Skandia MIP (Maximum Investment Plan) maturing - what to do?

br1anstorm

Ten years ago we were persuaded (by an adviser we no longer use - long story) to invest in a Skandia MIP. This is a regular savings plan, linked to life assurance (for taxation reasons) which if maintained for a minimum of ten years then permits you to cash in the capital sum, or draw income (or a combination of both) at the end of 10 years with no income tax or capital gains liability. The regular payments into the plan are invested in Skandia's range of unit-linked funds.

Our plan matures in a couple of months. The rate of return on our savings/investment in this plan hasn't been stellar: partly because of the heavy upfront commission-charges (which weren't exactly made visible at the outset - we're wiser now), and partly because the funds in which the plan is invested have dropped in line with the market in recent months.

So what do we do with this MIP money now that the plan is maturing? I recently retired, pay standard-rate tax on my pension, and we don't need the capital immediately. We appear to have the options of
(a) cashing in completely - in which case we'd want to invest the money somewhere else reasonably sensible but low-ish risk;
(b) continuing to make regular contributions, keeping the plan going, and hoping it will grow and offer us a rainy-day source of tax-free capital if/when we need it when we are older and possibly poorer and more infirm;
(c) partial encashment - continuing to invest at the same or a lower rate, but opting to draw down the capital in limited amounts (essentially cashing in one-by-one the 'policies'which make up the plan).

Instinctively I like the idea of a tax-free return (now or later), and not having to pay income tax or CGT. But I wonder if there is any way we can reinvest - or keep invested - this capital sum (like we rolled over our TESSAs into TOISAs and now into ISAs) in a way which preserves its tax-free status but delivers better growth performance than Skandia has delivered over the past decade? Incidentally we are already investing the annual max in normal stocks & shares ISAs, so I presume can't shift this MIP money into our ISAs.

Any thoughts or comments would be welcome.

br1anstorm

EdInvestor

An endowment, in other words.

Are you basic rate taxpayers?

br1anstorm

Yes, and yes. It is basically an endowment, I suppose. And I'm a basic rate taxpayer; my wife is a non-taxpayer.

br1anstorm

br1anstorm

Anyone care to offer thoughts? EdInvestor, perhaps?

br1anstorm

Vaquero

br1anstorm wrote: »

Ten years ago we were persuaded (by an adviser we no longer use - long story) to invest in a Skandia MIP. This is a regular savings plan, linked to life assurance (for taxation reasons) which if maintained for a minimum of ten years then permits you to cash in the capital sum, or draw income (or a combination of both) at the end of 10 years with no income tax or capital gains liability. The regular payments into the plan are invested in Skandia's range of unit-linked funds.

Our plan matures in a couple of months. The rate of return on our savings/investment in this plan hasn't been stellar: partly because of the heavy upfront commission-charges (which weren't exactly made visible at the outset - we're wiser now), and partly because the funds in which the plan is invested have dropped in line with the market in recent months.

So what do we do with this MIP money now that the plan is maturing? I recently retired, pay standard-rate tax on my pension, and we don't need the capital immediately. We appear to have the options of
(a) cashing in completely - in which case we'd want to invest the money somewhere else reasonably sensible but low-ish risk;
(b) continuing to make regular contributions, keeping the plan going, and hoping it will grow and offer us a rainy-day source of tax-free capital if/when we need it when we are older and possibly poorer and more infirm;
(c) partial encashment - continuing to invest at the same or a lower rate, but opting to draw down the capital in limited amounts (essentially cashing in one-by-one the 'policies'which make up the plan).

Instinctively I like the idea of a tax-free return (now or later), and not having to pay income tax or CGT. But I wonder if there is any way we can reinvest - or keep invested - this capital sum (like we rolled over our TESSAs into TOISAs and now into ISAs) in a way which preserves its tax-free status but delivers better growth performance than Skandia has delivered over the past decade? Incidentally we are already investing the annual max in normal stocks & shares ISAs, so I presume can't shift this MIP money into our ISAs.

Any thoughts or comments would be welcome.

br1anstorm

MIPs and life assurance policies have taken on a new lease of life:

1. Since you are retired - any chidren / grandchildren? The MIP can be placed in trust for their benefit Uni / Sch fees etc. ISAs cant be placed in trust.

2. If you go into local auth care in your dotage, the auth can spend all your cash funding care fees. Life policies are not assessable assets for LTC purposes and the policy proceeds would pass to your heirs.

3. Dont make a hasty decison - there are several considerations at your time of life.