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HMRC internal manual

Insurance Policyholder Taxation Manual

HM Revenue & Customs
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Ability to select property: broker bonds and investment advisers: circumstances where policy is not a PPB

Broker-managed funds (‘broker bonds’)

Many companies offer policyholders the opportunity to invest in broker-managed funds.An intermediary or adviser chosen by the policyholder selects the assets in this sort offund. The intermediary or adviser has an arrangement with the insurer to manage one of theinsurer’s internal funds and for this fund to be open to any client of the broker.

The broker is regarded as an agent of the policyholder when advising on whether the clientshould take out the policy or ‘broker bond’ in the first place. However, oncethe broker bond has been taken out, the broker manages the fund as an agent for theinsurer and is remunerated by the insurer for doing so. The broker is not an agent of thepolicyholder when acting in the capacity of an investment adviser for the insurer.

Policyholders who have a policy under whose terms they are able to select a broker-managedfund to determine the value of benefits under the policy would not therefore normally beregarded as having a PPB.

Exceptionally, arrangements may result in a policy described as a broker bond being a PPBbecause the policyholder retains the ability to select - see IPTM7730.

Investment advisers

Where the policyholder is unable under the terms of the policy to select the propertyto determine the policy benefits, there may nonetheless be an option to require theinsurer to appoint an investment adviser. The insurer may offer the policyholder a menu ofpossible advisers it is willing to appoint. There will usually be a separate agreement inthese cases between the insurer and the investment adviser.

A policy written in these terms would not in general be a PPB. In such a case, the adviserwould be acting as an agent of the insurer under the agreement between them. Thatagreement is separate from the insurance contract between the insurer and thepolicyholder, and from any agreement between the policyholder and the investment adviser.The adviser would not therefore be acting on behalf of the policyholder. The positionwould be the same as with broker- managed funds, as described in the previous section.

However, as with broker bonds, in exceptional circumstances the arrangements may be suchthat the policyholder does retain an ability to select - see IPTM7730.

Further reference and feedback IPTM1013