Countrywide Assured Endowment and tax Liability

Fredi

Hi,

I apologise if this thread already existed. I did a quick search, but did not find anything similar.


I recently received a letter from Countrywide Assured informing me that there will be a shortfall in my endowment policy and therefore the premium will need to be increased to hit the targeted amount. After some thoughts, I did not think throwing extra money into a furnace was a good idea and declined their offer. They have now written back to me saying that this action has broken some rules set out by the IR and therefore the policy will now be liable to tax. If anything, I thought changing the premium would break the IR tax rules.

1) Can someone knowledgeable in this matter comment?

On a slightly different subject but still related to endowment, I will be paying off my mortgage early in a few months time. This endowment is therefore nothing more than a saving account. For this reason, I am wondering:

2) if it's worthwhile for me to remove all life assurance and premium protection from the policy. The protection benfits currently made up 15% of the premium

3) will removing the protection benefits put the policy liable to tax


Thanks in advance for your comments/suggestions/advices/opinions.



F

dunstonh

1) Can someone knowledgeable in this matter comment?

They are wrong.

Endowments have to have at least 10 years at the same premium level to ensure they qualify under HMRC rules. Changing the premim breaks the qualifying rules and starts the clock ticking again. i.e. changing the premium in years 14 of a 25 year term will allow the policy to requalify as it has 11 years. Whereas changing the premium in year 16 would break it and it would be unable to requalify.

2) if it's worthwhile for me to remove all life assurance and premium protection from the policy. The protection benfits currently made up 15% of the premium

You cant. It will cease to be a qualifying policy if you do that and most endowments wont let you make amendments like that.

Fredi

Thanks Dunstonh for your post. My endowment has past the 10yrs mark. Could you point me to any literature that states CA is wrong? I've also spoken to someone at the IR centre and they have been less than helpful. I've also read te IR320 leaflet, but it's very non specific.


Thanks in advance.


F

ClownFish_2

Fredi,

I recently received the same letter from Countrywide Assured informing me that there will be a shortfall in my endowment policy and therefore the premium will need to be increased. I wrote to say that I wanted my premiums remained at the previous level of £67 as there was no guarantee that the increase in premiums would lead to an increase in payout. I received a letter saying that to decline the increase in premium would make me liable to pay tax on my policy proceeds... I am a basic tax payer and wondered if it is worth paying the increase (£40) or not - How did you reslove the dilemma? All thoughts much appreciated.