Kirk says more advisers and wealth managers are now considering a Mip, a regular premium ten-year policy which pays out a tax-free lump sum at the end of the savings term, as an alternative tax wrapper for their clients.
He says: “Advisers and wealth mangers are now thinking that a fee-based and no contribution limit Mip with wrap-style fund choice could have significant advantages in an era when tax rates are creeping up, pension contributions for high earners are capped and Isa contributions are severely limited. I expect a rush to market with new model Mips over the next few months.”
Novia chief executive officer Bill Vasilieff agrees. He says: “Pensions have been walloped for the wealthy, the Isa limit is restricted and tax is going up so for those wealthy people an Mip could be a real option. The downside of course is you are tied in and you have got to keep your contributions up on a regular period for at least 10 years.”
But Threesixty partner David Ingram says there is already something similar in the market, a single premium bond.
He says: “If you have a Mip which has no contribution limits then you simply have a non-qualifying investment plan. I don’t see any reason why providers would rush to market with this Mip structure when a minor modification to their bonds would meet the demand which, by the way, I do agree will exist as a result of pension changes.”
Ingram also says bonds already exist as wrap friendly investments and the tax treatment of a non-qualifying Mip and a single premium bond are the same. He says the only possible advantage of the Mip route would be that it might be able to accept lower top-ups than are currently available with single premium bonds.