International bonds are growing in favour among advisers with the bonds popular for IHT planning, according to Canada Life UK.

It said its research among advice professionals in the UK, signalled a clear direction of travel with the trajectory set to continue over the next five years.

For firms already using international bonds, almost three-quarters, 71%, said that they expect to be using them more in five years’ time than they are currently.

Of firms already recommending international bonds to their clients, two thirds, 66%, reported doing so more often than they were five years ago. A third, 33%, said they believed it was about the same, with just 1% saying they were recommending the product less. 

Among the advisers surveyed that did not currently recommend international bonds, most were of the opinion that it will change in the coming years. More than three-quarters, 77%, expected to be doing so a little, 59%, a moderate amount, 14%, or a lot, 5%, more in five years’ time. 

The most popular reasons advisers cited for choosing international bonds for clients over alternatives was inheritance tax planning, with four-fifths, 80%, choosing the option. Second most popular reason was “gifting in the most efficient way, picked by 54% of advisers.

The factors that determined which international bond provider to use, were servicing (69%), the reputation of the provider (63%) and the range of estate planning/trust options (61%).

Sean Christian, managing director wealth division, Canada Life UK, said: “The international bond market is gaining real momentum as advisers look to solutions that can flex with changing client needs.

“International bonds are a regulated solution that comprise a wide range of investments and estate planning opportunities. A shifting tax landscape, with changes to capital gains tax allowances and inheritance tax, means advisers are seeing clear demand for this type of solution. 

“With further tax changes speculated at the upcoming Autumn Budget, products like international bonds are likely to come into sharper focus as advisers look to solutions that enable clients to pass on wealth efficiently to their loved ones.”