I have an old A&M trust comprising of 5 single premium investment bonds. The settlor is still alive and wants to bring the trust to an end. The trust passed its second 10 year anniversary last year. I have calculated that there are anniversary (and will be) exit charges due.
The investment companies have provided me with valuations but I am not sure which figures I am meant to be relying on for the purpose of completing the anniversary charges: I have been given a mixture of:
- Surrender values
- Cash-in values
- Fund values
- Surrender values excluding final bonus
I am unsure which of the above (if any) are the correct figures to use.
Can any one help?
The periodic charge is levied on the value of the relevant property comprised in the trust immediately prior to the relevant anniversary.
I therefore suggest that of the values you list no 3 is the relevant value (ie the value of the trust fund). The other values would be relevant in computing charge event gains (for income tax purposes).
In my experience the surrender value and cash in value are just different terms for the same thing and none of them would include a final bonus if encashed or surrendered before maturity or death of the life assured. You should use these values rather than the fund value.
I would agree that the surrender values of the bonds should be used rather than the fund value. The reason being that the surrender value is the is real time value of the product and will discount any bonuses/extra allocation that will not be earned until maturity.
Surrender values are also used for AEOI reporting.