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Prudence Bond

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Smallholding
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Prudence Bond

#158014

Postby Smallholding » August 8th, 2018, 6:11 pm

The above Bond was purchased a long time ago as a low risk investment. As it has aged one thing has changed. The percentage of the total value which is attributed to the Final Bonus.

I have looked over the last 10 years records and can only find one occasion when the final bonus was in fact cut substantially. This was in 2009.
Nevertheless it does seem that as the FB amounts to well over 25% of the total I can no longer regard it as a very low risk.


Therefore I am considering a sizeable redemption - small enough to keep me from becoming a Higher Rate Taxpayer and large enough to use up an ISA allowance. This is of course due to the interesting tax situation Viz bonds like this.


There are two methods of achieving a partial surrender of this segmented policy. In the past we have surrendered equal amounts of each segment.
However now I am thinking that if we cancel whole segments to achieve the withdrawal it may help reduce the absolute amount of the Final Bonus as a proportion of the remaining bond. Having reread this last sentence I am not sure that it isn't b***ks. Indeed it is this which I am hoping someone else might have the low down on.


I might even have considered starting a new young Bond of this type which would not have the disproportionate FB. Alas I think they no longer offer them. Anyone know of similar from reputable firms? Especially somwhere that I am not obliged to line the pockets of an IFA to do what I want to do.


SH

Alaric
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Re: Prudence Bond

#158027

Postby Alaric » August 8th, 2018, 6:29 pm

Smallholding wrote:There are two methods of achieving a partial surrender of this segmented policy. In the past we have surrendered equal amounts of each segment.


I'd rather suspect that if you invested 200 originally and it's now worth 250 with the terminal bonus, that regardless of how you surrender it's the same. So if you surrender 125, you would be left with 100 original and 25 TB.

tjh290633
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Re: Prudence Bond

#158154

Postby tjh290633 » August 9th, 2018, 9:00 am

I would suggest that you think carefully before investing in a similar "bond". When you got Life Assurance Premium Relief, they were a reasonable medium. Removal of that relief means that you suffer the full costs. There are better and more transparent media.

TJH


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