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20 Year Old Investment Bond

I am a basic rate tax payer and just over 20 years ago I took out a (non ISA) investment bond with Aviva and have not added to nor withdrawn funds from it. My understanding is that the annual 5% non taxable withdrawal allowance rolls over and I could now withdraw the original sum invested in its entirety without incurring a chargeable event tax liability. The potential taxable status of the remaining funds remains less clear, the advice from Aviva frustratingly rather ambiguous but seems to be that I could withdraw further funds down annually without paying tax on them providing that additional income did not tip me over into the higher tax band. I have looked into getting some purely one off categoric advice from a financial advisor at a fair hourly rate but basically they seem to want a percentage of the total value and that is not a cost effective proposition at all for something that is almost certainly already at their finger tips and not requiring any work as such on their part whatsoever.
Is anyone please able to provide informed advice/confirmation about both aspects and perhaps based upon personal experience with a similar scenario? Thanks very much.
Comments
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My understanding is that the annual 5% non taxable withdrawal allowance rolls over and I could now withdraw the original sum invested in its entirety without incurring a chargeable event tax liability.No.
The 5% is deferred and not tax free. They are added back on if you surrender policy segments.the advice from Aviva frustratingly rather ambiguous but seems to be that I could withdraw further funds down annually without paying tax on them providing that additional income did not tip me over into the higher tax band.Aviva do not have advice permissions and won't be giving advice.
However, yes, any future draws will be subject to chargeable gain calculations and assessed on your income tax bands.I have looked into getting some purely one off categoric advice from a financial advisor at a fair hourly rate but basically they seem to want a percentage of the total value and that is not a cost effective proposition at all for something that is almost certainly already at their finger tips and not requiring any work as such on their part whatsoever.FAs retail their products of their employer or linked company. So, if you see FAs, that is inevitable.
It is possible that you would have been better off seeing an IFA over the years to manage the investment bond into other tax wrappers on a tax-efficient basis.
I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.2 -
@dunstonh I'm in a similar position. I invested £20k in an investment bond with Aviva in 2019 and (at the time of writing) is now worth £39k.
How much interest would I have to pay if I were to "cash it in"?0 -
RunsFromRobots said:@dunstonh I'm in a similar position. I invested £20k in an investment bond with Aviva in 2019 and (at the time of writing) is now worth £39k.
How much interest would I have to pay if I were to "cash it in"?
Topslicing relief in essence allows you to divide that gain by the number of years you held the bond (say 6 years in your case) and add that result to your other taxable income in the year of encashment ( 2024/25).
£19k divided by 6 is around £3k, add this to your total expected taxable income for the current year and only if this takes your total income above the 40% tax threshold will you face a higher rate income tax liabilty on the bond gains. Needless to say if you are already a 40% tax payer (without accounting for bond gains) it would be inadvisable to totally encash.
See below more detailled coverage of the investment bond taxation regime, which regrettably you may find heavy going -
https://techzone.aberdeenadviser.com/public/investment/Taxation-of-bonds
In the meantime, you can encash 6 times 5% of your original investment ( ie £6,000) on a tax deferred basis and without triggering an immediate taxable chargeable gain. Aviva can also guide you on the best way to achieve that outcome.
In passing, a little surprised you invested in a potentially complicated investment product with little or no understanding of how it will be eventually taxed. Investing in a stocks and shares ISA (with Aviva) would have eliminated all tax complications.
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poseidon1 said:RunsFromRobots said:@dunstonh I'm in a similar position. I invested £20k in an investment bond with Aviva in 2019 and (at the time of writing) is now worth £39k.
How much interest would I have to pay if I were to "cash it in"?
In passing, a little surprised you invested in a potentially complicated investment product with little or no understanding of how it will be eventually taxed. Investing in a stocks and shares ISA (with Aviva) would have eliminated all tax complications.Before easy direct access to investments was available they were arguably the best choice outside a pension.1 -
poseidon1 said:RunsFromRobots said:@dunstonh I'm in a similar position. I invested £20k in an investment bond with Aviva in 2019 and (at the time of writing) is now worth £39k.
How much interest would I have to pay if I were to "cash it in"?
Topslicing relief in essence allows you to divide that gain by the number of years you held the bond (say 6 years in your case) and add that result to your other taxable income in the year of encashment ( 2024/25).
£19k divided by 6 is around £3k, add this to your total expected taxable income for the current year and only if this takes your total income above the 40% tax threshold will you face a higher rate income tax liabilty on the bond gains. Needless to say if you are already a 40% tax payer (without accounting for bond gains) it would be inadvisable to totally encash.
See below more detailled coverage of the investment bond taxation regime, which regrettably you may find heavy going -
https://techzone.aberdeenadviser.com/public/investment/Taxation-of-bonds
In the meantime, you can encash 6 times 5% of your original investment ( ie £6,000) on a tax deferred basis and without triggering an immediate taxable chargeable gain. Aviva can also guide you on the best way to achieve that outcome.
In passing, a little surprised you invested in a potentially complicated investment product with little or no understanding of how it will be eventually taxed. Investing in a stocks and shares ISA (with Aviva) would have eliminated all tax complications.
I only invested in this product as I had £20k not doing very much at the time and on the advice of an IFA (he wanted me to invest more).0 -
RunsFromRobots said:poseidon1 said:RunsFromRobots said:@dunstonh I'm in a similar position. I invested £20k in an investment bond with Aviva in 2019 and (at the time of writing) is now worth £39k.
How much interest would I have to pay if I were to "cash it in"?
Topslicing relief in essence allows you to divide that gain by the number of years you held the bond (say 6 years in your case) and add that result to your other taxable income in the year of encashment ( 2024/25).
£19k divided by 6 is around £3k, add this to your total expected taxable income for the current year and only if this takes your total income above the 40% tax threshold will you face a higher rate income tax liabilty on the bond gains. Needless to say if you are already a 40% tax payer (without accounting for bond gains) it would be inadvisable to totally encash.
See below more detailled coverage of the investment bond taxation regime, which regrettably you may find heavy going -
https://techzone.aberdeenadviser.com/public/investment/Taxation-of-bonds
In the meantime, you can encash 6 times 5% of your original investment ( ie £6,000) on a tax deferred basis and without triggering an immediate taxable chargeable gain. Aviva can also guide you on the best way to achieve that outcome.
In passing, a little surprised you invested in a potentially complicated investment product with little or no understanding of how it will be eventually taxed. Investing in a stocks and shares ISA (with Aviva) would have eliminated all tax complications.
I only invested in this product as I had £20k not doing very much at the time and on the advice of an IFA (he wanted me to invest more).
On the plus side if you have taken no withdrawals since 2009, you have around £16k you can immediately access on a tax deferred basis with no problems, but better still your £19k gain can be divided by 16 years rather than 6. So unless you are already a 40% tax payer or at the borderlines thereof, you should be able to fully encash with no further tax liabilities beyond the deemed 20% already taxed at source.
Have a word with Aviva to scope out your possibilities, they seem to have been quite helpful to other OPs I have liased with, each holding similar Aviva bond products.
The original OP of this thread provided no figures by way of his original investment or current value of his bond, but perhaps my responses to you can assist him together with Aberdeen Adviser's technical note.2
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