In the UK’s 2016 budget the government announced that it would update the categories of permitted investments which could be held in a policy life insurance, life annuity or capital redemption policy without becoming taxable as a PPB.
Pinsent Masons life insurance expert Bruno Geiringer, in a post on Out-Law, said the new regulations are good news for holders of single premium investment policies as it provides more options that can be selected for their policy to invest in without triggering the PPB rules.
Three new categories
The new regulations, which come into effect on 1 January 2018, add three new categories of permitted assets.
These are real estate investment trust (both UK and foreign equivalents), overseas equivalents of UK approved investment trusts and UK authorised contractual schemes.
The changes are the first time the categories of permitted assets have been updated since 1999.
Real estate investment trusts
Geiringer said a real estate investment trust is a limited company which invests mainly in property and its shares must be widely held.
“Investors own shares in the UK real estate investment trust, and the company manages the underlying investments. The UK real estate investment trust is exempt from UK tax on the income and gains of its property rental business,” Geiringer said.
“It is, however, required to distribute at least 90% of its income to shareholders, and those shareholders are taxed as receiving property income. The shareholders, therefore, get a broadly similar return as if he or she had invested directly in the property,” he said to Out-Law.
Overseas equivalents
While investment trusts are already a permitted asset category, Geiringer said the new regulations will permit overseas equivalents of investment trusts to be included under the class.
Authorised schemes
An authorised contractual scheme is a type of investment fund that is regulated and authorised by the Financial Conduct Authority.
The scheme has an authorised manager responsible for investment decisions and policyholders would not be able to select an investment in a structure that held their personal property.
