Is Prudential New World Life Account Taxable?

carboot_karaoke

Good morning everyone,
I am hoping you can help me understand a policy l have.
It was set up with the Prudential (now part of M&G) in June 1997 hence, the ambiguity. It has had various names but its current name is "World Life Account".
Over the years, the value has gone up and down last year, the value only increased by £45 but the total fund value is still sufficient to clear our mortgage. My annual statement shows an "Account" value with regular bonus amount and a "Final Bonus" amount. Given that we are on a tracker mortgage and interest rates continue to rise l would like to withdraw the money and pay it off.
My question is, will l incur a tax liability for doing so?, If so how much. I am a basic rate tax payer with a low income.
Many thanks in advance 

dunstonh

My question is, will l incur a tax liability for doing so?,

Depsite seeing thousands of Pru policies over the years, I have never come across the "new world life account" phrase before.

So, I cannot answer specifically.   However, if its an endowment policy, then Pru only issued qualified endowment policies would would be free of further tax on maturity.    If its a whole of life policy, then tax is possible if you are a higher rate taxpayer or very close to being one.

carboot_karaoke

Many thanks for your reply . I have also contacted the Prudential for clarification on the type of account it is. 

LHW99

Was this originally linked to your mortgage, or completely separate? If it was linked it's perhaps more likely to be an endowment policy, which were often sold in connection with interest only mortgages (though maybe not as late as 1997)

carboot_karaoke

LHW99 said:

Was this originally linked to your mortgage, or completely separate? If it was linked it's perhaps more likely to be an endowment policy, which were often sold in connection with interest only mortgages (though maybe not as late as 1997)

Thank you for your response 😊.  l didn't have a mortgage at the time and vaguely remember being told it was a savings policy of some sort. I was only 19 at the time so didnt pay enough attention !!

H24b34

Hi.  Did you find out the answer to your question?  I also have a New World Life policy and I also have the same question, and also pondering whether to transfer my into ISA funding to overcome some of the management fees by the PRU.

dunstonh

 I also have a New World Life policy

What type of policy is?  

lindabea

Hello Dunstonh, in an attempt to help the OP, my partner also has one of the New World policies with the PRU.  That's how the PRU refer to it in all communications.  Unless there are other types of policies, the one my partner has is an insurance linked investment bond where you can withdraw 5% annually of the investment amount.  You often respond with helpful replies to the frequent questions that come up on this forum.  Generally, I think you seem to regard these policies as good investments as they have many benefits, although, I agree with the OP - this year's bonus was somewhat meager!!     .  

dunstonh

Hello Dunstonh, in an attempt to help the OP, my partner also has one of the New World policies with the PRU.  That's how the PRU refer to it in all communications. 

I think that must be a marketing name they use as I have never come across that name in all my years seeing countless Pru plans.

Unless there are other types of policies, the one my partner has is an insurance linked investment bond where you can withdraw 5% annually of the investment amount.  You often respond with helpful replies to the frequent questions that come up on this forum.  Generally, I think you seem to regard these policies as good investments as they have many benefits, although, 

That would make it an onshore investment bond (offshore would be Pru International).    There have been many versions of investment bonds over the years.    Some are very good value and very good steady eddies.     Some are expensive and low quality (e.g. things that used to be included in the single AMC getting charged extra or not available at all).     

I agree with the OP - this year's bonus was somewhat meager!!     .  

With bonds having their worst period in over 100 years (negative from Nov 2021 through to October 2023) that is somewhat inevitable.  

Oldhand_2

I too invested in 1997 in what I think was called The Prudence Gold Bond, which invested in the Pru's with profits fund. It is now called New World Life.

It has been fairly good, I put in £75k, took out £76k sometime before 2006, and it's worth £84k now. But last year it only increased by £28.

I'm in the process of making a withdrawal to fund a s/s ISA for 2024, and the withdrawal form (which you have to ask for) says this about tax:

You may be liable to tax, in the form of a chargeable
gain, on the withdrawal from this account/bond.
> You’re allowed to take regular withdrawals of up to
5% a year of the premiums paid in any policy year
without creating an immediate tax liability. This is
subject to the withdrawals not exceeding the amount
paid in. The first policy year is the 12 month period
that starts on the commencement date of your policy
– this is shown on the schedule page of your policy
document. Subsequent policy years run from the
anniversary of the commencement date. Any unused
5% allowances may be carried forward and used in
subsequent policy years.
> Where the regular withdrawals exceed the 5% a
year limit, the excess is treated as a profit. This profit
is known as a chargeable gain.
> Any withdrawals taken up to the 5% allowance will
be taken into account for a possible tax liability when
the policy is finally cashed in (including on death).
Any chargeable gain may cause a liability to tax if you
pay income tax above the basic rate or if the gain
results in you paying income tax above the basic rate

I hope this is some help to the O/P.

lindabea

What a pity the form does not make any reference to Top Slicing Relief (which you can apply) if the gain pushes you into higher rate tax. This can then alleviate any additional tax liability..