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Pension Term Assurance

Standard Life has launched a pension term assurance (PTA) product which takes full advantage of the new rules applying to PTA payments, writes Richard Eagling.

The new product, called Life Insurance with Tax Relief (LITR) will offer savings on payments of anywhere between 8% and 30%, depending on tax status, compared with conventional term assurance. For instance, a 35 year old male, non-smoker, looking for £100,000 sum assured for a 25 year term would pay a premium of £10.88 per month with an ordinary term assurance policy. The same individual would pay a premium of £9.27 per month with the new LITR product if he/she is a basic rate tax payer and just £7.13 if he/she is a higher rate tax payer.

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Although the product is governed by pension legislation, under the new A-Day rules consumers do not need to link the insurance to a pension to qualify fully from the tax relief on payments. LITR will be available as both level and decreasing term cover and contains a built in conversion option, which will allow clients to convert to a conventional life assurance plan with no additional underwriting if the client is at risk of exceeding their pension lifetime allowance.

Mick James, Marketing Manager, Protection at Standard Life, said: “Life insurance with tax relief provides a very affordable opportunity for people to review their protection requirements and ensure they are adequately insured, helping to close the £2.4 trillion personal protection gap that currently exists in the UK. Many people are concerned about the potential effect any payout may have on their pension lifetime allowance. Although something to keep an eye on, given that only 250 of our individual pension customers at present have benefits in excess of £1 million, I don’t think this will be a problem for most people. For those lucky individuals who have built up large pension benefits and are in danger of exceeding their lifetime allowance, our free switching option means they can maintain cover without penalty.”