Should I transfer from an SJP International Investment Bond to a UK-based ISA?

Octopussy91

I used to live abroad and built up about £250k in a medium risk, multi-asset International Investment Bond with St James' Place.  It's returned about 6% on average since I set it up exactly 7 years ago.  It's well outside the scope of its high early-years fees and I could cash it in for its full value.

I've been back in the UK for more than a couple of years now, and I'm starting to consider my options.  Should I start to cash it in and drip feed it year-on-year into a UK-based ISA instead?  Are the tax benefits - as well as the potentially better performance of self-chosen funds - likely to make such a switch worthwhile?

All thoughts welcome.

dunstonh

Should I start to cash it in and drip feed it year-on-year into a UK-based ISA instead? 

Are you able to do that without raising a tax issue (how much tax will depend on your circumstances)
Most of the SJP offshore bonds I come across are in trust.   Is yours?

 Are the tax benefits - as well as the potentially better performance of self-chosen funds - likely to make such a switch worthwhile?

Depends on your circumstances and how the bond is set up.

Octopussy91

dunstonh said:

Should I start to cash it in and drip feed it year-on-year into a UK-based ISA instead? 

Are you able to do that without raising a tax issue (how much tax will depend on your circumstances)
Most of the SJP offshore bonds I come across are in trust.   Is yours?

 Are the tax benefits - as well as the potentially better performance of self-chosen funds - likely to make such a switch worthwhile?

Depends on your circumstances and how the bond is set up.

Thanks dunstonh.

The Bond is not in trust - I'm the holder. 

The original investment value was £200k, which I think means I could drawdown 5% (£10k) every year tax-free.

I'm wondering if I should do this and invest the proceeds into a UK-based Stocks and Shares ISA, on the basis that it might offer greater flexibility (at any given time I could draw down 100% without a tax liability - not just 5%) and possibly better returns (though of course I appreciate this depends on how it's invested).

Voyager2002

We are speculating about the tax position at present: why not ask your SJP partner whether you would pay any tax (and at what rate) if you cashed in all or part of your bond?

Anyway, if you were to place the funds in an ISA you could certainly select investments that gave a similar balance of risk and reward to those you hold with SJP while paying lower fees. You should also consider whether a SIPP would be more beneficial for you.

dunstonh

The original investment value was £200k, which I think means I could drawdown 5% (£10k) every year tax-free.

Not quite.     The 5% allowance is tax-deferred. Not tax free.  i.e. putting it off until you until a later year. 

Deferment can be beneficial  (such as deferring it to when you are  non-rate taxpayer).   But it can also create a later bill if you get it wrong (such as deferring it to when you are a higher rate taxpayer but a basic rate now).    

The tax rules on an offshore bond are complicated and can be a disaster if you get it wrong.  There was a case some years back where someone had to declare bankruptcy as they used the wrong method to get the money out of the bond. Even though both methods (or combo of the two) gave them the same amount of money.

I'm wondering if I should do this and invest the proceeds into a UK-based Stocks and Shares ISA, on the basis that it might offer greater flexibility (at any given time I could draw down 100% without a tax liability - not just 5%) and possibly better returns (though of course I appreciate this depends on how it's invested).

Generically, offshore bonds and ISAs can largely invest in the same investments.    However, you have an SJP one. So, you are very limited.    Nowadays, the pension tax wrapper is the most tax-efficient for most people (better than ISA) providing the timescale matches.  And the pension wrapper can go some way to reduce the tax liability of getting it out of the bond.