Releasing funds from inherited SJP investment bond process

KLOR77

Sadly my mother passed away early last year and now that the probate process is complete i have asked the solicitor to call in the money from the SJP investment bond.

The investment bond is only nearly 2 years old and so i will unfortunately have to pay an exit charge.

I was expecting the process to be that the fund would be closed, the money sent to my solicitor and then the solicitor transfers the money to me.
However, the SJP rep has told my solicitor that it is beneficial to have the fund transferred to me and then close the fund (which will then mean the money can be transferred to me).

It sounded like this was due to tax reason (not inheritance tax though) but i really do not understand. I have asked for more details before deciding what route to take.

Does anyone have any experience of this? 

Ignoring early withdrawal charges and inheritance tax, what other fees/tax would there to be pay if the money is released without transferring the fund to me?

cloud_dog

Call me cynical, but might this move to transfer ownership be a option for them to keep you with SJP (through tax worries, exit penalties etc)?

KLOR77

That's my concern exactly.

Especially as i do not (yet) understand what difference it would make to just release the money straight away as opposed to transferring the bond and then releasing the money.

xylophone

https://www.bennettbrooks.co.uk/news-events/blog/death-and-taxes-on-investments-bonds/#:~:text=On the death of a,deceased, as a lifetime matter.

Is the above relevant to the case?

Do you not have the literature relating to the particular investment bond?

What does it say about the death of the owner?

wjr4

If it’s in a trust, and it’s an onshore bond, this makes sense. You assign the bond into your name then you withdraw it. You benefit from top slicing relief & will have no further tax to pay if a basic rate taxpayer. Make sure to get your own financial advice to check this is suitable. 

KLOR77

Yes, that does sound like what the solicitor was describing (although i still don't quite understand the impact for me).

I am the life assured on the bond and so the bond can continue if i wish and it then talks about the tax implications, but it is just not clear. 

I am guessing that i fall into this bit in your link, and that it should be transferred and then encashed, rather than encashed straightaway?

Therefore, it is almost always more tax efficient to consider assignment out to beneficiaries if this is practical rather than encashing in the hands of the PR

Would I pay income tax on the the total gain since the bond was started 2 years ago (no withdrawals have been made from the bond in those 2 years)?

tls123

If you are the life assured is there other trustees? It sounds like it’s in trust payable on last life assured. Check if you cash it now it’s not a chargeable event, yes if you do I think it’s highly likely you will pay tax. Trust policies are bit more complicated in their creation but the providers (SJP) paperwork options should be clear if your solicitor isn’t sure ask them for the paperwork which gave you the options. Long term bonds usually do better over time. I know your solicitor will have been a acting for you but SJP should be also able to talk you through the options as they are the experts in the policy. I find it a bit strange about an early exit policy definitely check their paperwork.

Malthusian

tls123 said:

I find it a bit strange about an early exit policy definitely check their paperwork.

This is common practice for SJP, although not in the wider world of UK financial services.

@OP - it would be worth a chat with an independent financial adviser if the bond is of any size. There may be more tax efficient options than cashing it in in your name and taking the tax hit all in one go. E.g. withdrawing across multiple tax years, or assigning it to heirs if you don't need the money yourself.

The taxation of insurance bonds is complex and full of traps.

EasySolution

This is common practice for SJP, although not in the wider world of UK financial services.

@OP - it would be worth a chat with an independent financial adviser if the bond is of any size. There may be more tax efficient options than cashing it in in your name and taking the tax hit all in one go. E.g. withdrawing across multiple tax years, or assigning it to heirs if you don't need the money yourself.

The taxation of insurance bonds is complex and full of traps.

Lets suppose that you have £100K to invest in a Bond(which is likely to be a medium term investment)

General UK Financial Services would agree a fee to Invest that for you. Say 2.5% =£97,500 Invested.

SJP practice was to Not charge an upfront Fee  confident that they could earn enough through their Investment that they would get their remuneration elsewhere.  £100,000 invested.  If the investor changed their mind and cancelled within a Short Term 5 years then they had an Exit Charge.  The press and Social Media got very excited about this exit charge so about a year ago SJP changed their policy so that they were in line with he rest of the Industry.

OP has an original product and a special circumstance that might preclude the exit charge.

The original literature explains how the Taxation calculation works if you assign the bond to the beneficiary.

It worked for me but not my sibling.  Best take specialist advice.