MIPs are structured regular premium qualifying life assurance policies, normally with an initial term of 10 years. The element of life assurance cover is generally kept to the minimum – typically seven and a half times the amount invested annually. At the end of the MIP’s initial 10 year term you have three main options:
- To cash in the plan free of any personal tax liability, provided you have paid contributions for at least seven and a half years.
- To take regular or one-off withdrawals from the plan, free of any personal tax.
- To continue to pay contributions for as long as you wish and then either take withdrawal or cash in the plan, both options being free of personal tax.
If you cash in your investment or stop contributions within the first 10 years, you could end up with less than you put in, as a result of the plan’s charges and possibly also exit penalties.
The underlying funds provide you with an opportunity to pool your money with that of other investors and have it managed by expert fund managers. This is more convenient than buying individual shares and also reduces risk, because the fund will hold a broad spread of different shares or other asset types.
This pooled approach is similar to that used by unit trusts, OEICs and investment trusts, but MIPs are treated differently for tax purposes.Last Updated
