1. For intermediary use only – not for use with your clients Era of higher taxation - opportunities for tax mitigators Ian D Black APFS IMC Chartered Financial Planner Wealth Solutions Sales Manager

2. © Zurich - 2 1/31/2009 Session objective Update on how Zurich can support your diploma journey To consider the implications of an era of higher taxation. To consider the investment and tax issues on tax wrappers To agree a strategy together to maximise the opportunities. Presentation based upon current understanding of Emergency Budget 2010

3. © Zurich - 3 1/31/2009 Retail Distribution Review - qualifications Advice Application - appropriate to the advice model Private Client Financia l Planning Other? Additional Advice Units - select any group Product area based units Need area based units Process based units Core Units - all Financial Svcs, Regulation and Ethics Investment Principles and Risk Personal taxation CORE UNITS + ADVICE UNIT(S) + APPLICATION STANDARDS = APPROPRIATE EXAMINATION STANDARD www.zurich4qualifications.co.uk

4. © Zurich - 4 1/31/2009 4

5. © Zurich - 5 1/31/2009 © Zurich 1/31/2009 Public Sector Net Debt June 2010 - £893 billion Equivalent to 62% of gross domestic product Equivalent to £35,452 per household 5 Source: Credit Action Debt Facts and Figures June 2010 For intermediary use only – not for use with your clients

6. © Zurich - 6 1/31/2009 Source: Emergency Budget June 2010

7. © Zurich - 7 1/31/2009 Emergency Budget 2010 - impact and opportunities

8. © Zurich - 8 1/31/2009 Emergency Budget 2010 - VAT

9. © Zurich - 9 1/31/2009 Emergency Budget 2010 - Pensions

10. © Zurich - 10 1/31/2009 Emergency Budget 2010 - Personal Allowance

11. © Zurich - 11 1/31/2009 Emergency Budget 2010 - Capital Gains Tax

12. © Zurich - 12 1/31/2009 Marginal Tax Rates – 2010/11 0% Personal Allowance

13. © Zurich - 13 1/31/2009 Marginal Tax Rates – 2010/11 0% Personal Allowance 10% Savings Rate

14. © Zurich - 14 1/31/2009 £18,740 Income and the 10% Band - 65 -74 Years of Age £34,960 Remaining Basic Rate £9,490 Age Allowance 65 - 74 £9,490 under Personal Allowance £2,440 10% Band £3,250 Dividends £10,490 Non Savings £5,000 Savings £1,000 Non Savings @ 20% £1,440 Savings @ 10% £3,560 Savings @ 20% £3,250 Dividends @ 10%

15. © Zurich - 15 1/31/2009 £20,180 Income and the 10% Band - 65 -74 Years of Age £34,960 Remaining Basic Rate £9,490 Age Allowance 65 - 74 £9,490 under Personal Allowance £3,250 Dividends £11,930 Non Savings £5,000 Savings £2,440 Non Savings @ 20% £5,000 Savings @ 20% £3,250 Dividends @ 10%

16. © Zurich - 16 1/31/2009 Marginal Tax Rates – 2010/11 0% Personal Allowance 10% Savings Rate 30% Age Allowance Trap 20% Basic Rate 40% Higher Rate

17. © Zurich - 17 1/31/2009 65 – 74 Age Allowance £22,900 Limit £9,490 Age Allowance £13,410 Basic Rate Tax @20% = £2,682 20% Marginal Rate

18. © Zurich - 18 1/31/2009 65 – 74 Age Allowance Trap - £6,030 more income £22,900 £6,475 Age Allowance £22,455 Basic Rate Tax @20% = £4,491 30% Marginal Rate £6,030

19. © Zurich - 19 1/31/2009 Client may also be able to minimise the tax payable when he cashes in the bond, if: his total income has reduced. the tax threshold has increased or the tax rate has been reduced. he is at that time, subject to a lower marginal rate of tax. the bond is assigned to someone with a lower marginal rate of tax. he is no longer UK resident. Offshore Bond - encashment strategies

20. © Zurich - 20 1/31/2009 Assignment opportunities Trust Offshore Bond Offshore Bond Invest Assig n Segment Cash-in Can assign whole bond or segments (minimum age 18). No chargeable event. Cash in and use Personal Allowance to receive any gains tax-free. Growth

21. © Zurich - 21 1/31/2009 Question? Which of your clients are eligible for the old Age Allowance and may benefit from old Age Allowance restoration?

22. © Zurich - 22 1/31/2009 Source: Emergency Budget June 2010

23. © Zurich - 23 1/31/2009 Historic Budget Changes - net estimated long-run fiscal impact of changes Source: Institute of Fiscal Studies March 2010

24. © Zurich - 24 1/31/2009 Marginal Tax Rates – 2010/11 0% Personal Allowance 10% Savings Rate 30% Age Allowance Trap 20% Basic Rate 40% Higher Rate 60% £100,000+ Personal Allowance Trap

25. © Zurich - 25 1/31/2009 Marginal Tax Rates – 2010/11 0% Personal Allowance 10% Savings Rate 30% Age Allowance Trap 20% Basic Rate 40% Higher Rate 60% £100,000+ Personal Allowance Trap 50% Super Rate £150,000+

26. © Zurich - 26 1/31/2009 Laffer Curve – opportunity for tax mitigators Chancellor announced in Budget 2009 that he expected to raise £3.4 billion from 50% tax rate. Mike Williams, the director of personal tax at the Treasury, explained to the Treasury Select Committee that the Government now expected to receive only 31% (£1.1 billion). Source: Timesonline, 29 April 2009

27. © Zurich - 27 1/31/2009 Question? Which of your clients earning over £100,000 may lose their Personal Allowance?

28. © Zurich - 28 1/31/2009 1979

29. © Zurich - 29 1/31/2009 Learning from history On May 4th 1979, Margaret Thatcher became Prime Minister She inherited 11 bands of tax Up to £750 @ 25% £750 -£8,000 @ 33% £8,000 -£9,000 @ 40% £9,000 -£10,000 @ 45% £10,000 -£11,000 @ 50% £11,000 -£12,500 @ 55% £12,500 -£14,000 @ 60% £14,000 -£16,000 @ 65% £16,000 -£18,500 @ 70% £18,500 -£24,000 @ 75% Over -£24,000 @ 83% Savings top rate @ 98% Source: www.hmrc.gov.uk

30. © Zurich - 30 1/31/2009 Investment Tax Efficiency Income Personal Allowance Income ISA

31. © Zurich - 31 1/31/2009 ISA tax savings can add up to substantial sums over time maximum permitted into an ISA since 1999 c. £90,000. For basic rate taxpayers there is now no direct income tax benefit from an equity-based ISA because the 10% tax credit cannot be recovered. ISA income does not count as “income” for either Age Allowance, £100,000 Personal Allowance reduction, or £150,000 ‘Additional’ rate of tax. ISAs

32. © Zurich - 32 1/31/2009 www.isarollout.co.uk

33. © Zurich - 33 1/31/2009 Investment Tax Efficiency Personal Allowance Capital Gains £10,100 Income ISA

34. © Zurich - 34 1/31/2009 Invest in zero yielding unit trusts. Utilise Capital Gains Tax Exemption currently £10,100 2010/11. Gain in excess of £10,100 taxed at 18% for gains within Basic Rate and 28% for gains within Higher Rate 2010/11 (from 23/6/2010). Going for growth may or may not be suitable. Going for growth

35. © Zurich - 35 1/31/2009 Question? Which of your clients may benefit from a growth only strategy?

36. © Zurich - 36 1/31/2009 Investment Tax Efficiency Personal Allowance Capital Gains £10,100 10% Savings Rate Tax deferred Income ISA

37. © Zurich - 37 1/31/2009 New rate applicable to trusts 2010/11 new higher rate income tax for trust income. 50% for savings and other income. 42.5% for dividend income.

38. © Zurich - 38 1/31/2009 Trust case study

39. © Zurich - 39 1/31/2009 Trust case study – Nigel Nigel is retired and most of his income comes from his company pension scheme. This is topped up with c.£20,000 a year from investments in mutual funds and short-term cash deposits. The portfolio is currently worth £534,000 and held in a discretionary trust (set up his late father, 10 years ago.) As a retired banker he is aware of his need to diversify his investments but in recent years has become more cautious in his attitude to risk. Nigel is worried that the trust’s investments are not right for the current climate. the tax the trust pays on accumulated income will be: 50% tax on interest and 42.5% on dividends.

40. © Zurich - 40 1/31/2009 Trust case study – income Gross dividends£10,000 Gross interest£10,000 TOTAL INCOME£20,000 Income generated by the investments within the trust

41. © Zurich - 41 1/31/2009 Trust case study – porfolio Unit trust portfolio£200,000 Bank deposits£334,000 Total investments£534,000 Investment split within the trust

42. © Zurich - 42 1/31/2009 Trust case study – tax computation Income typeAmountTax calculationTax Interest£10,000 £1,000 @ 20% £9,000 @ 50% £200 £4,500 Dividends£10,000£10,000 @ 42.5%£4,250 TOTAL TAX Interest (20%) Dividend (10%) £8,950 (£2,000) (£1,000) Less tax paid at source TAX PAYABLE£5,950

43. © Zurich - 43 1/31/2009 Nigel’s options – going for growth Invest in zero yielding unit trusts. Utilise Capital Gains Tax Exemption currently £5,050 2009/10. Gain in excess of £5,050 taxed at 28% 2009/10 (from 23/6/2010). Going for growth may or may not be suitable.

44. © Zurich - 44 1/31/2009 Trust case study – options Liquidate unit trust portfolio – BUT be careful of CGT liability. Invest deposits and proceeds from unit trusts into unfettered offshore bond. Hold deposit account in offshore bond. Recreate unit trust portfolio in offshore bond. If income required, take 5% tax-deferred withdrawals.

45. © Zurich - 45 1/31/2009 Trust case study – defer income Gross dividends£0 Gross interest£0 TOTAL INCOME£0 Income can be replaced by taking 5% tax-deferred withdrawals.

46. © Zurich - 46 1/31/2009 Trust case study – non income producing tax wrapper Offshore bond£534,000 TOTAL INVESTMENTS£534,000

47. © Zurich - 47 1/31/2009 Trust case study – revised tax calculation Income typeAmountTax calculationTax Interest£0£0 @ 40%£0 Dividends£0£0 @ 32.5%£0 TOTAL TAX Interest (20%) Dividend (10%) £0 (£0) Less tax paid at source TAX PAYABLE£0 Immediate tax saving of £8,950* *Income tax may be due on final cash-in or any chargeable events.

48. © Zurich - 48 1/31/2009 Trust review pack www.ZurichIntermediary.co.uk

49. © Zurich - 49 1/31/2009 Question? Which of your clients or professional introducers may benefit from the Trust Review Pack?

50. © Zurich - 50 1/31/2009 www.haveacloserlook.co.uk

51. © Zurich - 51 1/31/2009 Support all investments Sterling ISA & Investment Account Structured Deposits Sterling Onshore Investment Bond Bespoke Structured Deposits Dublin Unfettered Offshore Bond IOM and Dublin Fettered Offshore Bond

52. © Zurich - 52 1/31/2009 Standard death benefit

53. © Zurich - 53 1/31/2009 Question? Which of your clients may benefit from the death benefit?

54. © Zurich - 54 1/31/2009 Next steps Visit www.isarollout.co.uk www.haveacloserlook.co.uk www.zurich4qualifications.co.uk Segment your clients by marginal tax spikes 30%, 60% and 50%. Contact trustees and professional connections Review trust assets to minimise tax rises. Contact your Zurich consultant for Emergency Budget Summary Trust Review pack. Latest versions of the Zurich Wrapper Comparison Adviser Tool

55. © Zurich - 55 1/31/2009 Thank you for listening Important Information The tax and legislation information contained in this document is based on Zurich Intermediary Group current understanding as at June 2010 and may change in the future. HM Revenue and Customs (HMRC) practice, and the laws relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. The value of any investment and the income from it can fall as well as rise as a result of market and currency fluctuations and your client may not get back the amount originally invested. You shouldn’t use past performance as a suggestion of future performance. It shouldn’t be the main or sole reason for an investment decision. Money in a bank or building society account is secure, whereas the value of your client’s investment in a Sterling plan is not guaranteed so they may not get back as much as they originally put in. Sterling is a trading name of Zurich Assurance Ltd, authorised and regulated by the Financial Services Authority, for its life assurance, pension and investment products. Registered in England and Wales under company number 02456671. Registered Office : UK Life Centre, Station Road, Swindon SN1 1EL. Sterling ISA Managers Limited, authorised and regulated by the Financial Services Authority. Registered in England and Wales under company number 02395416. Registered Office : UK Life Centre, Station Road, Swindon SN1 1EL. The Zurich International Portfolio Bond is provided by Zurich Life Assurance plc, a member of the Zurich Financial Services Group. Zurich Life Assurance plc is authorised and regulated by the Irish Financial Regulator and subject to limited regulation by the Financial Services Authority for the conduct of insurance business in the UK. Registered office: Eagle Star House, Frascati Road, Blackrock. Co Dublin. Registered in Ireland under company number 58098. Zurich Assurance Ltd, authorised and regulated by the Financial Services Authority, for its life assurance, pension and investment products. Registered in England and Wales under company number 02456671. Registered Office: UK Life Centre, Station Road, Swindon, SN1 1EL.. 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. 2010 528 (Expiry – 31/12/2010)