HMT/HMRC Statement on Pensions Term Assurance

Background

Following the announcement on the review of Pensions Term Assurance (PTA) contained in section 5.77 of the Pre Budget Report, the Treasury and HMRC have been engaged in discussions with insurance industry representatives on a number of issues.

As part of these discussions the industry has asked for some specific and immediate guidance regarding those customers in the ‘pipeline’ - those who had applied for a policy on or before the 6th December, but where the policy has yet to be issued. This statement is intended to provide that guidance on this particular topic in advance of the more general consultation that the PBR proposes.

Statement

  • Those customers who have applied for policies on or before the 6th December will be treated in the same way as those whose policies have already been issued - they will continue to benefit from tax relief, and will be unaffected by the announcement in the Pre Budget Report, with the conditions below.
  • In response to requests from the insurance industry we recognise that there will be some customers whose application was not received by the insurance company on or before the 6th December, even though it had been completed by the customer and submitted, possibly via an advisor, to the insurance company on or after that date.
  • Therefore in all cases where an application applying for life insurance cover, has been fully completed on or before 6th December, submitted to the insurance company and receipt recorded by that insurance company by midnight on 13th December 2006 the existing tax relief regime will apply, provided that the “sum assured” issued is no greater than that applied for on or before 6th December 2006. Treatment of increases will be considered as part of the wider consultation. Insurers will have until 5 April 2007 to process this business, so that appropriate medical evidence can be checked and an appropriate commencement date for cover settled.
  • For the avoidance of doubt applying for life insurance cover does not include merely applying for a quotation with no other commitment.

This announcement is intended to ensure customers, their advisers and insurers benefit from clarity and certainty on this key issue in advance of the broader consultation into the future of pensions term assurance. We will be engaging further with the industry on the broader issue of the future of pensions term assurance over the coming weeks as part of the wider consultation.