Offshore bond withdrawal strategy
I suppose I'm wanting a sense check here.
Client has an offshore bond, set up May 2012 with £10m with 1000 segments. She has taken a mix of monthly regular £10k pm & partial withdrawals across the plan over the years, totalling £4,58m all within the 5% allowance. Cumulative 5% remaining £1.34m, so massive future chargeable gain built up.
She needs an income to support her £120k pa lifestyle (+ larger ad hoc w/d for discretionary needs c£100k-£250k pa).
Her other income is c£35k from property rental & savings interest, so PA, PSA, SRB all used up but capacity to make pension contributions limited to £3600 pa.
1) She can continue with the £10k pm regulars with no immediate liability to income tax, but with v large potential chargeable gain on future surrender or death.
2) She could surrender individual segments each year (there are 983 remaining) for larger withdrawals (e.g. c£100k - £200k) but these would generate a gain with an immediate liability to tax, whilst reducing the cumulative 5% allowance.
Does this sound a sensible strategy - paying relatively small amounts of tax each year via individual policy surrenders, but chipping away at the 5% allowance & overall gains building up? Anyone think of a better way to structure it?