As interest rates on traditional savings accounts stay low, Irish investors are looking for better ways to grow their money. One option rising in popularity is the unit-linked investment, often accessed through an Investment Bond. These investments offer the benefits of flexible access, expert fund management, and strong long-term growth potential. However, they also come with important factors around risk and taxation that you need to consider.

In this post, Stephen Donnelly (QFA, RPA) from Donnelly Financial Planning explains what unit-linked investments are, how Investment Bonds work, and the key points every investor should know before deciding if this is right for them.

A Guide to How Investment Bonds Work

If you’re looking to make your money work harder in today’s low-interest environment, you may have come across the term “unit-linked investment.” These investments, often offered through Investment Bonds, have become increasingly popular among Irish investors seeking long-term growth and flexibility.

While the terminology can sound complex, the principles are straightforward once explained. Let’s take a closer look at what unit-linked investments and Investment Bonds are, how they work, and what you should consider before investing.

What Is a Unit-Linked Investment?

A unit-linked investment is an investment where your money is used to buy units in one or more professionally managed funds. Each fund invests in a mix of assets such as shares, bonds, property, and cash.

The value of your investment is directly linked to the performance of the underlying funds — hence the term “unit-linked.”

When the funds perform well, the value of your investment rises.
When the funds fall in value, your investment decreases.

Unlike a fixed-rate deposit, a unit-linked investment doesn’t offer guaranteed returns — but it does provide the potential for higher growth over time.

What Is an Investment Bond?

An Investment Bond (sometimes called an Investment Policy or Unit-Linked Bond) is a single-premium unit-linked investment.

This means:

You invest a lump sum, typically €10,000 or more.
Your money buys units in your chosen investment funds.
The bond’s value moves in line with the performance of those funds.

Investment Bonds are designed for people who want to invest a lump sum for medium- to long-term growth, usually over five years or more.

They’re commonly chosen by investors who have received an inheritance, sold an asset, or built up savings and who want an alternative to keeping cash on deposit.

Key Features (as of 2025)

1. Access to a Wide Range of Funds

Investment Bonds give you access to a broad selection of funds, from cautious to adventurous. You can choose equity, property, bond, or multi-asset funds, and many providers now offer ESG (Environmental, Social, and Governance) options for responsible investing.

2. Flexibility

You can usually switch between funds, withdraw money when needed, or set up regular withdrawals to create an income stream all within certain limits.

3. Tax Treatment

In Ireland, Investment Bonds are taxed under the life assurance “exit tax” regime, currently at 38% (as of 2025).This tax is deducted automatically by the provider when a gain is realised or on the 8-year anniversary of the policy, whichever comes first.
The advantage is simplicity — you don’t need to include the investment on your annual tax return, as the provider handles the tax deduction on your behalf.

4. Estate Planning Benefits

Because an Investment Bond is structured as a life assurance policy, it can be set up on a single- or joint-life basis. This can offer estate-planning advantages, making it easier to pass assets to beneficiaries efficiently.

Why Consider an Investment Bond?

Investment Bonds can be a valuable option if you:

Want to invest a lump sum for long-term growth potential.
Prefer professional fund management rather than choosing investments yourself.
Value flexibility — the ability to switch or withdraw funds.
Appreciate a tax-efficient structure where tax is deferred until gains are realised.

However, they’re not suitable for short-term goals or for those who need guaranteed returns. The value of your investment can fall as well as rise, and charges will vary by provider and fund choice.

Important Considerations

Before investing, it’s essential to:

Assess your risk tolerance and time horizon.
Understand the charges — including fund management fees and early withdrawal penalties (if any).
Review your investment regularly with a qualified financial advisor to ensure it remains aligned with your goals.

Summary

An Investment Bond is a unit-linked, lump-sum investment that provides access to a diverse range of professionally managed funds. It offers flexibility, potential growth, and useful tax advantages — but it also carries investment risk.

In the right circumstances and with the right advice, an Investment Bond can play an important role in building long-term financial security.

Talk to Stephen Donnelly, If you’re considering whether an Investment Bond aligns with your personal financial goals, we’re here to help. Contact our team for a confidential consultation, and together we’ll explore how to make your lump-sum investment work effectively for your future.

Frequently Asked Questions About Unit-Linked Investments and Investment Bonds in Ireland

1. What is the difference between a unit-linked investment and an Investment Bond?

A unit-linked investment links your money directly to the performance of one or more investment funds.
An Investment Bond is a specific type of unit-linked life assurance policy where you invest a lump sum (single premium) into these funds.
Put simply, all Investment Bonds are unit-linked, but not all unit-linked investments are structured as Investment Bonds.

2. How long should I hold an Investment Bond?

Investment Bonds are best viewed as medium- to long-term investments — typically five years or more.
This allows your funds time to grow and smooth out short-term market fluctuations, improving your chance of positive returns.

3. Can I access my money early?

Yes. You can usually make partial withdrawals or set up regular income payments from your Investment Bond.
However, withdrawing funds early may affect growth potential, and in some cases, early encashment charges may apply.

4. What is the minimum lump sum to start an Investment Bond?

Most Irish providers require a minimum investment of around €10,000, though some may accept smaller amounts depending on the product and provider.

5. How is tax applied on Investment Bonds in Ireland (2025)?

Investment Bonds are subject to life assurance exit tax, currently 38% (as of 2025).
This tax is automatically deducted by the provider either when gains are realised or at the 8-year policy anniversary, whichever comes first.
Because the provider handles the deduction, you don’t need to declare the investment growth on your annual tax return.

6. What happens to my Investment Bond when I die?

An Investment Bond is a life assurance policy, so the proceeds are paid out to the estate when the life assured (or last life assured) dies.
This can make it a useful tool for estate planning, helping to transfer wealth efficiently to your beneficiaries.

7. Are Investment Bonds risky?

Yes! as with all investments, there is some level of risk.
The level of risk depends on the funds you choose. Investors can select from cautious, balanced, or adventurous fund options to suit their personal risk tolerance and financial goals.

8. Can I switch funds within my Investment Bond?

Yes. One of the key advantages of unit-linked bonds is flexibility. You can switch between funds (usually free of charge within limits) if your circumstances or market conditions change.

Who should consider investing in an Investment Bond?

Investment Bonds are suitable for investors who:

Have a lump sum to invest (e.g. from savings or inheritance).
Can commit to a medium- to long-term timeframe.
Are comfortable with investment risk and want professional fund management.
They may not be suitable for short-term investors or those needing guaranteed capital.

For Unit-Linked Investment Advice or Help

If you’d like to understand whether an Investment Bond suits your personal financial goals, we’d be delighted to help. Stephen and the team can help you assess your goals, risk tolerance, and investment timeframe, ensuring any decision fits your overall financial plan. If you’d like expert guidance on unit-linked investments or Investment Bonds, contact Stephen Donnelly, QFA, RPA

Author

Stephen Donnelly, QFA, RPA Qualified Financial Adviser and Retirement Planning Adviser
Donnelly Financial Planning is Regulated by the Central Bank of Ireland

Disclaimer:

This article is for general guidance only and does not constitute financial advice.

Please consult a regulated financial advisor for recommendations tailored to your personal circumstances.

Donnelly Financial Planning Ltd is regulated by the Central Bank of Ireland.