The Budget has introduced an annual limit of £3,600 on the maximum level of premiums that can be paid into new Qualifying Policies which are issued from 6th April 2013.
New transitional rules also mean that Qualifying Policies started on or after 21st March 2012 will face a maximum premium limit of £3,600 a year from 6th April next year.
This will effectively mean that all new Qualifying Policies started from yesterday face the same annual premium limit, as a reduction in premiums on a Qualifying Policy started during the transitional period would result in it losing its qualifying status for tax purposes.
Qualifying Policies are savings or investment plans that satisfy a number of criteria and benefit from some tax advantages.
The premium payment term must be at least ten years, the capital sum payable on death must be at least 75% of the total premiums paid over the whole term and the premium paid in any twelve month period cannot exceed twice the premium paid in any other twelve month period.
In return for meeting these conditions, a Qualifying Policy has a sum assured payable on death which is free of any further tax liability. Any gains from the policies do not normally result in chargeable event gains either.
With a stricter set of rules for pension contributions introduced last year, restricting contributions to a maximum of £50,000 per annum, Qualifying Policies were gaining in popularity as a way to save for retirement in a tax advantageous environment.
The new rules being introduced as a result of the Budget will not have any impact on Qualifying Policies already established. They are likely to reduce their popularity for new Qualifying Policies.
Photo credit: Flickr/Erwin Bolwidt
