This presentation is provided to you by Zurich Intermediary Group in your capacity as a financial services industry professional. It must not be made available or copied or otherwise quoted or referred to in whole or in part in any way, including orally, to any person without our express written permission, which we may, at our absolute discretion, grant or withhold or grant subject to conditions, including conditions as to our responsibility. We accept no duty or responsibility, and we disclaim all liability whether in contract, tort (including negligence) in respect of this material but this sentence does not exclude any liability which by law cannot be excluded. Important information For intermediary use only – not for use with your clients

Tax Wrappers & Taxation – taxation considerations when giving investment advice Andy Woollon, Dip PFS Strategic Partner Specialist 2 For intermediary use only – not for use with your clients

Transfer of risk onto the individual For intermediary use only – not for use with your clients

4 Mind the gap…..tax matters! Source: HMRC – Levelling the tax playing field – March 2013 Government investing almost £1bn to increase tax compliance

5 For intermediary use only – not for use with your clients But are clients disclosing investments correctly?

6 For intermediary use only – not for use with your clients Sources of “income”- minimizing tax liability Borrowed Capital Income deferred liability Income immediate liability E.g. Mortgages / Loans / Credit cards E.g. 5% Inv-bonds / structured deposits E.g. OEICs / UTs E.g. Deposits / Yield from OEICS / UTs Tax Free E.g. ISA Income less tax payable E.g. PAYE income, pension, shares

7 For intermediary use only – not for use with your clients Personal tax computation order Income Ignoring National Insurance and indirect taxes/traps Personal Allowance / Age Allowance 1 st – Non Savings 2 nd – Savings 3 rd – Investment e.g. Dividends 4 th – Chargeable Event Gains 5 th – Capital Gains

8 Discombobulated? For intermediary use only – not for use with your clients

Learning Outcomes Knowledge is.…. opportunity By the end of this session you will be able to explain how: the taxation of different investment products and funds affects advice to different age and income groups; the Budget changes to the ISA allowance, other investment options and taxation allowances will impact on investment decisions; to make effective use of the various tax allowances, whilst avoiding tax traps that can reduce client returns. For intermediary use only – not for use with your clients

Taxation of tax wrappers & assets 10 For intermediary use only – not for use with your clients

11 For intermediary use only – not for use with your clients Wealth and income lifecycle Nil IncomeNil to Low Income Modest Income and Low Capital Accumulation High Income and Capital Accumulation Low to Medium Income* and Wealth De-accumulation Schoo l College & tertiaryCareer building yearsPrime Retirement & Estate Planning Matching assets and tax wrappers *May have a need for higher income for Care Home fees

T A X 12 Advice process Tax wrapper selection? Clear picture of current position Understanding of current value and worth Establishing long term goals Strategy plan Implement solutions Report of solutions advised and actions taken Future relationship strategy For intermediary use only – not for use with your clients

13 For intermediary use only – not for use with your clients Fund choice & switching Tax traps Income withdrawals & CGT Education funding Key facts to consider… Assignment & account designation Asset type & performance Age Legislation changes Death & ill health Self assessment Admin & online capability Customer charges Customer tax & investment amount Adviser charging Care home fees planning IHT planning & trusts

14 For intermediary use only – not for use with your clients Main tax wrappers

Tax and onshore bonds 20% within fund after indexation relief and expenses Pays 0%, 20% or 25% of net gain NT/SRT no reclaim Gains Within fund, received net of 10% or 20% tax credit No further liability Dividends Within fund, received net of 20% No further liability Interest/Rent UK investment bond – fund and investor taxation INVESTOR FUND

Tax and authorised investment funds No tax within fund Pays 18% or 28% on gains over exemption Gains Within fund, received net of 10% or 20% tax credit Pays 0%, 22.5% or 27.5% additional tax Dividends Within fund, received net of 20% Pays 0%, 20% or 25% additional tax NT/SRT can reclaim Interest/Rent UK unit trust / OEIC – fund and investor taxation INVESTOR FUND

17 For intermediary use only – not for use with your clients Calculating capital gains Minus current year loss Deduct Capital Gains Tax Annual Exemption Elect whether to utilise carry forward losses = Net taxable gain Establish current year gain

18 For intermediary use only – not for use with your clients Basic Rate Income Tax Higher Rate Income Tax Personal Allowance / Age Allowance Additional Rate Income Tax Taxable Income Net 28% Higher Rate Net 18% Basic Rate Basic Rate Tax Threshold Calculating the CGT rate

Tax and onshore bonds No tax within fund Pays 0%, 10%, 20%, 40% or 45% of net gain Gains UK dividends received net of 10% tax credit No further liability Dividends No tax, received gross No further liability Interest/Rent Offshore bond – fund and investor taxation INVESTOR FUND

20 For intermediary use only – not for use with your clients National Savings Tax- Free Growth Limited Amounts Wrapper allocation ISA Tax Efficient Growth Limited Amounts Income not Taxed No Tax in Fund CGT on disposal Income Taxed at highest marginal rate UK Unit Trust / OEIC Gross Roll Up Tax at highest marginal rate 5% a year Tax Deferred Top-slicing relief Time Apportionment Relief Offshore Bond Tax Efficient Growth Limited Amounts Tax Relief on Contributions Tax- Free Cash Sum Income Taxed as Earned Income Pension Life Fund Tax in fund HRT/ART on exit 5% a year Tax Deferred Top-slicing relief Onshore Bond

21 For intermediary use only – not for use with your clients Tax efficiency Personal & Age-related Allowance Collectives Capital Gains exemption NISA Investment Bonds 5% Tax-deferred Wrapper Savings rate band Non-Yielding Funds Fixed Interest / Property Yielding Funds / Deposits Fixed Interest Yield Offshore Bond Gains Asset

For intermediary use only – not for use with your clients Handset Question 1 Do you have clients invested in UT/OEIC funds who may not fully understand the taxation implications and risk not fully disclosing all income to HMRC?: Yes – press 1 No – press 2

Budget 2014 update 23 For intermediary use only – not for use with your clients

The New ISA (NISA) JISA and CTF for under 16’s – stocks & shares or cash – up to £4,000 NISA for year olds – cash only – up to £15,000 For intermediary use only – not for use with your clients

NISAs – extra appeal? Increased flexibility on transfer: Cash to Stocks & Shares and vice versa Switch within the existing wrapper Extension of eligible assets: Starting / Basic rate taxpayers Higher / Additional rate taxpayers Tax traps – Age/Personal allowance, Child Benefit NISA vs Pension alternative? For intermediary use only – not for use with your clients

Allowance and taxation changes 6/4/20136/4/20146/4/2015 Personal allowance£9,440£10,000£10,500 Starting rate band at 10%£2,720£2,880- Starting rate band at 0%--£5,000 Basic rate tax band£32,010£31,865£31,785 Higher rate tax threshold£41,450£41,865£42,285 Annual CGT exemption£10,900£11,000£11,100 Age-related allowance <75£10,500 Age-related allowance >75£10,660 Age-related income limit£26,100£27,000TBC Source: HMRC

New 0% starting rate for savings income from 6th April 2015 Starting rate band for savings income increases to £5,000 Band reduces proportionately for any non-savings income above personal allowance, as per current practice No tax payable if non-savings and savings income is less than £15,500 Savings income = deposits, fixed interest yield and offshore bond gains Potentially beneficial for pensioners with savings or income from fixed interest funds, and investors with gains from offshore bonds Starting rate for savings income

Example – from April 2015 – Sheila age 60 Part-time job at DIY store£12,000 Personal allowance£10,500 Taxed at 20% on £1,500 Deposit interest of £400 net (£500 gross) (£25,000 * 2%) Total gross income £12,500 Total income is below £15,500 (personal allowance + starting rate band) Can apply for tax-free savings with form R85 Source: HM Treasury fact sheet - Abolishing the 10% rate of tax on savings income

Starting rate for savings income Example – from April 2015 – Derek age 60 Pension£14,000 Personal allowance£10,500 Taxed at 20% on £3,500 Fixed Interest yield of £2,000 net (£2,500 gross) (£62,500 * 4%) Total gross income £16,500 Total income is above £15,500 (personal allowance + starting rate band) Cannot apply for tax-free savings – but can claim back the tax on £1,500 of the Fixed Interest yield with form R40 Source: HM Treasury fact sheet - Abolishing the 10% rate of tax on savings income

Starting rate for savings income Example – from April 2015 – Ronald age 75 Pension£10,000 Personal allowance£10,500 No tax is due Offshore bond gains of £5,500 gross (£55,000 gain / 10 years) Total gross income £15,500 Total income is below £15,500 (personal allowance + starting rate band) No tax payable on offshore bond encashment Source: HM Treasury fact sheet - Abolishing the 10% rate of tax on savings income

Mind the tax traps! 31 For intermediary use only – not for use with your clients

The tax traps Age Allowance Child Benefit Personal Allowance ,00020,00030,00040,00050,00060,00070,00080,00090, ,000110, , ,000140,000150,000160,000 Effective rate of tax % Income £ Higher Rate Tax

Adjusted Net Income Earned income Savings / Investment income Pension / Trust income Chargeable gains (full gain) Gift aid payments Less Pension contributions (gross) Trading losses = Adjusted Net Income

34 For intermediary use only – not for use with your clients Age allowance trap – 2014/15 £17,500 £10,000 £10,000 personal allowance only, as £500 of age allowance lost on a 2- for-1 basis on income over £27,000 Basic rate = £3,600 £1,000 30% Marginal Rate £27,000 income limit For intermediary use only – not for use with your clients £500

Personal allowance tax trap – 2014/15 60% effective tax rate Tax year 2013/14 £100,000 £118,880 60% effective tax rate Tax year 2015/16 £121,000 £ 100,000 60% effective tax rate Tax year 2014/15 £120,000 £100,000 For each £2 of adjusted net income over £100,000 the personal allowance reduces by £1

Personal allowance tax trap – 2014/15 Client with £120,000 adjusted net income Make a £20,000 gross pension contribution £10,000 invested Income over limit £20,000 Income 40% = £8,000 tax Lost personal allowance £10,000 Lost allowance 40% = £4,000 tax Amount in bank = £8,000 = £20,000 Amount in pension OR Reduction in bank £8,000 60% tax

37 For intermediary use only – not for use with your clients Higher rate tax threshold trap 1.1 million extra higher rate taxpayers* Source: HMRC and IFS*

£10,000 Child Benefit tax trap – 2014/15 Bank Income Tax 40% £4,000 Income Tax 40% £4,000 Income Tax 40% £4,000 Income Tax 40% £4,000 £10,000 £6,000 £2,820 £3,525 £4,934 £4,229 Child Benefit tax charge £2, Child Benefit tax charge £1, Child Benefit tax charge £1, Child Benefit tax charge £3, £50,000£60,000 For each £100 of adjusted net income over £50,000 the child benefit reduces by 1%

Client with £60,000 adjusted net income Make a £10,000 gross pension contribution £10,000 invested Income over limit £10,000 Income 40% = £4,000 tax Lost child benefit (2 kids) £1, Lost child benefit = £1, Amount in bank = £4, = £10,000 Amount in pension OR Reduction in bank £4, % tax 57.70% TAX RELIEF Child Benefit tax trap – 2014/15

40 For intermediary use only – not for use with your clients Maximising use of allowances How much could an individual invest at 4%pa net, and by only using their 2015/16 personal allowance, starting rate band for savings income, NISA and annual CGT exemption, not pay any Income Tax? 1. £117, £217, £317, £417,500 Approximately £417,500

Fully utilised allowances can be valuable Allowance type & amount in 2015/16 Equivalent investment amount net return*) Income Tax payable Personal allowance£10,500Nil – assumed offsets pension income Nil 0% savings rate band£5,000£125,000*Nil NISA allowance£15,000 Nil Annual CGT exemption£11,100£277,500* (in zero yielding funds) Nil (and no CGT) Total = £417,500 NIL Other sources of untaxed ‘income’ may include existing ISAs and tax-deferred withdrawals from investment bonds

42 For intermediary use only – not for use with your clients Platforms can facilitate use of multiple wrappers Investment Bond Other Investment Account Pension Funding Pension Income PLATFORM ISA

43 For intermediary use only – not for use with your clients Treating Customers Fairly Consumers do not face unreasonable post-sale barriers imposed by firms to change products, switch provider, submit a claim or make a complaint. Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard as they have been led to expect. Where consumers received advice, the advice is suitable and takes into account their circumstances. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale. Products and services marketed and sold are designed to meet the needs of identified consumer groups and are targeted accordingly. Consumers can be confident that they are dealing with firms where fair treatment of customers is central to the corporate culture. Outcome 6 Outcome 5 Outcome 4 Outcome 3 Outcome 2 Outcome 1

For intermediary use only – not for use with your clients Handset Question 2 Do you have any of the following client types that may benefit from further advice around allowances and taxation: older individuals looking to fully utilise their allowances; those investing into income-producing funds, but not doing a tax return; high earners potentially caught by tax traps; clients expecting their tax rate to reduce in future; those already fully using their annual CGT exemption. Yes – press 1 No – press 2

45 Next steps Visit: Call: Technical Support Team on Review and segment your clients: Those who are older and/or have deposits Actively use their ISA allowance By income levels or tax/trap thresholds HRT who don’t want to lose child benefit Contact your Zurich Partnership Development consultant for: Details of our Platform and associated funds and features Details of our range of Adviser Tools Sterling Flexible Bond information

For intermediary use only – not for use with your clients Handset Question 3 Would you like a Zurich Partnership Development Consultant to contact you regarding the support available? Yes – press 1 No – press 2

Thank you for listening. Zurich Intermediary Group Limited. Registered in England and Wales under company number Registered Office:The Grange, Bishops Cleeve, Cheltenham, GL52 8XX. Telephone no We may monitor or record calls to improve service. For use by professional financial advisers only. No other person should rely on, or act on any information in this advertisement when making an investment decision. This advertisement has not been approved for use with clients. Important information Any tax and legislation information is based on Zurich’s current understanding and may change in the future