Pension Term Assurance
On 6th December 2006 the Government announced an important review of Pension Term Assurance (PTA). In a short but vital paragraph the Treasury has effectively thrown the PTA market into turmoil as it has indicated it is not happy with the current products on offer.
What does this mean for consumers?
The statement seems to indicate that PTA plans that have already started before 6th December 2006 are unaffected at this stage. The key point here is what is meant by ‘entered into’ - the insurance industry has now obtained clarification from the HMRC and we can now advise as follows:
Plans that started before 6th December 2006
The initial indications are that your policy is unaffected, therefore, you do not need to take any further action.
Applications outstanding on 6th December 2006
Your pending Pension Term Life Insurance application can proceed as planned. In the meantime, you do not need to take any immediate action. We will be contacting you again when your provider has completed the underwriting process and your policy is ready to start.
It is important to remember that PTA hasn’t been withdrawn at this stage, however the Government has stated that there will be some significant changes in the 2007 Budget. If your policy is subsequently affected, we will advise on the best course of action for you and ensure that you continue to have life cover at the lowest possible premiums.
If you have any questions or are in any doubt please contact us… even if your current plan or quote wasn’t obtained via Torquil Clark Life Insurance we will still be happy to assist where we can. We will also be updating this section of our website with further information as it becomes available, so please check back here soon.
Further clarification can be found on the HM Revenue & Customs website at http://www.hmrc.gov.uk/pensionschemes/pensions-term-assurance.htm
The full extract from the Government statement is below:
The Government has become aware that, as a result of the flexibilities that the new pensions tax regime has brought in, life insurance policies that provide lump sum death benefits alone are being offered as personal pension arrangements eligible for pensions tax relief. This undermines the principles set out above. The Government will therefore work with the pensions industry to explore in time for the budget, how the principles can be applied to pensions term assurance contracts. Any changes the Government decides to make will not effect either personal arrangements entered into before 6 December 2006 or existing types of employer arrangements.
Last Updated: 22nd December 2006
