Prudential Investment Bond

davidr99

Thanks everybody for all the advice, it's been very helpful. I'll probably check the tax details with an accountant when my mother-in-law is thinking of taking a lump sum.

DRS1

One thought - is your MIL already receiving her state pension? If not then maybe that is a reason to do something now while there is a bigger gap between her income and the higher rate threshold?

I am wondering if cashing it in one third/one third/one third over three tax years might keep her below the higher rate threshold in each of those years. I confess I don't know when the payments she has taken to date would be added into the mix - that may depend how she takes the withdrawals - eg cashing in whole policies each time or only part of each policy until the last one when she cashes in what is left of all the policies. Hopefully the accountant will know.

But then of course what would she do with the money? Will it all be used up by care home fees?

kermchem

If you go back to the earlier post linking to the Pru tax advice on such bonds and look in more detail then each year you can withdraw 5% of the original capital investment without paying tax, as you are effectively getting your original investment back. These 5% allowances are cummulative. So if MiL has only been taking small sums then she can withdraw all of her cumulated 5% portions free of tax.

davidr99

Thanks for the above comments. She is receiving state pension plus a small private pension which is about £15,000 per year. She wanted to know what the options are with the bond. I think she will take amounts out when she needs them for spending on herself - car, house, etc. If she takes a lump sum out of about £20,000 then I'm fairly certain she won't pay tax on it but I will check with an accountant first.