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SEI trust pushes 5% withdrawals

Scottish Equitable International is urging IFAs to take advantage of the 5 per cent withdrawal facility on life bonds ahead of its possible abolition in this year&#39s Budget.

The company has launched the reserved interest trust to enable tax-deferred withdrawals to be made.

The product works by establishing a trust which purchases an offshore bond. The client can take 5 per cent withdrawals for the next 20 years. As the rules stand, this income is not liable immediately for income tax and, because the plan is written in trust, there are inheritance tax benefits.

Technical manager Margaret Jago says: “The reserved interest trust enables investors to take regular 5 per cent withdrawals from an insurance bond while deferring income tax. At the same time, it offers the potential to reduce inheritance tax liability.

“Following Sandler&#39s recommendations, there is a real chance the 5 per cent withdrawal facility may disappear, perhaps as early as this year&#39s Budget. We would urge IFAs to act now to ensure that their tax plans for clients can incorporate this facility.”


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