tax on endowment question

aiminghigh

Hi
I would appreciate any help please.

I have today received notice of my maturing endowment policy from scottish/amicable prudential after 25 years!!!!

In November they said it would be £28,500 now its down to £26,500.

I rang and they said it was because of the state of the markets but £2,000 down in just over a month is rediculous.

They also said I have to pay tax on it which is a shock.

How much tax and why?

Please help as most of this was going to pay off oustanding loans and help my kids with theirs.

dunstonh

I rang and they said it was because of the state of the markets but £2,000 down in just over a month is rediculous.

Why is it ridiculous? Didnt you follow the news in October and November last year when the stockmarket dropped over 20%? You suffered a 7% drop. So, well done Pru.

They also said I have to pay tax on it which is a shock.

You dont have to pay tax unless some of the maturity involves interest. Interest is often added if the maturity is paid out more than a few days after maturity.

aiminghigh

Thankyou dunstonh

It was a shock because my sisters policy had paid out a month before and she got the full amount quoted 3 months previously.

She was told by legal and general that the policy after 25 years was unlikely to be altered in the last 3 months and it wasn`t.

mine was.

AND its not well done pru at 7% - the £2,000 was taken off the £8,000 terminal bonus - the other amounts had been accrued over the 25 years and could not be altered.

This is more like a 25% drop not 7%

dunstonh

It was a shock because my sisters policy had paid out a month before and she got the full amount quoted 3 months previously.

The drops in October were sudden and sharp. That was why they were on the news. Drops tend to be slower and over a longer period. They couldnt absorb the drops like they would have done had it only been a smaller amount.

AND its not well done pru at 7% - the £2,000 was taken off the £8,000 terminal bonus - the other amounts had been accrued over the 25 years and could not be altered.

This is more like a 25% drop not 7%

£2000 down on a £28k value is 7%. A 25% drop would have seen it go to £21k.

The terminal bonus is just one part of the return. The annual bonuses and guaranteed sum assured are the other part and they were not reduced.