Adding flexibility with segmentation

Most life companies allow their bonds to be split into a number of 'mini policies', known as segments or clusters, each designed to add flexibility to the plan. One of the benefits and frequent uses of policy segmentation is when a partial surrender is taken from the bond. A withdrawal of up to 5% of the original investment can be taken each year for 20 years without an immediate liability to income tax. If the 5% is not taken in any policy year, the unused allowance can be carried forward on a cumulative basis. Any excess over and above the 5% allowance is chargeable, which will be liabl...