Cashing aviva bond

ross1892

My mother has had a 5 year with profit fund. It has just matured and she has been informed there will be a charge for every time she withdraws money. She was under the impression when she took it out in 2007 that she could just take out the ammount when it matured. The ammounts involved are that she invested £122000 in 2007 and now the total bond value is £144581 and the cash in value is £156585.

What is the best way to advise her to remove this money with leat penalties and the least tax implications.

Thanks

ross

jem16

ross1892 wrote: »

My mother has had a 5 year with profit fund. It has just matured and she has been informed there will be a charge for every time she withdraws money.

Not sure what you mean by that. Normally with an Investment Bond, you could cash 5%pa with no charge or tax due.

She was under the impression when she took it out in 2007 that she could just take out the ammount when it matured.

It would be fairly normal to have a penalty free withdrawal after 5 years. As it's a with-profits fund there may be an MVR but possibly a window of opportunity to exit with no MVR. Have Aviva mentioned the MVR?

The ammounts involved are that she invested £122000 in 2007 and now the total bond value is £144581 and the cash in value is £156585.

What is the best way to advise her to remove this money with leat penalties and the least tax implications.

Thanks

ross

What is your mother's tax status now? If she cashes the whole bond in there would be a chargeable gain of £34,585. The top slice of this is £6917 and would be added to her income for tax purposes. This may move her into a higher tax bracket. If she is over 65 and receiving the higher personal allowance, the whole gain is used and she may lose some of her higher personal allowance.

Has she made any withdrawals over the last 5 years? If not she may be able to use the 5%pa that she would be allowed and take them all at once.

dunstonh

Aviva have not sold maturing plans for many years (not including structured products here). The 2007 investment bond had a guarantee option or an RPI option but did not mature. It was open ended.

One of the options available 5 years ago was a 5 year MVR free exit point. You could exit at that point and if there was an MVR it would be waived. However, if you did not exit at that point then it would apply until the next MVR free exit point (assuming there was still an MVR).