Cashing in investments for retirement, tax implications?

Sea_Shell

@Malthusian

Thanks for that in depth reply.   Let me just say "it's complicated", and yes, I'm planning on staying out of it....but I may get dragged in, so want to have knowledge and information up my sleeve. 
 

Thanks again.   (sorry OP for hijacking) 

Malthusian

The problem is not just that it's complicated. Quite often it is pretty easy (let's say someone whose only other income is State Pension cashing in a whole bond). The trouble is that because there are so many traps, it is impossible to confidently tell someone whether they are going to fall into one. Unless you are their adviser and have full details of their finances. (Or their Attorney in which case the same applies.)

This is especially the case if partial withdrawals are involved.

The more you know about insurance bonds, the more inclined you are to keep out of it if a friend asks what they should do about theirs.

Linton is correct that if their only income is state pension and they cash in one onshore bond in the tax year which has a chargeable gain of 70k spread over 20 years, it is pretty straightforward. But this may not be the case if say she took a large partial withdrawal.

sienew said:

Somehow the bond is at an all time high. Last months statement is the highest amount it's ever been.

Yes, I should have qualified that bit given that the bond is With Profits. It may be an especially good time to cash in a With Profits investment if it hasn't applied a "market value reduction" yet.

That seems to be right. Just now a case of really trying to figure the self assessment stuff out, or finding an accountant/FA who can help with that.

The self-assessment form should be straightforward to DIY for someone whose only income is State Pension and chargeable gains from an onshore bond.

Sea_Shell

Malthusian said:

The problem is not just that it's complicated. Quite often it is pretty easy (let's say someone whose only other income is State Pension cashing in a whole bond). The trouble is that because there are so many traps, it is impossible to confidently tell someone whether they are going to fall into one. Unless you are their adviser and have full details of their finances. (Or their Attorney in which case the same applies.)

This is especially the case if partial withdrawals are involved.

The more you know about insurance bonds, the more inclined you are to keep out of it if a friend asks what they should do about theirs.

From my POV it's the relationship that's "complicated" 😉. Families eh!

Being asked to be their Attorney is a worry (or likely administrator, in time).  

And yes, it's been treated as an "easy access" account over the years.  So lots of regular partial withdrawals, with one or two noticeable lump sums.  

I have no idea how many "segments" make up the bond.

Messy!!

Malthusian

Actually if you're their Attorney it is much simpler - you can then obtain full details of their financial position, and a full withdrawal history from the insurer (including all the details about segmentation), and either work out the gain yourself or ask their / your adviser to do it.

It's when you're just their relative and not entitled to full details of their finances that it's messy.

If they ask you to be their attorney and/or executor and you don't feel able to take on the job, you can always just say no. Same as if they asked you to clean their house.