Onshore & Offshore Bonds - Have the software calculate a tax-optimal withdrawal strategy

You will find the settings for life fund segmentation via the Investment screen’s Advanced Settings > Life Fund Segments panel. Where an existing Bond is segmented, be sure to enter the current, and original number of segments within the policy. For a new (i.e. yet-to-be-purchased) Bond, we would recommend making an assumption, rather than leaving the default (1 segment) setting in place.

Note that the Attempt to Optimize strategy is the software's default setting. As alternative strategies, however, the software gives one the choice to Always Incur Excess Withdrawal or to Always Encash Segments. Given the 'optimization' strategy, an individual may plan to take withdrawals to the value of £10,000, annually; if one could, in fact, reduce taxes by selling (as an example) £15,000 worth of segments, the 'optimization' option allows this to occur. Were the Always Incur Excess Withdrawal option selected, on the other hand, only £10,000 worth of units (in this example) would be withdrawn from the fund.

Why would one not always seek to optimise withdrawals? If there are long-term reasons to keep as much value within the life policy as possible, then one may not want to withdraw more than is scheduled. It may be a good from a tax perspective to withdraw more in a single year, but such a withdrawal might not necessarily be consistent with one's objectives, over the full term of the plan. 

Related Topics

How to schedule planned future withdrawals from a bond (onshore or offshore life fund)

 

Last updated 19 October 2015, Release 4.0.23