23rd April 2014

AXA life invest: Two tax allowances in one Plan

AXA Life Invest is the exclusive sponsor of the Defaqto Offshore Bonds for Income Case Study published at the end of February. 

Click here to download the Defaqto Offshore Bonds for Income Case Study

If you have clients who are looking to maximise their tax planning, the Secure Advantage™ Offshore Investment Plan could be the solution.  Here’s a short case study on how the Plan could work for your clients.

Jack's story...

Jack invests £100,000 at age 70 and immediately decides to take income from the Plan. Jack's ability to receive a tax efficient income is greater through the Secure Advantage™ Offshore Investment Plan that utilises purchase life annuity legislation:

If Jack decides to take £4,750 (4.75%) per annum as provided by the purchased life annuity, there is no further income tax to pay and this level of income will continue for life.

If Jack decides to take £5,000 per annum (equivalent to the 5% allowance allowable from a standard offshore bond) and pay the adviser an ongoing fee of £500 a year, this can be facilitated without an immediate tax charge.

Purchased Life Annuity                        Investment Bond

       4.75%                                                        0.75%

      £4,750                                                  £250 additional income

                                                                 + £500 Ongoing adviser charge

The result:

• £5,000 of income is produced for Jack.

• Jack can settle the £500 ongoing adviser charge from the plan.

• No tax is payable on the balance from the purchased life annuity as it is within Jack's exempt capital amount.

• No immediate tax is payable on the balance from the investment bond as it is within the 5% annual allowance, the excess of 4.25% can be carried forward to the next year’s allowance.

Note: If Jack raises the £750 (£250 to Jack and £500 to the adviser) as a partial surrender from the Investment element of the bond, this will reduce his Guaranteed Income Payments.

For a complete description of the risks associated with the Secure Advantage™ Lifetime Income Plans you should refer to the Plan Key Features Document, 

 The Secure Advantage™ Lifetime Income Plans guarantee an income for life. They do not guarantee the Plan Value, which will fluctuate depending on the performance of the underlying investments. Clients must be aged between 45 and 75 and have a minimum of £25,000 to invest. The use of the term “Guarantee” does not indicate that a guarantee has been provided by any other company than AXA Life Europe. We deduct a charge for providing the guarantee, which will reduce the growth potential of your client's plan.

Tax, Trust & ISA