Advert Descriptions of Insurance

The description can be applied only to those investments which are genuinely tax-free, such as National Savings Certificates or friendly society bonds; with these, no tax is payable either by you or by the organisation running the investment. On the other hand, the proceeds of some types of life insurance may be tax-free in your hands but the insurance company itself will already have paid, or set aside amounts to cover, income tax, corporation tax and capital gains tax.

You can't reclaim the tax paid by the company.

In such instances, the words 'tax-free' may still be used but the fact that the proceeds are payable out of a fund from which tax on income and gains has already been paid must also be stated and given equal prominence - in other words, the information can't be tucked away in tiny print where it might easily be missed.

WARNING Do not confuse the words 'income paid free of tax' with 'tax-free'. The former means that income from the investment is handed over to you before any tax has been paid - for example, as with National Savings Income Bonds or British Government stocks (except when bought through the Post Office - see p. ). But these proceeds count as taxable income and you may have to pay some tax depending on your particular circumstances.

Performance claims '22 per cent a year - unit price growth since 1976' and similar phrases used to be common enough claims. A more colourful alternative was a graph showing clearly the staggering growth of the fund. This technique invites you to think that future growth will be as good. But a great deal of research - much of it in universities and business schools both here and in the US - strongly concludes that past performance is not a reliable guide to the future. Performance claims can still be used in advertisements, but they must carry a warning that past performance is not necessarily a guide to future performance. And the new rules limit the ways in which past performance can be quoted so that advertisers can't create a misleading impression by deliberately picking on a period of exceptional growth. Even so, you'd be wise to pay little heed to performance claims.

WARNING The rules do not set out any specific form of wording, leaving the way open for cloudy variations. For example, an advertisement can legitimately say: 'Though past performance cannot guarantee the future, the figures speak for themselves.' Translation: 'We've got to warn you about investment performance in general, but don't worry about ours!'

Investments And Non-taxpayers

Advertisements For Investments

The British Code of Advertising Practice rules applying to investment advertisements are fairly general. Much more detailed and stringent rules were introduced under the Financial Services Act. The most important of these are outlined below.

WARNING The Financial Services Act (and hence its rules governing advertising) doesn't apply to deposit-type investments, such as bank and building society accounts, National Savings Bank accounts, and deposit-type pension plans.

Who, what and where An advertisement must include the name of the advertiser and, in most cases, the name of the... see: Advertisements For Investments

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