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Should I just leave my matured bonds as passive investments or should I cash them in and re-invest?

03 November 2021

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Question by Julia

I am 64, retired on a reasonable DB pension and have £120K in 4 investment bonds which were taken out in the 1990s and have all now matured. I haven't taken income from these bonds so their 5%pa tax free withdrawal amounts have accumulated. I don't need the income from them and already have a SIPP and an investment portfolio (direct and ISA based) and a rented out property.
I am looking at my IHT position too.


Answered by Luke James

Hi Julia,

Thanks for your question.

What you should do with them will be entirely dependent on your situation and the level of risk you want to take.

If your investment bonds have been left where they are after maturity this isn't likely to be the best option for them. It likely means they are not in investments that are going to be earning very much (I might be wrong but just talking generally here).

One option is ISA's but it seems you might already be using up your ISA allowance.

Another option is pension contributions. The money held within your SIPP would likely be free of inheritance tax which makes it a great way to reduce any future Inheritance Tax bill. Although as you are retired you will be limited on how much you can contribute.

There are also general investment accounts. These do not have any particular tax benefits but allows you to invest your money in similar investments to your ISA/SIPP. You can then move money from this account into your ISA/SIPP each year to use up your allowances.

There are certain investments that can help reduce your inheritance tax bill such as AIM investments or business relief investments. However, a word of warning that these are considered high risk so careful consideration would be needed before making any investments into these.

Something to bear in mind is that there could be tax to pay upon cashing in your bond so this is something that needs to be looked into as well.

Basically, you have got loads of options which is great! Now it is just choosing the best one for you to benefit you and your family.

If you want to have a bit more of an in depth chat about this then please get in touch and I would be happy to help.

Thanks
Luke James

Independent Financial Adviser

Answered by

Luke James

Independent Financial Adviser

I like to think that I am a bit different compared to most other financial advisers. I like to help people achieve their life goals, whether that be retiring early, buying a new car or helping your kids through university. That is what is most important to me and to most of the people that I meet. Money is just a way to get there!