It can pay to divide up your investments; SURGERY

Sunday Telegraph (London, England)

Lorna Bourke

January 4, 2004

IN MARCH 1997 my wife and I invested pounds 8,000 in a Commercial Union Premier Investment Bond. For reasons which we have never understood, our investment was broken down into 10 separate units of pounds 800. We have even been cynical enough to wonder if this could have been a ploy to increase the commission payable to our financial advisers.

At the end of 2002, we held 5,642.50 units with a total value of pounds 10,748.90. We would be most grateful for an explanation regarding the subdivision of our original investment and, if possible, advice on whether this remains a good investment for my wife and myself. We are aged 72 and 71 respectively.

Ronald Webb

Solihull, West Midlands

The adviser will have earned the same commission on the 10 subdivided policies as he would on a single policy. Investments are most commonly subdivided like this to provide flexibility. You may not want to encash all the investment so you have the choice of cashing in part of it.

Pension policies are typically set up in this fashion to allow you to phase your retirement. It could also have been done so that you can minimise or wipe out any capital gains tax liability - by encashing different bonds in different tax years you can utilise your annual CGT allowance of pounds 7,900 each.

For more information, please visit http://www.gale.com.

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