Distribution Bonds

The main feature of Distribution Bonds, apart from their lower risk profile, is that they address the traditional problem with many income producing investments - the fact that it is sometimes difficult to tell whether it is truly income you are spending - or whether you are simply eating into your capital.

Distribution Bonds produce dividends twice a year regardless of the value of the capital - so if you simply spend the dividends, you know with certainty that you are not eating into your capital at all. There are one or two exceptions to this - some investment managers do reserve the right to take from the capital to supplement the income. The value of the underlying funds will vary according to the markets.

As a general rule the underlying funds are pretty conservative - though they will include exposure to shares. Several of the leading insurers offer products in this area.

See also: Insurance Bonds - overview , With-Profits bonds, Managed Bonds

Last Updated: June 2007 © Moneyextra.com

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