As tax planning grows more complex and market volatility continues to test clients’ confidence, advisers are under more pressure than ever to deliver value, not just in terms of investment performance, but in helping clients feel secure and in control.

One solution is quietly regaining its place as a smart, versatile wrapper for a broad range of clients: onshore bonds. And with products like the LV= Smoothed Bond (Onshore), advisers can offer clients both tax efficiency and emotional reassurance, a powerful combination in today's planning environment.

The planning landscape has evolved

The appeal of onshore bonds isn’t new, but the reasons to use them have grown stronger in recent years. Key drivers include:

Tax compression

Frozen tax thresholds have pulled many clients into higher-rate tax, even without a change in income. The dividend allowance has dropped to £500, and the CGT allowance now sits at just £3,000, making previously tax-efficient solutions less attractive. For clients trying to keep income below tapering thresholds (such as the personal allowance or child benefit), onshore bonds offer control over when and how tax is paid.

Market volatility

Clients who remain focused on long-term goals still struggle emotionally with investment swings. Behavioural finance tells us that staying invested is half the battle, and smoothed investment options, such as the LV= Smoothed Bond (onshore) can make this easier.

Administrative simplicity

Trustees, business owners, and clients in later life are increasingly seeking investment solutions with less complexity, both in tax treatment and reporting.

The modern benefits of onshore bonds – at a glance

Tax Deferral: Investors can defer tax until a chargeable event occurs — useful for income smoothing or long-term wealth planning.

5% Tax-Deferred Withdrawals: Clients can withdraw up to 5% of the original investment each policy year, cumulatively, without an immediate tax charge.

Top Slicing Relief: For higher- or additional-rate taxpayers, top slicing can reduce the tax on bond gains if the gain pushes them into a higher tax band.

No Capital Gains Tax: Unlike many other investment options, onshore bonds aren’t subject to CGT.

Trust Planning: Effective within discretionary trusts with aligned tax treatment and lower reporting requirements.

Estate Planning and Control: Used in loan trusts, discounted gift trusts, and gift and loan strategies for IHT benefits without loss of access.

Please note: How much tax you pay depends on your personal circumstances. Any references to taxation are based on our understanding of current legislation and HM Revenue & Customs practice which can change.

The LV= Smoothed Bond (Onshore)

The LV= Smoothed Bond (Onshore) brings together the structural advantages of an onshore bond with LV’s well-established smoothing mechanism*, designed to reduce the impact of short-term volatility and deliver a smoother investment experience.

Key Benefits for Clients:

• Our unique smoothing mechanism helps reduce the emotional impact of market ups and downs.
• We offer a range of smoothed risk-rated fund options to suit different client goals and risk appetites.
• Our Smoothed Bond also offers flexible access to capital and income via the 5% withdrawal facility.
• Your clients can access client-friendly reporting and transparency through ‘My LV=’.
• Clients will also be eligible for a number of additional benefits and the potential for a mutual bonus**.

Although our smoothing process aims to reduce the impact of sudden market movements, it doesn’t mean investments won’t drop in value. It doesn't prevent losses due to a long-term falling market.

Final thought: more than just a wrapper

Onshore bonds, particularly those offering smoothing and flexible access, like the LV= Smoothed Bond (Onshore), have become increasingly relevant in a world where tax rules are tighter and client expectations are broader.

They’re no longer niche tools. They’re multifunctional planning assets, helping advisers deliver not just tax efficiency, but emotional confidence, flexibility, and peace of mind.

It’s not about going back to old solutions. It’s about rethinking how smart planning tools can meet modern client needs, and giving advisers a way to deliver genuinely holistic outcomes.

Visit our LV= Smoothed Bond page to find out more.

* Please note that smoothing can be suspended if there are extreme market conditions, or at our discretion.

** Our mutual bonus isn’t guaranteed, and the amount can vary. Each year, the LV= Board decides if a mutual bonus can be awarded. The decision is guided by the Board's overriding responsibility to balance the need to deliver for our members both today and in the future, against LV’s investment needs and projected financial strength. Any past mutual bonuses could be reduced or removed, though could be reinstated at a later date.