Top five chargeable queries of 2017
By Kirsten Hastings, 15 Dec 17
One of the most common topics prompting advisers to reach out to life companies for support was around chargeable events. With a myriad of changes in recent years, it is little wonder that the already complicated topic has many UK advisers scratching their heads. Canada Life has put together a list of the five most common chargeable event queries advisers asked in 2017.
The fifth most commonly asked question around chargeable events was on segment surrender or partial withdrawals.
Which way is best will depend on the client’s circumstances at the point they require the money. When deciding which option is suitable there are a number of factors to take into consideration but, as a general rule, if the amount required is less than the 5% tax-deferred allowance, use that.
If the amount required is much higher than the 5% tax-deferred allowance, or regular withdrawals have used it up, segment surrenders would normally result in the lowest gain. A combination of partial withdrawals and segment surrenders could, however, trigger an even lower gain.
But remember chargeable gains in respect of partial withdrawals are calculated at the end of the policy year, whereas gains on segment surrenders are calculated on the actual date of the event.
If these dates fall in different tax years, the tax bill could be payable earlier depending on which way the money is withdrawn. So, if the client has fluctuating income, the timing of the chargeable event may be crucial.
Also remember that if segments are surrendered, any accumulated and future 5% withdrawals relating to the surrendered segments will be lost.
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