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Insurance Bond Surrender and Pension Contributions – being aware of opportunities

There is sometimes a need to surrender an Insurance company ‘Capital Investment Bond’, or Offshore Bond.  Perhaps the capital is required for a specific purchase, or sometimes there is just the need to change the investment provider.  It quite frequently occurs as people approach retirement and seek to recalibrate their investments to suit their retirement plans.

Where this happens and a chargeable gain arises, there can be a tax bill for the investor.  Using Pension Contributions in conjunction with an insurance bond surrender, can significantly reduce this tax bill.
This is because pension contributions are deducted from income before considering the ‘top-slicing calculations’, which determine to what extent higher rate tax is due on any chargeable gain.

For a bond held for some time, the effect is magnified.  On occasion, the tax saved by making a pension contribution can run to 2 or 3 times the cost of the pension contribution.

Careful consideration is needed before making a contribution to a pension, or surrendering an Insurance Bond and professional guidance should always be sought. Expert advice can ensure that significant opportunities such as this are not overlooked.



Date: 17th January, 2013
Author: Tony Slocombe


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