Life Insurance

[tamborine]

Is it usual for LI companies to withdraw tax before payouts

[SirOracle]

Not usual

[boxtops]

what sort of policy?

[Captain Spod]

I don't believe they ever do. If it is a 'non-qualifying' (don't worry about the definition) policy they will inform HMRC that a gain has been made and the investor may have to pay up but only if he/she is a higher rate taxpayer.

[factor-fiction]

Was this an early surrender, tamnorine?
I recall that in certain cases there may be some tax due if you surrender a policy early. I'll have a look later

[tamborine]

Its my dec'd OH Life policy. Scittish Widows have deducted third payout for tax. Robbery or what ?

[SirOracle]

I do not understand why Scottish Widows would deduct tax from a death claim on a whole life or endowment policy.

If I were you I would contact them and ask them for their reasons for making this reduction. Make sure that you speak to someone in authority and get an adequate and satisfactory explanation.

If you are not completely satisfied then post again with full details of the policy and their reasoning,when I may be able to assist you further.

[tamborine]

SWdows revealed this policy 6y after OHs death; weve been at same address for more than 40y. I wasnt aware of this policy. I will report more from SW as known.

Do you deal with SW, SirOracle?

[bednobs]

you can hardly expect SW to know he had died though!

[factor-fiction]

If the tax was deducted incorrectly you'll get it back, either from them or via HMRC. You need to ask SW why they've deducted tax on behalf of HMRC

[SirOracle]

Tamborine. In view of the later facts which are emerging,I am coming to the conclusion that "tax" as such is perhaps the wrong term being used here.

As I see it premiums to SW ceased some six years ago,but they were not informed of the death of the Life Assured.The policy would be put into "cold storage" where it has remained until now. It would have had a "surrender" value and this amount is perhaps what they are now paying out to you.

Despite the Late Claim aspect I would be inclined to approach SW in a gentle manner and suggest that perhaps they reconsider matters ie had you known of the existence of this policy six years ago then there would have been a valid claim for the full Sum Assured which they would have met.

I would also politely mention that they have had the interest on the full Sum Assured for the last six years.

In conclusion I would like to stress that the Scottish Widows have a great reputation in the Life Assurance business. I would say they are second to none.

Good luck and please keep me posted.

[factor-fiction]

I agree with SirOracle. One third would be an unusual tax rate given that the tax rate is 20%, so maybe it is something else. If it has been treated as a surrender then some deduction may have been made. I'm sure a query with SW would lead to an explanation and resolution.
I'd be interested to see how you get on.

[tamborine]

Ongoing.....will post in due course, ta all

[dzug2]

There's another possibility - though on the facts as given so far extremely unlikely except as the reason for the erroe

They may have deducted the premiums that would have been payable had the policy still been in effect and that were owed over the 6 years