The child may have to make additional student loan repayments if they receive savings income of more than £2,000 a year. Savings income includes interest on stocks, shares or savings.
Chargeable gains are treated as savings income so, where a gain is realised and assessed on the child, they could be asked to make loan repayments of 9 per cent of the gain.
No. 5. Segment surrender or partial withdrawals
Which way is best will depend on the client’s circumstances at the point they require the money. When deciding which option is suitable there are a number of factors to take into consideration but, as a general rule, if the amount required is less than the 5% tax-deferred allowance, use that.
If the amount required is much higher than the 5% tax-deferred allowance, or regular withdrawals have used it up, segment surrenders would normally result in the lowest gain. A combination of partial withdrawals and segment surrenders could, however, trigger an even lower gain.
But remember chargeable gains in respect of partial withdrawals are calculated at the end of the policy year, whereas gains on segment surrenders are calculated on the actual date of the event.
If these dates fall in different tax years, the tax bill could be payable earlier depending on which way the money is withdrawn. So, if the client has fluctuating income, the timing of the chargeable event may be crucial.
Also remember that if segments are surrendered, any accumulated and future 5% withdrawals relating to the surrendered segments will be lost.
Kim Jarvis ACII, Technical Manager, Canada Life
Since 1903 Canada Life has operated in the United Kingdom and developed a comprehensive range of onshore and international trusts, as well as packaged estate planning solutions. Our leading Premiere and Premiere Europe Accounts have won multiple awards. You can read more about us at www.canadalife.co.uk/adviser or more about chargeable gains here.
