Dewhurst Torevell, in conjunction with Legal & General, has designed and launched the Portfolio Regular Investment Plan (PRIP) as a means of achieving tax efficient growth on regular investments over at least 10 years.

What is a PRIP?

The Legal & General PRIP is a ‘qualifying’ life assurance policy.

‘Qualifying’ life assurance policies have a distinct and advantageous treatment for tax purposes for those clients who are able to invest into the plan over a 10 year period. Once payments have been made for at least ¾ of the 10 year term the policy becomes qualifying and it becomes possible to extract capital or regular withdrawals without any personal tax liability.

The PRIP has been designed be a flexible and tax efficient vehicle for regular savings. It will offer a transparent and simple charging structure along with access to a range of quality actively managed unit trusts.

How does it work?

The PRIP operates in a very simple way.

Regular premiums are invested into the PRIP over a 10 year period. Premiums can be invested on a monthly or annual basis.

The premiums are invested into a wide range of investment funds which can be switched at any time without any tax charges.

Ongoing premiums can be redirected to suit changing investment conditions. Premiums can be stopped during the policy term but penalties will be incurred and full tax benefits will be lost. The policy includes life cover equivalent to 7.5 times the value of the annual premium (dependent upon age) or the value of the underlying funds if this is greater.

Full details of the PRIP are set out in the relevant Key Features document here. This includes information on the costs and charges, together with the details of the relevant cancellation rights and other regulatory matters.

Uses of a PRIP

The PRIP offers a number of tax efficient options:

• Tax efficient regular savings at a high level
• Supplementing tax efficient ISA investments and pension contributions
• Savings for school and university fees
• Conversion of highly taxed capital (eg Capital Gains) or income into a fund free of personal taxes
• Accumulation of tax efficient trust funds:
  • For children or other beneficiaries
  • To provide IHT free funds
  • Without the need for accounts and tax returns
  • For new settlors or trustees of existing trusts.

Options on maturity

After 10 years, the investor has a series of choices:

• Cash in all or part of the plan, free from personal income tax and capital gains tax
• Continue the policy for a further 10 year term
• Stop premiums and leave the policy invested, to be encashed in full or in part at any time, again without any personal tax liability
• Assign the policy to family members, free of income and capital gains taxes.

Please note: The value of investments can go down as well as up, and the past is not necessarily a guide to future performance.

Working with Legal & General

Following our work with Legal & General on the design of this new qualifying investment plan, we were asked to help explain the benefits of the Portfolio Regular Investment Plan (PRIP) to their consultants. Please click here to view the full video.