Royal & Sun Alliance With Profits Bond.....

hoof

Would appreciate some advice regarding a with profits bond my father took out with Royal & Sun Alliance (now Resolution/Phoenix?).
Invested £30k July 98 in 10 year with profits bond.
He is allowed to withdraw up to 5% pa without penalty and has so far withdrawn circa £6k.
Current value of units is £28,700 with every £50 he withdraws reducing the value by some £51.
He is unsure on whether to:
a) leave investement untouched until end of 10 year period (July 08)
b) continue withdrawing max amount without penalty and invest this money elsewhere until July 08 or
c) cash in policy (circa 17.5% MVA has been mentioned) and invest all proceeds elsewhere.
He does not really need the money and is looking to maximise value from these funds by end of 10 year period - July 08.
Presumably there are some potential tax implications?
Advice would be welcomed.

dunstonh

He has invested at the worst time possible (with hindsight). Plus the company chosen is closed for new business and owned by venture capitalists. This doesnt look good for the future. However, there are rumours that they may begin trading again and there MAY be the option to move out of with profits at a later date without penalty. These are just rumours though at this stage and I havent seen anything concrete.

a - Judgement call. If the Market Value Reduction is not too bad then it is certainly worth considering a move. It may be too big to justify at this time. It depends on where the money is moved to.

b - certainly keep drawing the max allowable. its one way to reduce the MVR down over time

c - Depends on where its going. Potentially, with the right IFA, you could get 6% initial allocation and had it been done 12 months ago, that MVR would have been recovered with both low risk and stockmarket based funds. A building society would take 3-4 years to recover.

Tax would be an issue potentially if he is a higher rate tax payer or the bond was placed in trust.

hoof

Thanks for the info. Given the high MVR and period left to run before end of 10 years, it seems that best option is to carry on withdrawing max allowed for now unless MVR fall significantly - unlikely.

dunstonh

hoof wrote:

Thanks for the info. Given the high MVR and period left to run before end of 10 years, it seems that best option is to carry on withdrawing max allowed for now unless MVR fall significantly - unlikely.

As i said, it really depends on where you would put it. I have pulled a number out but they have gone into better portfolio spreads or a range of lower risk asset classes. If you plan long term and intend to stay equity based, pulling out may well be the best option. If you plan to put it on deposit, then staying put may be better option, whilst keeping it under review.