Prudence Bond with-profits

pnaj

Hi again,

One last related question. This investment has been in place since 1992 and no tax has ever been paid/taken since my parents had never taken any money out.

How would I go about calculating the tax that would be payable at any one time? I would assume that we would take the difference between the initial investment and the final payout and calculate accordingly ... so much at 20%, so much at 40%. Does that sound right?

Thanks guys.
Pnaj

johnllew

As I understand it, any gain (difference between price paid and total paid out) is regarded as having already suffered basic rate and capital gains tax. It is only if your mother is liable at the higher rate of tax (or the gain takes her into the higher rate band) than further tax is payable. There is "top slicing" relief which may mitigate or event cancel out any HR tax. More info on this here: http://www.pru.co.uk/content/acrobat/INVS0002.pdf

baby_boomer

But even with the info from the Pru, you don't know if it's acutally a good time to sell.

For instance, does any Pru MVR exceed the hit taken on the Pru WP fund? That would be the information I would want before making my decision.

Can members get this information from the Pru? Does an IFA have access to such information? Or are we doing the investment equivalent of sticking on the donkey's tail with a blindfold?

pnaj

Hi all,

Thanks for the link, john ... think I'm getting somewhere. Here's my calculation ... might help someone else, but if anyone thinks I've got it wrong, please let me know and I'll correct my post:

Having called the Pru, we got back the figures (roughly):

Initial Investment: £30K in 1992
Cash-in value inc. Final Bonus : £101K
MVR (groan) : -£8K
Actual balance: £93K

Profit: £63K (No withdrawals or credits paid in over the whole 16-year period)
Top-slice: £63K/16 ~ £4K

Now, this £4K is not going to take my mum into higher-rate tax so am I right in thinking that this means no tax will be due?

Glad I did my maths homework when I was a lad.

Cheers for any help.
Paul.

johnllew

pnaj wrote: »

Profit: £63K (No withdrawals or credits paid in over the whole 16-year period)
Top-slice: £63K/16 ~ £4K

Looks right to me. But why cash it all in now? Don't Prudential allow up to £25k encashment a year without an MVR? Can your mother not wait? £8k is a lot to lose.

dunstonh

Does an IFA have access to such information?

Yes. Once the policy if on that IFAs agency its just a few button presses to login to the Pru system and get the info you need.

Why does your mum want to cash it in? Returns are good. MVR is temporary. The investment bond doesnt exist for pension credit means test or local authority care means test. So, unless your mum is spending the money, there isnt much of a reason to move it.

pnaj

Hi dunstonh and johnllew,

Thanks for the 'why cash it in' comments. To be honest, we both had no clear idea whether or not it would be right to cash it in - all of it, some of it or none of it.

Just trying to get the real (current) value is a help, though. My mum's got various bits and pieces (some larger than others) dotted around in savings accounts, fixed-rate accounts, ISA's, etc. and I'm just trying to help her gauge what she's got, where it is and what it's doing for her.

Really appreciate the help,
P.

mrcrow

pm to pnaj