Question
In 1994 I invested jointly with wife £15,000 in Allied Dunbar Distribution Bond ( joint life - joint ownership. I used the execution only services of Credenda Limited, an IFA, to acquire the bond. I have never had or requested any advice from this company, but they still get annual renewal commision from Allied Dundar.
On several occasions since 1994 I have contacted Allied Dunbar and requested that I be permitted to change my IFA re: this ongoing investment..but they have refused and said it is not their policy to do so.
Would be interested in your advice if their action (or non action) is legal? or where do I go from here?Answer
Sadly a handful of less progressive providers, Allied Dunbar (now Zurich Life) being the most prominent, don’t allow ongoing trail commission to be transferred to another adviser. I believe Skandia can also be awkward sometimes too.
While legal, this practice seems at odds with the Financial Services Authority’s (FSA’s) mantra that financial companies should treat their customers fairly. You could try pointing this out to Zurich Life and see what they say (please let me know how you get on).
Perhaps more importantly, it would be worth reviewing whether the distribution bond is still an appropriate investment for you and your wife.
If either of you are non-taxpayers it could be positively awful, as investment bonds pay income and gains net of basic rate tax which can never be reclaimed.
Even if you are both basic rate taxpayers you would, in theory, be better off switching to a unit trust with a similar investment style, as gains will be tax-free if within your annual capital gains tax allowance.
If you are higher rate taxpayers then there might be an argument for continuing to hold the bond, it would need closer analysis. But even then it may still make sense to switch the money into individual savings accounts (ISAs) which ensure tax-free growth and interest, with no further tax on dividends – again, you could choose a unit trust that invests similarly to your existing bond.
If you decide to sell the bond then check you won’t end up paying tax – any gains will be subject to a 'top-slicing' tax calculation. You can read more on our life company investment page and use our investment bond tax calculator to estimate how much tax, if any, you’ll have to pay.
In 1994 I invested jointly with wife £15,000 in Allied Dunbar Distribution Bond ( joint life - joint ownership. I used the execution only services of Credenda Limited, an IFA, to acquire the bond. I have never had or requested any advice from this company, but they still get annual renewal commision from Allied Dundar.
On several occasions since 1994 I have contacted Allied Dunbar and requested that I be permitted to change my IFA re: this ongoing investment..but they have refused and said it is not their policy to do so.
Would be interested in your advice if their action (or non action) is legal? or where do I go from here?Answer
Sadly a handful of less progressive providers, Allied Dunbar (now Zurich Life) being the most prominent, don’t allow ongoing trail commission to be transferred to another adviser. I believe Skandia can also be awkward sometimes too.
While legal, this practice seems at odds with the Financial Services Authority’s (FSA’s) mantra that financial companies should treat their customers fairly. You could try pointing this out to Zurich Life and see what they say (please let me know how you get on).
Perhaps more importantly, it would be worth reviewing whether the distribution bond is still an appropriate investment for you and your wife.
If either of you are non-taxpayers it could be positively awful, as investment bonds pay income and gains net of basic rate tax which can never be reclaimed.
Even if you are both basic rate taxpayers you would, in theory, be better off switching to a unit trust with a similar investment style, as gains will be tax-free if within your annual capital gains tax allowance.
If you are higher rate taxpayers then there might be an argument for continuing to hold the bond, it would need closer analysis. But even then it may still make sense to switch the money into individual savings accounts (ISAs) which ensure tax-free growth and interest, with no further tax on dividends – again, you could choose a unit trust that invests similarly to your existing bond.
If you decide to sell the bond then check you won’t end up paying tax – any gains will be subject to a 'top-slicing' tax calculation. You can read more on our life company investment page and use our investment bond tax calculator to estimate how much tax, if any, you’ll have to pay.
Read this Q and A at http://www.candidmoney.com/questions/question120.aspx
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