IPTM3660 - Personal portfolio bonds: calculation method: example
Facts
Mr White took out a life policy at the start of insurance year 1 with a premium of £5,000. During year 4 he made a withdrawal of £3,500 and during year 7 a further withdrawal of £2,750. A further premium of £2,000 was paid in year 9. The policy was surrendered in year 11 for £20,500.
Gains on 'excess events'
Under the rules described in IPTM3560, gains arise on excess events at the ends of insurance years 4 and 7 as follows:
Year 4: £2,500 on the withdrawal of £3,500 (that is, £3,500 바카라 사이트“ £5,000 x 4/20)
Year 7: £2,000 on the withdrawal of £2,750 (that is, £2,750 바카라 사이트“ £5,000 x 3/20)
Calculation of annual PPB gains
| Year y |
Premiums paid, years 1 to end year y (A) |
Cumulative amount of PPB excesses for years 1 to (y 바카라 사이트“ 1) (B) |
Aggregate part surrender gains for years 1 to (y 바카라 사이트“ 1) (C) |
PPB gain for year y = 15% x (A + B 바카라 사이트“ C) |
|---|---|---|---|---|
| 1 | 5,000 | Nil | Nil | 750 |
| 2 | 5,000 |
750 | Nil | 862 |
| 3 | 5,000 |
1,612 | Nil | 991 |
| 4 | 5,000 |
2,603 | Nil | 1,140 |
| 5 | 5,000 |
3,743 | 2,500 | 936 |
| 6 | 5,000 |
4,679 | 2,500 | 1,076 |
| 7 | 5,000 |
5,755 | 2,500 | 1,238 |
| 8 | 5,000 |
6,993 | 4,500 | 1,123 |
| 9 | 7,000 | 8,116 | 4,500 | 1,592 |
| 10 | 7,000 | 9,708 | 4,500 | 1,831 |
| 11 | 7,000 | 11,539 | 4,500 | No gain |
These calculations must be carried out in full even if year 1 ends before 6 April 2000, the date on which the PPB rules took effect. But the PPB gains are only taxable for insurance years ending on or after 6 April 2000. Then each PPB gain is treated as arising on a chargeable event (a 바카라 사이트˜personal portfolio bond event바카라 사이트™) occurring at the end of the insurance year and is taxable in the tax year in which the event occurred. No PPB gain can arise in the final year.
Calculation of gain on final surrender in year 11
Applying IPTM3510, Total Benefits (TB) 바카라 사이트“ Total Deductions (TD) 바카라 사이트“ Previous Gains (PG)
TB = £3,500 + £2,750 + £20,500 = £26,750
TD = £5,000 + £2,000 = £7,000
PG = £2,500 + £2,000 (gains on 바카라 사이트˜excess events바카라 사이트™) + £11,539 (PPB gains) = £16,039
So, gain on surrender is £26,750 바카라 사이트“ £7,000 바카라 사이트“ £16,039 = £3,711.