What is a Bond?  

A Bond is debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing.

 What is Investment Bond? 

Investment bonds are such bonds which are offered by life assurance companies which are used to invest one-off lump sum payments. Life assurance companies allow access to a number of funds such as With Profits, Distribution and Property funds, as well as the life companies own internal unit-linked funds. Investment bonds can also be termed as an asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

Types of Investment Bonds 

Treasuries - Treasuries are direct obligations of the U.S. government. The federal government uses the proceeds from treasuries to finance its budget. Each treasury is backed by the full faith, credit and taxing power of the U.S. Government and is generally considered the safest investment in the world.

Corporate Bonds - Corporate Bonds are those bonds issued by corporations to fund their financial needs in a way that does not dilute company ownership.  As Corporate bonds usually pay higher rates of interest than government and municipal bonds, since more risk is generally involved in corporate bonds. Bond holders are called as creditors of the company. This means that if the company goes bankrupt and the assets of the company are liquidated, bondholder claims must be paid before stockholder claims.

Different types of corporate bonds:

1. Secured bonds.
2. Debentures.
3. Convertible bonds.

Government Agency Bonds

Government Agency Bonds are issued by government agencies and are generally not insured by the federal government.

Different types of govt agency bonds:

1. Ginnie Maes
2. Fannie Maes
3. Freddie Macs

Government Agency issuing such Bonds is:

1. Government National Mortgage Association
2. The Federal National Mortgage Association
3. The Federal Home Loan Mortgage Corporation

Municipal Bonds or "munis"

Municipal Bonds are issued by state and local government agencies to pay for civic and governmental programs. Some municipal bonds may also be exempt from state and local income taxes.

Different types of municipal bonds:

1. Revenue bonds.
2. General obligation bonds
3. Special project bonds

 What is with tax in Investment Bonds

At the time investment bonds are encased, the amount generated as profits are taxed as income rather than capital gains. Up to 5% of the original investment can be taken from an Investment Bond each year for 20 years without incurring an immediate tax liability. In the end the gain on final encashment is assessed in the tax year in which it occurs. Where no withdrawals have been made the chargeable gain is calculated by deducting the original investment amount from the policy‘s proceeds.

All amounts you receive from your Bond are free from personal liability to income tax at the starting and basic rates of income tax.

If you're over 65, your entitlement to age allowance could be affected. Any entitlement to Working Tax Credit or Child Tax Credit could also be affected.

Amount of Investment

Amount of Investment to invest for future needs depends upon these points:

1. Retirement
2. Protection for your family
3. Education for your children
4. Special needs or emergencies
5. Specific occasions.
6. Wealth accrual

After calculating the amount needed for each goal will help you to decide the amount and the duration of investment. 

Advantages of an investment bond

The main Advantages of an investment bond are:

1. A packaged investment for growth.
2. Can take income by cashing in units.
3. Simple to operate.
4. Wide range of geographical funds available.  

Amount withdrawn during the period.

5% of the original investment can be withdrawn each year for 20 years until entire capital is returned, deferring taxation until final encashment.

How to Invest In Investment Bonds. 

How to invest in investment bond is not a difficult task as there are many options available of taking a investment bond via branch network, over the telephone, via a written application or online through their website. By making a detail study on net one could get more information about different plans available on net.

The Amount which you get back depends upon such conditions:

How much you invested in bonds.
The length of time you invested for your bonds.
The performance of the funds you have chosen to invest.
How much charges are taken for investment.
The amount of any regular or one-off withdrawals you have taken.