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IFA greets closure of loophole

National IFA the Millfield Partnership has welcomed the Chancellor&#39s decision to remove the little known 5 per cent deferral option on life policies.

Current legislation allows the deferral of gains when the proceeds from a maturing life insurance policy are reinvested in a new policy with the same insurer. The holder then has a second chance to make tax-deferred 5 per cent withdrawals.

The new proposals close this loophole, which had potentially meant that policyholders could withdraw more than their original premium without incurring a tax charge.

However, the Government said it has decided to delay any move to get rid of the 5 per cent withdrawal facility.

Millfield Partnership adviser Anthony Clements says: “The Treasury has endorsed the main proposals of Sandler and the removal of anomalies between investments such as the 5 per cent withdrawal would be consistent with this thinking. The deferral of a decision leaves investors and advisers with an unclear perspective.

“Life offices will no doubt employ a buy now while stocks last philosophy.”

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