Important information

1. Important information 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. For intermediary use only – not for use with your clients

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

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

4. Mind the gap…..tax matters! Government investing almost £1bn to increase tax compliance Source: HMRC – Levelling the tax playing field – March 2013 For intermediary use only – not for use with your clients

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

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

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

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

9. Learning Outcomes 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. Knowledge is .…. opportunity For intermediary use only – not for use with your clients

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

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

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

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

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

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

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

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

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

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

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

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

22. 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 For intermediary use only – not for use with your clients

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

24. JISA and CTF for under 16’s – stocks & shares or cash – up to £4,000 NISA for 16-18 year olds – cash only – up to £15,000 The New ISA (NISA) For intermediary use only – not for use with your clients

25. 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? NISAs – extra appeal? For intermediary use only – not for use with your clients

26. Allowance and taxation changes Source: HMRC

27. 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

28. 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

29. 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

30. 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

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

32. The tax traps 70 60 50 40 Effective rate of tax % 30 20 10 0 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000 120,000 130,000 140,000 150,000 160,000 Income £ Child Benefit Personal Allowance Higher Rate Tax Age Allowance

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

34. 30%Marginal Rate Age allowance trap – 2014/15 £17,500 £1,000 £27,000 income limit Basic rate tax @20% = £3,600 £10,000 personal allowance only, as £500 of 65-74 age allowance lost on a 2-for-1 basis on income over £27,000 £500 £10,000 For intermediary use only – not for use with your clients For intermediary use only – not for use with your clients

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

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

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

38. Child Benefit tax trap – 2014/15 Bank Income Tax 40% £4,000 Child Benefit tax charge £1,066.00 £4,934 £10,000 £6,000 £10,000 Bank Income Tax 40% £4,000 Child Benefit tax charge £1,770.60 £6,000 £4,229 £10,000 £10,000 Bank Income Tax 40% £4,000 Child Benefit tax charge £2,475.20 £6,000 £3,525 £10,000 £10,000 Bank Income Tax 40% £4,000 Child Benefit tax charge £3,179.40 £10,000 £6,000 £2,820 £10,000 £50,000 £60,000 For each £100 of adjusted net income over £50,000 the child benefit reduces by 1%

39. Child Benefit tax trap – 2014/15 Lost child benefit (2 kids) £1,770.60 Make a £10,000 gross pension contribution Income over limit £10,000 Income taxed @ 40% Lost child benefit = £4,000 tax = £1,770.60 Amount in pension Amount in bank = £4,229.40 = £10,000 Client with £60,000 adjusted net income OR £10,000 invested Reduction in bank £4,248 57.70% TAXRELIEF 57.70% tax

40. 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? • £117,500 • £217,500 • £317,500 • £417,500 Approximately £417,500 For intermediary use only – not for use with your clients

41. Fully utilised allowances can be valuable Other sources of untaxed ‘income’ may include existing ISAs and tax-deferred withdrawals from investment bonds

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

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

44. 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 For intermediary use only – not for use with your clients

45. Next steps Visit: www.zurichintermediary.co.uk Call: Technical Support Team on 0870 6092178 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

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

47. Thank you for listening Importantinformation Any tax and legislation information is based on Zurich’s current understanding and may change in the future . Zurich Intermediary Group Limited. Registered in England and Wales under company number 01909111 Registered Office:The Grange, Bishops Cleeve, Cheltenham, GL52 8XX. Telephone no. 0500 546 546. 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.