Many people think of superannuation as the main tax-effective savings structure. Super can be extremely powerful, but it is not always suitable for every goal. This is especially true where funds may be needed before retirement, where contribution caps limit how much can be added to super, or where parents and grandparents want to save for children or grandchildren.

More and more families are concerned about how to invest wisely to help kids into the property market and ensure funds are available for the "bank of mum and dad" when called on.

One option worth considering for longer-term savings is an investment bond, also known as an insurance bond or tax-paid bond.

An investment bond is a long-term investment structure issued by a life insurance company or friendly society. Earnings inside the bond are generally taxed internally at a maximum rate of 30%, rather than being included in the investor's personal tax return each year.

If the bond is held for at least 10 years and contribution rules are followed, withdrawals after the 10-year period can generally be received without further personal tax. The key contribution rule is often called the 125% rule, which allows additional annual contributions of up to 125% of the previous year's contribution without restarting the 10-year period.

This can make investment bonds useful for:

• Saving for children or grandchildren.
• Education funding.
• Building wealth outside super.
• Long-term savings where flexibility is important.
• Estate planning.
• Investors on higher marginal tax rates.
• People who have already maximised super contribution opportunities.

Investment bonds are not suitable for everyone. For example, the 30% internal tax rate may be unattractive for investors on lower marginal tax rates. Direct investments such as shares, ETFs or managed funds may also provide advantages in some circumstances, particularly where capital gains tax discounts and franking credits are relevant.

However, for the right person, an investment bond can provide a structured, disciplined and tax-effective savings plan. It can also be attractive where the investor wants a clear purpose for the money, such as helping children with education, a future home deposit, or a broader family wealth transfer strategy.

A simple example might be a parent or grandparent setting up a regular savings plan for a child, with the intention that the funds are available in 10 or more years. If structured correctly, the investment can grow in a tax-paid environment and later be accessed without personal tax on withdrawal after the 10-year period.

Before starting an investment bond, it is important to consider:

• Your timeframe.
• Your tax rate.
• Whether you may need access to the money within 10 years.
• The investment options available.
• Product fees.
• Estate planning objectives.
• Whether super, direct investing or debt reduction may be more appropriate.

Important information

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. You should obtain and consider the Product Disclosure Statement relating to any product referred to in this presentation before making any decision about whether to acquire the product.

WSC Group (Aust) Pty Ltd is an authorised representative of Count Financial Limited ABN 19 001 974 625, holder of Australian financial services licence number 227232 ("Count"). Count is owned by Count Limited ABN 11 126 990 832 of GPO Box 1453, Sydney NSW 2001. Count Limited is listed on the Australian Stock Exchange. The information on this web page is not financial product advice and is provided for information only.