Advice Requested Please on Drawdown of Investment Control Bond
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Shampton
Posts: 2 Newbie
Good Morning All and hello, I have been a long time watcher but this is my first post, I hope it isn't too stupid.
I am age 59 and my wife is 54, we have both given up work and are living off my small works pension and drawdown of savings. We have an Investment Bond which is 6 years old and the initial investment was 48k into 10 equal segments, we have not touched this Bond and its current value is about 67k. I am thinking about the most tax effiicient method of drawing this down and would appreciate your advice. You will see, I am not well clued up on these matters.
I think that if we cash in completely 2 segments per year for the next 5 years then our tax liability will be as such. current value of the 2 segments minus 2 x 4.8k, split between the pair of us as the bonds are in joint names. My wife wouldn't pay any tax on her half as she is below the threshold and I would pay tax on my half less £1k personal savings allowance. Am I correct in my thoughts?
I would appreciate any help that folk are prepared to give and hope I haven't broken too many rules. Aye Steve H
I am age 59 and my wife is 54, we have both given up work and are living off my small works pension and drawdown of savings. We have an Investment Bond which is 6 years old and the initial investment was 48k into 10 equal segments, we have not touched this Bond and its current value is about 67k. I am thinking about the most tax effiicient method of drawing this down and would appreciate your advice. You will see, I am not well clued up on these matters.
I think that if we cash in completely 2 segments per year for the next 5 years then our tax liability will be as such. current value of the 2 segments minus 2 x 4.8k, split between the pair of us as the bonds are in joint names. My wife wouldn't pay any tax on her half as she is below the threshold and I would pay tax on my half less £1k personal savings allowance. Am I correct in my thoughts?
I would appreciate any help that folk are prepared to give and hope I haven't broken too many rules. Aye Steve H
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Comments
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As a bond holder rather than an expert......
The taxation of investment bonds can get quite complicated. Suggest you have a look at what the pru website says - it seems to be described as clearly as it can be.
Basically, assuming yours is a standard UK one, you can withdraw 5% of the original investment/year without any tax being deducted at that time. The 5% is carried forward for years where you dont withdraw anything. However I found with a pru bond that they wouldnt let me take more than 7.5% annually even though I had some 15 years of non-withdrawal.
When you take larger amounts you will be subject to tax only if the gain treated as income brings you into a higher rate tax band. Standard rate tax is considered as having already been taken by the bond manager. Look at the pru reference for the details.0 -
The cashing of segments acts as a surrender of that part of the policy. The gain, after top slicing relief is added to your income. If you remain a basic rate taxpayer after that, then there is no further tax to pay. If it takes you into higher rate, then the top slicing relief is lost and you have to pay additional tax.
As it is joint and assuming 50/50, then any gain is shared equally between you before you add it to your income for calculation.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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