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Investment bonds are often misunderstood but are a very effective way to save for the future.

Whether it’s saving to buy a home or working towards paying off a mortgage, a trip of a lifetime, putting away some extra money for kids or retirement. Not sure of what an investment bond is, or how it works? Then let us help break it down.

What is an investment bond?

An investment bond is a savings product, but unlike traditional savings or investment products, investment bonds have unique tax effective features.

Investment bonds are all about establishing long-term regular savings habits. If you continue to save and hit the 10-year mark, you can withdraw with no personal income tax to pay.  And you’re not locked in, you can easily access your money at any time (unlike Super) and still benefit from a 30% tax offset.

An investment bond also has similar features to managed funds or superannuation and should not be confused with Government or Corporate bonds which are significantly different.

Like a managed fund, the money you invest is pooled with other investors. Each investor selects where their money is invested, from different investment options. The investment options generally include cash, shares, fixed interest, and property, with a range of risk levels that help determine how conservative or aggressive you want to be with your investment.

Another feature of an investment bond includes the ability to nominate a beneficiary for the investment, just like you would with your superannuation. This means that should you pass away, your funds will go to your nominated loved one, trust or even charity; the advantage of an investment bond is that you can nominate any person/charity/trust, whilst Super generally restricts beneficiaries to dependants only.

By getting started and saving often, you can let the power of compound interest, coupled with the tax effectiveness, help to accelerate your savings. Compound interest means that interest earns interest and the long-term funds can make a real difference to savings. 


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