4Definition of personal portfolio bond (applying to all policies or contracts whenever issued or made)
(1) Subject to paragraph (2) and regulation 3, “personal portfolio bond” means a policy of life insurance, contract for a life annuity or capital redemption policy under whose terms—
(a) some or all of the benefits are determined by reference to the value of, or the income from, property of any description (whether or not specified in the policy or contract) or fluctuations in, or in an index of, the value of property of any description (whether or not so specified); and
(b) some or all of the property, or such an index, may be selected by, or by a person acting on behalf of, the holder of the policy or contract or a person connected with him (or the holder of the policy or contract and a person connected with him).
(2) A policy or contract is not a personal portfolio bond if—
(a) the only property which may be selected as mentioned in paragraph (1)(b) is of the description prescribed by either or both of paragraphs (3) and (4), and
(b) the only index which may be selected as mentioned in paragraph (1)(b) is of the description prescribed by paragraph (7).
(3) The description prescribed by this paragraph is of property which the insurance company has appropriated to an internal linked fund, where the property satisfies the condition specified in paragraph (5).
(4) The description prescribed by this paragraph is of property consisting of any of the following—
(a) units in an authorised unit trust within the meaning of subsection (6) of section 468, read with subsections (7) to (9) of that section,
(b) shares in an investment trust within the meaning of section 842,
(c) shares in an open-ended investment company within the meaning of section 75(8) of the Financial Services Act 1986,
(d) cash, including cash deposited in a deposit account or share account with a building society, or in a bank account or similar account, except where the acquisition of the cash was made wholly or partly for the purpose of realising a gain from the disposal of it,
(e) policies or contracts to which Chapter II of Part XIII of the Taxes Act applies, which satisfy the conditions specified in paragraph (6), and
(f) an interest in a collective investment scheme which is constituted by—
(i) a company, not being an open-ended investment company, which is resident outside the United Kingdom,
(ii) a unit trust scheme the trustees of which are not resident in the United Kingdom, or
(iii) any arrangements which do not fall within paragraph (i) or (ii), which take effect by virtue of the law of a territory outside the United Kingdom and which, under that law, create rights in the nature of co-ownership (without restricting that expression to its meaning in the law of any part of the United Kingdom),
where the property concerned satisfies, or further satisfies, as the case may be, the condition specified in paragraph (5).
(5) The condition specified in this paragraph is that, at the time when the property is available to be selected, the opportunity to select property of the same description as the first-mentioned property is available to, or to persons acting on behalf of, all the policy holders of the insurance company concerned or one, or more than one, class of policy holders of that insurance company, as mentioned in paragraph (8)(a) to (c).
(6) The conditions specified in this paragraph are that neither—
(a) the policy or contract, nor
(b) any property by reference to which the value of any benefits under the policy or contract is or has been directly or indirectly capable of being determined, nor
(c) any property which, in relation to the policy or contract, or the premium paid in respect thereof, is “derived property” within the meaning of section 660A(10) of the Taxes Act,
is a personal portfolio bond.
(7) The description prescribed by this paragraph is of indices consisting of any of the following—
(a) the retail prices index,
(b) any similar general index of prices which is published by the government of any foreign state, or by an agent of such a government, or
(c) any published index of prices of shares listed on a recognised stock exchange,
in circumstances where, at the time when the index is available to be selected, the opportunity to select the same index is available to, or to persons acting on behalf of, all the policy holders of the insurance company concerned or one, or more than one, class of policy holders of that insurance company, as mentioned in paragraph (8)(a) to (c).
(8) In paragraphs (5) and (7) a “class” of policy holders means a number of policy holders to whom the opportunity is given to select property or an index as mentioned in paragraphs (5) and (7) in circumstances where—
(a) that opportunity is clearly identified in marketing or other promotional literature published by the insurance company concerned to members of the public, or members of the public who are intending investors, as available generally to any person falling within its terms,
(b) the class and the opportunity are not limited to connected persons, and
(c) the composition of the class (which means the inclusion in or exclusion from the class of any person, or the ability of that person to take the opportunity, if he so chooses) is determined by the insurance company alone.
Specified date: 6 April 1999 (with respect to any year ending on or after 6 April 2000): see reg 1.