Whole of life policy

P

peterwilson

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65
Hi
My dad has a whole of life policy.
He is wondering if he should cash it in now or if he should wait until death (oddest sentence I've ever written)
It's with a uk company if that makes any difference.
Would there be tax implications for him now or for me when he dies?
Thanks p
 
peterwilson said:
Hi
My dad has a whole of life policy.
He is wondering if he should cash it in now or if he should wait until death (oddest sentence I've ever written)
It's with a uk company if that makes any difference.
Would there be tax implications for him now or for me when he dies?
Thanks p
Click to expand...
Peter, would need a lot more info than that.
What type of WoL policy? (unit linked or non linked for example)
Age of dad
How long policy in force
Premium
Sum assured
Current surrender value
just for starters...
 
Thanks Duke!
Plan date start 1986
Dad is 91
Sum assured 5000 euro
Premium 307 euro per annum
Current surrender 12150 euro
Not sure if unit linked or not
 
My parents has a very bad experience with a whole of life policy. The company radically increased their contributions as they got older and deducted the additional amount from the savings element.

My.mum didn't understand why and rang up to ask whether this was because the find was poorly invested and whether it could be moved to a safer investment options. They said no problem and never explained the real reason why the fund was shrinking.

They list a lot of money and I managed to retrieve just half of it when I made a claim to the Ombudsman on their behalf.

To my knowledge these are problematic products. But I am open to correction if anyone else has better knowledge than me.
 
peterwilson said:
Thanks Duke!
Plan date start 1986
Dad is 91
Sum assured 5000 euro
Premium 307 euro per annum
Current surrender 12150 euro
Not sure if unit linked or not
Click to expand...
So the plan has a higher value than the payout if he died?

Some of these plans will pay the higher of the value or the sum assured, others will pay both. With a sum of €5,000, I am assuming that he took it out to cover his funeral costs. He has that in the value of the policy, so he doesn't need the insurance. I would cash it in and just keep the €5,000 on deposit.

Normally there is no tax liability on these plans as there is no gain but with your dad's policy, the value seems to be higher than the total premiums paid. If that is the case, he will pay tax on the gain, which the life company will deduct and pay to the Revenue directly.

The only other issue that could arise is that if he needs care, the €12,000 could be taken into account.

But generally, a 91 year doesn't need life cover.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Peter,
Believe it or not your Dad’s policy has done quite well for such a low premium. You say it is with a UK company but you talk in euros so I presume the policy itself is Irish. As such it would be under a previous tax regime which levies 20% tax on any profits inside the policy and no tax on surrender or claim. On tax grounds alone I would keep it in force. There does not seem to be any “insurance” element any more, it is purely a savings plan. As I say on tax grounds I would keep it in force but neither would I disagree with SBarrett’s advice to cash it in, realising the proceeds will earn no interest these days.

Further thoughts, there are probably policy fees which on such a small premium would negate the minor tax advantage, so on balance I would cash it in.
 
Last edited:
There's no additional tax on this one @SBarrett as it pre-dates the 'new business basis' of Life Assurance Exit Tax from 01/01/2001

Tax is already paid by Life Insurer @ 20% rate.
 
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