Scottish Widows Flexible Options Bond withdrawls

weezie7

Brilliant dunstonh, thank you so much, much clearer to me now! I will do as you suggest with just two policies segments each year, until I need more! Many thanks again.

weezie7

dunstonh, thank you for the clarity. That would be my plan.
However, I have just heard back from SW and they now tell me I can withdraw £1200 per month, which would pay the fees.......!!! Don't understand why they told me I couldn't do that initially!! Is this an option I should consider....? Pros and cons.....? 

dunstonh

weezie7 said:

dunstonh, thank you for the clarity. That would be my plan.
However, I have just heard back from SW and they now tell me I can withdraw £1200 per month, which would pay the fees.......!!! Don't understand why they told me I couldn't do that initially!! Is this an option I should consider....? Pros and cons.....? 

Surrendering of policy segments will be cleaner from a taxation point of view.   If you draw £1200pm it will generate a chargeable event across all the policy segments sooner or later as it will exceed the annual 5% deferral allowance.  Initially, it will use up any unused allowance rolled up from earlier years.  So, it will not be immediately.   Also, the deferral allowance only puts off the tax calculation until later.      Any withdrawals made that way are added back on to the value which could create a tax issue later on.

So basically, the £1200pm will be more convenient from a money control point of view (money in/money out each month) but could create a tax issue in the future.  However, surrendering 2 policy segments would be cleaner from a taxation point of view as there would be no tax issues but less convenient terms of having to so a surrender each year of 2 segments.

weezie7

Okay, I get that. Really clear and thank you dunstonh. I will go with my plan for withdrawing two policy segments a year. Many thanks again.

weezie7

Many thanks for all for their contributions, two segments withdrawn, was done during Corona, but all done easily and fairly quickly, was in account within 3 days of them getting my paperwork. Many thanks.