Understanding 5% cumulative withdrawal allowance

[Toomuch44]

My Mum has a 5% cumulative withdrawal allowance. She's had the policy 28 years and has never made a withdrawal/received a payment. Am I right in thinking that she doesn't have to worry as the cumulation will take her allowance to 100%?

More information needed.

What policy, for a start?

It's a Bond with profits.

In the policy is says you withdraw more than 5% per policy year of the amount that you have paid into your Bond. This 5% withdrawal allowance is cumulative, and any unused part can be carried forward to future years, subject to the total cumulative 5% allowance amount not exceeding 100% of the amount you have paid into your Bond.

Am I right in thinking she can withdraw the whole of her initial premium?

maybe that should be investment, not premium

That would be my understanding of it too OP.

It’s 100% of the premium, but depending on the gain she can also take that tax free too. The gain is distributed over the 28 years of ownership and that ‘slice’ added to her income. If that slice is still in her basic tax band, she can take the lot tax free. If it pushes her into a HR band, she will pay 20% tax on the whole gain.

You may find this helpful OP....https://www.mandg.com/pru/customer/en-gb/our-products/investment-products/investment-bonds

Thank you for your replies. At the moment she won't need more than her original investment, so that's reassuring. Also, reading the Pru document, it's almost reading that it's 5% each year on top of the original investment, rather than 5% of the investment - obviously I'll clarify this with the company concerned, but just wanted a heads up as my DM doesn't listen, doesn't take things in (always been the case, not age related), so I have to work it out in a simple way.

It is absolutely 5% of the principle (original investment) to avoid a chargeable event (tax assessment)