Cash in a 15K With Profits Fund?

Matticus

I turned 21 in February and according to my Grandmother's will am now allowed access to my inheritance.

This has been in a Prudential With Profits Fund and is currently worth just over £15,000. I currently have an HSBC online saver, an ICESave Account and have subscribed £100 into a Barclays ISA (though it hasn't been processed yet :rolleyes:).

The money is held in trust with myself as the beneficiary and my father and a solicitor acting as trustees. Currently it is still in trust but we're looking at transfering it into my name or encashing the entire fund as appropriate.

£10,500 was invested in April 12 2001, as of April 12 this year the cash in value was £15,108.71. This is ~%50 growth in 6 years, though initially slow to perform with balancing and MVRs, in the 2006-2007 tax year it grew from £13,678.47 to £15,108.71, just over 10%.

The way I see it I have three options:

1. Partial Encashment - Take out about 5K to fund my student lifestyle until graduation in July as well as summer travel plans and top us the ISA.
2. Total Encashment - Remove it all, fill up ISA and put the rest in ICESave or similar
3. Do Nothing - Leave it as is and hope it continues to perform.

So essentially is it worth taking some or all of the money?
Is the money better placed here earning ~10% or in a tax free wrapper at 6.5% (I don't pay tax at the moment but am starting a job in Sep which will put me in the middle tax band)
How likely is to continue performing at 10%?
Is this still true if make a withdrawal?

Thanks,

Matt

EdInvestor

I am not sure what rules might apply for a bond in trust like yours, but normally these WP bonds will allow you to take 5% out per annum tax free without penalty, and this is cumulative, so you could be able to get 3,150 out immediately with no problems.You need to check for any penalties and taxes that might apply if you cash in the rest and when you can do the cashing in to avoid this.

Bonds like these are not usually suitable for non or basic rate young taxpayers as you are charged taxes on the investments within them that you cannot reclaim.They also levy high charges.

Assuming you wish to continue to invest the money in a mix of risk based investments, you would be better to use a mini S&S ISA (assuming you already have a cash ISA) for 4k of the money ( the property and bonds bit) and invest the rest directly into funds (the equities bit) using a discount broker such as https://www.h-l.co.uk which will rebate the charges and offer quality fund choices.

TBeckett100

keep one segment in there, the pru will allow you to top up without starting exit penalties again,could be useful for the future

dunstonh

Plus Pru are looking at dispersing orphan assets at some point. We dont know much at this stage but its worth leaving a bit in the with profits fund so you qualify.

Bonds like these are not usually suitable for non or basic rate young taxpayers as you are charged taxes on the investments within them that you cannot reclaim.They also levy high charges.

I'm afraid that Ed posts this on every investment bond post but it just isnt the case with every investment bond.

Looking at the Pru Flexible Investment bond from around that time and assuming the adviser took full commission (no discounts), the reduction in yield over 5 years equates to 0.8% p.a. That is very low as most of the investments Ed would have you looking at are 1.5% p.a.