Cash bonds

Reply: 1
From: Michael Croft

Think of a cash bond as an annuity. These are provided by major insurers and are essentially the same as a superannuation annuity.

The funding of an annuity (cash bond) and its impact on serviceability is what smarter property investors are using to good effect.

The risk with a cash bond/annuity is that the provider(s) goes broke and if this happened it would make HIH look like a walk in the park as Australia's super scheme would collapse.

Michael Croft
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Reply: 1.1
From: Steve Navra

Hi Michael,

BIG difference between the Major Life Insurers (Who provide pensions / annuities) and the General Insurers (HIH type of risk insurance)

It is about the level of guarantee they are able to offer - all to do with the amount of prescribed assets they hold. The Life insurers hold approx 12 X the security that the Major banks do. (Hence the funds are 12 times as safe!) Can't say the same about the general risk insurers.

Holding funds in the form of a pension / annuity / cashbond is about the safest home one can find for funds in this country.
This incidently is why we use the cashbond, so as to offer the best form of guarantee on the amounts invested - after all, most people utilise the equity in their homes for the purchase of such structure and you wouldn't want to be taking any risk with your home.

And yet, many still cross-collateralise their homes against various risk investments like property, margin lending /shares, warrants debentures, commodities to mention just a few!

Can anyone think of a safer home for one's funds?



Oh, about Jacinta's article - whatever these i.o.u. / promisary notes are, they are about the complete opposite of the cashbond!
The cashbond being a GUARANTEED annuity (Pension) which fully returns your funds plus interest and linked to the long term bond rate, which is a conservatively low return on investment.
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Reply: 1.1.1
From: Jas

Didn't know much about either, so thanks for clearing it up :)

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