Threadneedle Investment has redesigned its cash withdrawal facility (CWF) to allow investors to take...
Threadneedle Investment has redesigned its cash withdrawal facility (CWF) to allow investors to take regular withdrawals from their investment.
Under the scheme, all dividend income generated by the fund is reinvested - free of charge - and withdrawals are made by selling sufficient shares or units to meet the level set by the investor.
Regular payment - yearly, half yearly, quarterly and monthly - can be made from any of the Threadneedle Oeic funds or managed funds and the facility is also available through Peps and Isas.
Investors can withdraw a set cash sum or up to 7.5% of the value of their holding. The amount of cash generated each year can be set to increase automatically at any rate up to 5%.
How to take these payments is left to the investor, so they can be increased, decreased or stopped on request. The CWF can also be linked to some funds in the portfolio but not all funds.
David Sachon, retail managing director, said:
"In the current environment of low inflation, low interest rates, low equity yields and low annuity rates, finding extra money to boost a client's earnings or pension is difficult and unlikely to get easier. Income generation is a real problem.
"Not only is the Threadneedle cash withdrawal facility a simple and flexible way to solve this problem, it is a very tax-efficient way of generating regular returns to support investor life styles by using the annual CGT allowance and making regular withdrawals of capital.
"Many people fail to make use of their CGT allowance and if it is not used it is lost. For example, for a 40% taxpayer, 5% withdrawals within the CGT exemption give the same net cash flow as a deposit yielding 8.3% and offers prospects of capital growth over the long term. The fact that it is also available through an Isa and the tax shelter they provide for bond funds adds a new range of options for financial advisers.
"We believe the Cash Withdrawal Facility is a valuable planning tool that advisers can offer their clients, a tool which will help overcome the problem of income starvation."
Consultation closing 15 September
Across all public sector schemes
Proceeds being returned to investors