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Chargeable gains

Our most common queries on chargeable events no.4 & 5

Continuing our focus on the most common questions around chargeable events, we look at our final two queries below.

No. 4. Student loans and chargeable gains

Most children heading to higher education need to supplement their finances with a student loan. Where that child could also potentially benefit from an investment bond, consideration needs to be given to the exit strategy, if that occurs when the child is working.

The child may have to make additional student loan repayments if they receive savings income of more than £2,000 a year. Savings income includes interest on stocks, shares or savings.


Chargeable gains are treated as savings income so, where a gain is realised and assessed on the child, they could be asked to make loan repayments of 9% of the gain.

No. 5. Segment surrender or partial withdrawals

Which way is best will depend on the client’s circumstances at the point they require the money. When deciding which option is suitable there are a number of factors to take into consideration but, as a general rule, if the amount required is less than the 5% tax-deferred allowance, use that.


If the amount required is much higher than the 5% tax-deferred allowance, or regular withdrawals have used it up, segment surrenders would normally result in the lowest gain. A combination of partial withdrawals and segment surrenders could, however, trigger an even lower gain.

But remember chargeable gains in respect of partial withdrawals are calculated at the end of the policy year, whereas gains on segment surrenders are calculated on the actual date of the event.

If these dates fall in different tax years, the tax bill could be payable earlier depending on which way the money is withdrawn. So, if the client has fluctuating income, the timing of the chargeable event may be crucial.

Also remember that if segments are surrendered, any accumulated and future 5% withdrawals relating to the surrendered segments will be lost.

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Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.

Stonehaven UK Limited and MGM Advantage Life Limited, trading as Canada Life, are subsidiaries of The Canada Life Group (U.K.) Limited. Stonehaven UK Ltd is authorised and regulated by the Financial Conduct Authority. MGM Advantage Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority.