Both Insurance Bonds (IBs) and Friendly Society Bonds (FSBs) are investments made with a single payment and have a nominal ten year term although the term may continue past ten years. Investment earnings accumulate within the bond on a regular basis and can accessed without further tax liability after ten years. Most bonds are unit linked so the value of the investment, including earnings, is reflected in the unit price. Bonds are most suitable for accumulating money but not for providing regular income payments.
Beneficiaries may be nominated indicating the proportion of the asset they are to receive. In the event of the death of the owner the proceeds of the bond are paid, free of further tax, to the nominated beneficiaries, by-passing the deceased estate and the risk of this distribution being contested.
IBs are provided by Life Insurance companies while FSBs are provided by Friendly Societies. Life Insurance companies and Friendly Societies are regulated by the Australian Prudential Regulation Authority (APRA) and by the Australian Securities and Investments Commission (ASIC).
Product providers may restrict the amount an investor can place in an individual bond or with a particular society. These restrictions and details of the types of assets that may be purchased should be outlined in the Product Disclosure Statement (PDS).