Overseas LIfe Assurance

Steve_666_

I have a policy which was sold to me as a "pension" whilst working overseas more than 20 years ago. It was a monthly contribution scheme, which I stopped payments into once I returned to the UK permanently in the 90's. I have left this untouched since, until now. I know that the company concerned reports information to HMRC and queried with them what they actually send. They have informed me  "if you choose to surrender your policy, we will issue you with a Notification of Life Insurance Payment by Overseas Insurer Certificate. This has led me to HS321. I always intended to treat this as a supplement to my UK pension provision, and intend if possible to withdraw from it annually over 10-20 years. There is a section in HS321 concerning annual withdrawals of 5% or less which suggest this will not attract "gains" (taxed as income, but talks about gains, guessing my historic contributions aren't taxable). However it is not clear to me whether this avoids income tax, or delays it until the policy is completely surrendered.
Any suggests would be welcome on how to minimise my tax liability both for me annually and for my estate at fill policy surrender. 

dunstonh

 However it is not clear to me whether this avoids income tax, or delays it until the policy is completely surrendered.

It doesnt avoid the tax.  It just defers it to a future year when a chargeable gain is created.  It is added back in at that point.

And a chargeable gain doesn't have to be on full surrender.  They can occur on partial surrenders depending on the method used to extract funds.

Steve_666_

If I take 5% or less each year until its exhausted, does a chargeable gain ever occur?

dunstonh

Steve_666_ said:

If I take 5% or less each year until its exhausted, does a chargeable gain ever occur?

If you took 5% or less a year and it exhausted then it means there has never been any gains to pay tax on.
5%x20 = 100%.      It it unlikely that an investment has no gains over 20 years.

sheramber

Did you read Hs321 properly

10. Withdrawals up to 5%

You may also have made a gain which is only taxable when your policy ends.

………….

and last paragraph

The 5% annual limit is not a tax-free amount. All amounts paid from or withdrawn from a policy have to be added into the calculation made when your policy ends.