Quilter 11 Taking withdrawals You have a choice of withdrawal options to suit you. As the settlor, you can select at outset to take withdrawals of up to 15% of the initial investment each year, but bear in mind that the larger the level of withdrawals, the greater the chance of your investment decreasing, even taking into account investment growth. Potentially this could leave you with no investment from which to take withdrawals, or to pass onto your beneficiaries. You can receive up to 5% of the investment each policy year, for at least 20 years, without having to pay any income tax. Withdrawals over 5% each policy year may also be subject to UK income tax at your highest rate. Withdrawals are paid in arrears, either monthly, quarterly, half-yearly or yearly. The first withdrawal will be paid by reference to the declaration date of the trust, not the start date of the investment. So, where you ask for withdrawals yearly in arrears and your declaration date is 1 October 2021, the first payment will fall due on 1 October 2022. For trusts with more than one settlor, the payment must be made to both settlors jointly. The amount of each withdrawal is determined at outset and will not increase. Waiving withdrawals You may not want to receive withdrawals every year, in which case you can waive the withdrawals (ie not take them) and instead turn these withdrawals into a further ‘gift’ to the beneficiaries. You can do this by deed in advance of a payment. However, you should be aware that this amount will be treated as a further PET for UK IHT purposes. Once a withdrawal has been waived, you will not be able to access this money again. It is essential that before you waive any withdrawals, you discuss this with your financial adviser. Deferring the start date of withdrawals You may want to begin your IHT planning, but instead of having withdrawals starting when the trust starts, have the withdrawals starting from a future date of your choice. Deferring the start date of your withdrawals would enable the seven-year UK IHT ‘clock’ to start. Your regular withdrawals will start at a later date. Once you state when you want your withdrawals to start, you cannot change or defer this date. Risk warning: If you do not spend the money you have withdrawn, it will form part of your estate and could be liable to UK IHT when you die. If market returns are poor for a sustained period, then taking withdrawals could use up all the investment together with any growth. The withdrawals would therefore stop once the trust fund has no value. During your lifetime, and that of any other settlor, no withdrawals can be paid to the beneficiaries. The level and frequency of the withdrawals are set at outset and cannot under any circumstances be changed in the future. Deferring the start date of withdrawals will reduce the value of the discount you receive. Deferment must be for at least one month and up to 60 months (five years) from the date the trust is set up. Age Withdrawals as a % of the investment Withdrawal amount £ 61 0 0 62 0 0 63 0 0 64 5 5,000 65 5 5,000 Fictional example Mrs West, aged 60, invests a cash sum of £100,000. Withdrawals are set at 5% each year, but deferred for the first three years.