Life Assured Portfolio Bonds & Tax

[Terzo123]

I'm wondering if any of you have knowledge around this scenario and can provide advice, as to be honest i don't have a clue

Longish version

A family member is stressing out over some Aviva Life Assured Portfolio Bonds that they have.

The policies were taken out in joint names (Husband and Wife) easily 20 years ago.

One of the named persons on the policy passed away approx. two years ago.

The other party due to the stress of the bereavement has done nothing with the bonds for some time, but on the recent advice of an IFA enquired about redeeming the bonds/cashing them in.

However the family member is concerned about potential tax that might be due if any.

The IFA was unable to advise on this aspect.

TLDR - Short version - If you cash out a life assurance bond is there tax to pay, and would they not have paid out on notification of death of one of the insured?

Thanks in advance

T

[Simpo Two]

I had an Aviva product and - once I'd cleared my head of the idea that only an IFA can do things - rang Aviva and they were happy to tell me all about it. They aren't tax advisers but do know their products.

[Terzo123]

Thanks for the reply.

Its definitely worth them making another call to Aviva.

In the paperwork they sent out, there is a warning in their t&c's that there may be tax implications, but no one at the moment seems to be able to confirm what these implications are.

Thanks again.

[Simpo Two]

Terzo123 said:

In the paperwork they sent out, there is a warning in their t&c's that there may be tax implications, but no one at the moment seems to be able to confirm what these implications are.

I can't answer your question because I haven't had this product, but you might find that Nik at IM can help you understand what 'implications' mean to the extent you can apply them to the exact position. For example would it be income tax or capital gains tax? Maybe there's nothing to worry about, but best to jump in knowing. They could consider mitigating any tax bill by dumping the IFA...

If they get easily confused/stressed over these matters it might be best if you make any call to Aviva.

[Terzo123]

Simpo Two said:

.............For example would it be income tax or capital gains tax? Maybe there's nothing to worry about...

That is the crux of the matter.


I think another call to Aviva is required in the first instance.

Im slighly annoyed that the IFA cant help with this, although I appreciate they had nothing to do with the set up of the products.

On the other hand, they are happy to invest the proceeds of the bonds once they are cashed in.

[PistonHead007]

I expect the adviser could help but didn't want to...

It's a bit of a mess but in practice can be quite simple for most people.

https://techzone.abrdn.com/public/investment/Taxat...

[Terzo123]

PistonHead007 said:

I expect the adviser could help but didn't want to...

It's a bit of a mess but in practice can be quite simple for most people.

https://techzone.abrdn.com/public/investment/Taxat...

Thanks for the link.

[Simpo Two]

Ah well if it's an investment bond Nik can help you for sure. Top-slicing and all that.

I sold mine and incurred no tax, but your mileage may vary of course.

[SuperCharged V6]

When life assurance bonds are encashed, they create a "chargeable event", this is top sliced, based on the number of years the contract has been held, this "slice" is then added to your income in the year the encasement takes place, then a calculation is done to work out any tax payable.

The fact an IFA did not know this is, well, outrageous.

PM if I can help further.

[Terzo123]

Simpo Two said:

Ah well if it's an investment bond Nik can help you for sure. Top-slicing and all that.

I sold mine and incurred no tax, but your mileage may vary of course.

Thanks Simpo,

Aviva will be getting called this week, hopefully that will provide some reassurance for them.

[Simpo Two]

SuperCharged V6 said:

When life assurance bonds are encashed, they create a "chargeable event", this is top sliced, based on the number of years the contract has been held, this "slice" is then added to your income in the year the encasement takes place, then a calculation is done to work out any tax payable.

The bit that my brain never computed was the phrase 'deemed tax paid'. So I asked my accountant 'Well is it paid or not?' and he said 'It is deemed paid'. Wibble.