fixed rate returns.
• Cash

Potential Risks to Consider

As with all investments, capital is at risk. Please also consider the following factors:

• If you surrender within the first five years, a surrender penalty will apply, and you may receive less than you initially paid.
• Tax treatment depends on individual circumstances and may be subject to change in the future.
  
  
• Interim and final bonuses are not guaranteed and may go up or down before being declared.

Read to open an Investment Bond?

Invest a lump sum and watch it grow toward your future financial goals. Before you begin, ensure you fully understand the Key Information and decide how much and for how long you want to invest. You may also wish to contact Sheffield Mutual with any additional questions about the product or our services. 

Once you feel comfortable with your decision, you can apply online, by post, or over the phone to start your bond.

This blog provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has provided no advice. If you doubt whether a savings or investment plan is suitable for you, you should consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.