The game is bond..

Think carefully when you’re deciding how to invest your cash during retirement

Q I RETIRED in March 1993 after 44 years service with British Rail. I consulted a financial adviser who set up two Clerical Medical bonds

The original companies have changed several times, which I am informed is causing no change to the rules concerning my investments.

Am I still allowed to receive five per cent tax free? William Nimmo

A This is an interesting question and one we haven’t covered before. First of all, a bit of background for other readers on the “bonds” you purchased. When investors talk about bonds, there is often confusion between the bonds that you can buy in a bank or building society, the bonds that you can buy from the Government or a limited company, and the bonds you buy from insurance companies, like the one we are looking at here. A Government bond, or a corporate bond, is generally a loan that an individual makes to a government or company usually for a fixed period of time and at a fixed or variable rate of interest. Interest will be paid on the bond until the date the bond is redeemed at which point the investor will get their money back. A building society bond is just another name for a deposit type account, usually offering a fixed rate of interest for a fixed period of time.

The investment bond you were sold when you retired is a different type of beast altogether. It is, in fact, a type of life assurance policy and this is important to keep in mind when we come to look at the taxation of the bond.

You’ll probably have invested a lump sum into each bond when you set them up. Because you’re asking about income, I presume you are taking, or have taken, some sort of income from the bonds since you set them up. You ask whether that income is tax free and the short answer is no, it has never been tax free.

What you can do is to take up to five