Moneybuilder - should I cash in

Arlene_Robertson

I set up what I thought was a pension through RNPFN which was taken over by Liverpool Victoria. It is apparently called a moneybuilder policy now. It is due for maturity / release in 2 years. I asked about release now and they told me that if it was released early there was no penalty apart from the fact I would have to pay full tax on it. Is this right ?
Also is it possible to have a small amount released to keep below the tax bracket . It seems so wrong to be taxed on what you have saved for all your life ? Any thoughts on a way round paying the tax on this savings if I release early ?

Pyxis

Did you not get tax relief on your payments into the fund?

That's why you would be taxed if you draw it out.

I think, anyway.

dunstonh

I set up what I thought was a pension through RNPFN which was taken over by Liverpool Victoria. It is apparently called a moneybuilder policy now.

I believe that would be an endowment policy.

and they told me that if it was released early there was no penalty apart from the fact I would have to pay full tax on it. Is this right ?

If it was a non-qualifying endowment then you would pay tax if the gains take you into higher rate. If its a qualitying endowment plan, then as long as you have done 10 years of paying in, then there is no further tax to pay.

Also is it possible to have a small amount released to keep below the tax bracket .

Some do allow partial surrenders but on monthly premium endowments that is not common. Also, a partial surrender could trigger a chargeable gain on the whole amount and create more tax than a full surrender.

SamsReturn

I think you're allowed to withdraw 25% without paying tax.
You need to give a few more details, the figures and someone will be able to help better.

Malthusian

As DunstonH says it is probably an endowment - not a pension - and posts #2 and #4 do not apply.

xylophone

If it was a non-qualifying endowment then you would pay tax if the gains take you into higher rate. If its a qualitying endowment plan, then as long as you have done 10 years of paying in, then there is no further tax to pay.

https://www.gov.uk/hmrc-internal-manuals/insurance-policyholder-taxation-manual/iptm2020

https://www.gov.uk/hmrc-internal-manuals/insurance-policyholder-taxation-manual/iptm2020

https://www.lv.com/investments-advice/about-rnpfn/useful-information

Arlene_Robertson

Thanks for all your replies

No I did not get tax relief on this savings at all

So you think I can take out 25 percent of the lump sum without penalty. ?

I do not know if its an endowment as it started as the royal national pension fund for nurses ?

Arlene_Robertson

Is money spinner a "qualifying endowment plan " ?

dunstonh

The Royal National Pension Fund for Nurses was a society and not a product. They offered a range of products. This included endowments and pensions.

Pensions do not mature. Endowments do. The product name is more consistent with an endowment than a pension. The era these were taken out was back in the days of home collection insurance agents. I believe that the moneybuilder is an industrial branch policy. Chances are it has a sum assured to which bonuses are added to.

Most of these were taken out in the 80s or earlier and may have qualified for LAPR (life assurance premium relief). However, until you know exactly what the plan type is, then you shouldnt be guessing what you can do with it.

edit: I found out for you. it is an endowment policy.

wannaberichbtch

The policy is indeed an endowment type but is unusual in that upon maturity you are offered the following options:-


1. Take the full maturity proceeds as a tax free lump sum.


2. Take a single life, level term annuity which ceases on the
policy owners death. The income from the annuity is
classed as unearned, and would be taxable if you exceed your
personal tax allowance.


Maturity is usually around the policyholders 60th birthday, but some are 55. The annuity offered is usually around 8.5% of the
lump sum, so is reasonably generous in today's terms.


If you surrender the policy prior to maturity you are not eligible for the annuity option.


Hope this helps.

Arlene_Robertson

Thank you all for your contribution which is most helpful. I am still gathering the pieces of my jigs and its good to get help making it so comments much appreciated ! I guess my final question is this. If I cash in 2 years earlier than the full 30 years is there away of avoiding paying tax as I understand I won't pay tax if i wait till maturity (just would like the lump some now).