Investment review – can I maintain my income levels?

A solicitor introduced us to a lady who was concerned with the level of income she was taking from her investments. Her portfolio included building society accounts, shares and investment bonds.

We reviewed the building society accounts and found that her existing society offered an account with a higher interest rate, which would increase that part of her income.

With regards to the share portfolio, she felt her bank had not taken an active role in the management. She wanted to maintain her shares as she did not want to pay the capital gains tax that would have to be paid if she disposed of them. She also felt an obligation to keep them as some of the shares had been held by previous generations of her family. Therefore, we introduced her to a stock broker whom we felt would relate to her needs, for this part of her portfolio.

One of the client’s investment bonds was invested in a distribution fund. This fund was with a company that had performed well and had generated a good level of income. Our client was happy with the returns and we recommended she took no action with this bond.

The other investment bond was a ‘with profit’ bond. This bond had not been a success story. No bonus rates had been added to the bond for the last couple of years. As a result, the capital value was being reduced to provide the income needed. Even though there was a small penalty for encashing the bond, we recommended a full surrender. The full surrender did not create any liability to high rate income tax.

The surrender proceeds from the with profit bond were invested to provide diversification of both investment risk and tax planning. We recommended a fixed rate building society bond and an investment bond, both to provide income. The investment bond was structured within a trust, to make sure it was inheritance tax efficient.

The result of taking our advice was that the client increased her overall income. She also had a structure in place that met her current and future financial objectives, incorporating inheritance tax planning within the new bond.

The above case study is for information and illustration only. It is not intended to be individual advice and it should not be taken as such. If you have any questions relating to your own circumstances, please contact us.