Tax on endowment windfall?
Discussion
When I bought my first house 25 years ago I part financed it with an interest only mortgage and took out an endowment policy to cover the final repayment. I paid off the mortgage a few years later with savings but just let the endowment policy run as it wasn't a great deal of money. I didn't pay much attention as it underperformed and I hadn't really been expecting much but it looks like maturing in August at around £15000.
Will I get the full £15000 to spend on a new toy or will I be taxed on the profits? I've probably paid in about £6000 over the 25 years.
Will the insurance company just send me a cheque?
Will I get the full £15000 to spend on a new toy or will I be taxed on the profits? I've probably paid in about £6000 over the 25 years.
Will the insurance company just send me a cheque?
I think its tax free if it is a qualifying policy under HMRC rules http://www.hmrc.gov.uk/helpsheets/hs320.pdf
Hope so - as I've got one maturing next year !!
Hope so - as I've got one maturing next year !!
Thanks for this Guys, now I just need to trawl the Classifieds for something to buy.
I've just noticed in the guff from the insurance company (Standard Life) that I may be entitled to an additional sum from their Mortgage Endowment Promise because the policy isn't going to match the original mortgage repayment amount. Do you know whether I'll still be entitled to this if the mortgage has already been paid off?
I've just noticed in the guff from the insurance company (Standard Life) that I may be entitled to an additional sum from their Mortgage Endowment Promise because the policy isn't going to match the original mortgage repayment amount. Do you know whether I'll still be entitled to this if the mortgage has already been paid off?
Get advice (not from one of these miss selling firms)as you could be due compensation from miss selling the original policy?? (see the other topic here).I`ve had a similar situation as yours.Bought a house with a pension mortgage,the 25% tax free lump some pays off the mortgage,the rest is your pension pot,during the 25 years or so you pay interest only on the loan and pay monthly into the pension fund to build up the pot.
Any way I remarried, sold the house,paid off the mortgage but kept up the pension fund payments.When I retired although the 25% lump sum was all mine and went into my account TAX FREE I realised it would not have paid off the mortgage if I still had it.I made a complaint and got a huge compensation payment (TAX FREE).There are so many people out there who do not realise that they were ripped off by banks,miss sold,etc etc and are due compensation.
Any way I remarried, sold the house,paid off the mortgage but kept up the pension fund payments.When I retired although the 25% lump sum was all mine and went into my account TAX FREE I realised it would not have paid off the mortgage if I still had it.I made a complaint and got a huge compensation payment (TAX FREE).There are so many people out there who do not realise that they were ripped off by banks,miss sold,etc etc and are due compensation.
The general rule is that you allow the endowment to run for its specified period then the capital lump sum received when it matures should be tax free.
I don't think what you are receiving would be classified as a "windfall". It is just the policy doing what it should do. In fact, being an endowment, it may not even be giving to you the amount predicted when you first took it out 25 years ago.
I don't think what you are receiving would be classified as a "windfall". It is just the policy doing what it should do. In fact, being an endowment, it may not even be giving to you the amount predicted when you first took it out 25 years ago.
Old Merc said:
Ripped off by banks,miss sold,etc etc and are due compensation.
As were the thousands and thousands who paid off their mortgages and pocketed a large surplus, strange how they didn't complain.We really should have more of a culture where people take some level of responsibility for understanding what they buy, I had two endowments from the eighties (paid out tax free btw) that I was entirely aware were investments and so it was obvious that they did need to grow to reach the required amount.
vanordinaire said:
When I bought my first house 25 years ago I part financed it with an interest only mortgage and took out an endowment policy to cover the final repayment. I paid off the mortgage a few years later with savings but just let the endowment policy run as it wasn't a great deal of money. I didn't pay much attention as it underperformed and I hadn't really been expecting much but it looks like maturing in August at around £15000.
Will I get the full £15000 to spend on a new toy or will I be taxed on the profits? I've probably paid in about £6000 over the 25 years.
Will the insurance company just send me a cheque?
I looked at this many moons ago when I had 7 Endowments running. IIRC so long as it has run for at least 10 years it qualifies as tax free. Even if it hasn't then the profit (payout minus premiums) comes under capital gains? for which you have an allowance anyway.Will I get the full £15000 to spend on a new toy or will I be taxed on the profits? I've probably paid in about £6000 over the 25 years.
Will the insurance company just send me a cheque?
Most companies also operate the 3 year rule for considering compensation claims ie you must claim within 3 years of receiving a RED underperforming letter. There are some exceptions.
You will receive a tax free cheque or you can give them your bank details. FFS make sure you pay your premiums right to the end as the Terminal Bonus CAN be generous
I have a 25 year Aviva (ex-Norwich Union) policy maturing next April - original sum assured was £79k but current projection is £46k (subject to any terminal bonus being added).
However, Aviva will add a further £16k to that making £62k which is slightly more palatable - the premiums paid total £33k, so the value has increased by 90% and had the life cover as well. I reckon £33k in a managed fund would be well over £100k!
BTW, my mis-selling claim was not upheld as they thought a trainee Accountant should have understood the risks - not so sure myself but cannot face the hassle of a court case.
David
However, Aviva will add a further £16k to that making £62k which is slightly more palatable - the premiums paid total £33k, so the value has increased by 90% and had the life cover as well. I reckon £33k in a managed fund would be well over £100k!
BTW, my mis-selling claim was not upheld as they thought a trainee Accountant should have understood the risks - not so sure myself but cannot face the hassle of a court case.
David
Siscar said:
Old Merc said:
Ripped off by banks,miss sold,etc etc and are due compensation.
As were the thousands and thousands who paid off their mortgages and pocketed a large surplus, strange how they didn't complain.We really should have more of a culture where people take some level of responsibility for understanding what they buy, I had two endowments from the eighties (paid out tax free btw) that I was entirely aware were investments and so it was obvious that they did need to grow to reach the required amount.
In the mid-90's when first reports about under-performance started to surface I contacted our provider (Clerical & Medical, now part of Halifax) and they literally laughed out load at my suggestion that it might miss its target. I'd taken the guys name and I used that conversation as part of my claim.
Thanks all, I wasn't intending to claim for compensation as I knew exactly what I was signing up for (and the bank made sure I knew the risks at the time). However, I've been told by my provider (Standard Life) that they have a scheme called the Mortgage Endowment Promise in which they make additional payments on top of standard bonuses to help make up policies which are going to fall short of the original target. I'm just not sure if I'll get a payment under this scheme if I've already paid off the mortgage. Does anyone know?
vanordinaire said:
Thanks all, I wasn't intending to claim for compensation as I knew exactly what I was signing up for (and the bank made sure I knew the risks at the time). However, I've been told by my provider (Standard Life) that they have a scheme called the Mortgage Endowment Promise in which they make additional payments on top of standard bonuses to help make up policies which are going to fall short of the original target. I'm just not sure if I'll get a payment under this scheme if I've already paid off the mortgage. Does anyone know?
Have you read the web page: http://www.standardlife.co.uk/1/site/uk/fund-info/...*IF* you and your endowment qualify, I don't think it makes any difference whether you've paid the mortgage or not, it's about hitting the original targetted value.
You should claim anyway, they'll soon (well, eventually) tell you if you qualify or not.
Indeed, the actual mortgage is usually irrelevant, just check the policy isn't still assigned to the original mortgage lender before it matures, or you might have to go to them to get your loot.
The Mortgage Promise or Guaranteed Minimum Maturity Value is just that, an actuarially guessed sum guaranteed at maturity that was never expected to be needed, and sold as an incidental item on many endowments. A lot of policyholders are rather glad of this!!!
The Mortgage Promise or Guaranteed Minimum Maturity Value is just that, an actuarially guessed sum guaranteed at maturity that was never expected to be needed, and sold as an incidental item on many endowments. A lot of policyholders are rather glad of this!!!
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