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Budget 12: Skandia, L&G and Transact to axe Mips after contribution cap

Skandia and Legal & General are both dropping their maximum investment plan products after the Government placed a £3,600 annual cap on the contributions that can be paid into the schemes.

A Mip is a regular-premium savings plan which allows investors to save for a period of 10 years or more.

Mips are a “qualifying policy”, which means any growth from the investments is free from higher and additional rate income tax and capital gains tax, provided regular investments are payable each year for the full term of the policy.

Although the Government says the change will apply from next April, the requirement effectively imposes a £3,600 limit on new policies taken out from today onwards. This is because a reduction in contributions next year of more than 50 per cent would result in the policy becoming non-qualifying.

Skandia, Legal & General and Transact have all pushed Mips as an attractive tax planning alternative following the Government’s decision to reduce the annual allowance from £255,000 to £50,000 in April last year.

A Skandia spokesman says: “We already had plans in place to pull the Mip product ahead of the RDR but this change is likely to accelerate that process.”

A Legal & General spokesman confirms the provider’s Mip, the portfolio regular investment plan, has now closed to new business as a result of the cap. The product required a minimum investment of £1,000 a month.

Transact managing director Ian Taylor says: “It is very unlikely we will retain our Mip given the restriction in tax advantages announced yesterday but we haven’t made a final decision yet.”

Standard Life head of pensions policy John Lawson says: “A lot of companies were pushing Mips as an attractive pension planning alternative when the annual allowance was cut.

“This change has effectively killed off the market for Mips. Anyone thinking about putting a policy in place today should not put in any more than £300
a month.”

St James’s Place private client director Colin Jelley says: “This was one attractive way of building up funds in excess of the lifetime allowance but change brings opportunity and there continue to be other alternatives.”


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