IPTM3550 | Calculating gains: part surrenders and part assignments: ‘periodic calculations’ and ‘excess events’: guaranteed income bonds

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.