Life assurance premium relief cut is "cruel move" aimed at soft targets
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Royal London head of corporate affairs Gareth Evans says the removal of life assurance premium relief from 2015 is a “cruel move” which will hit the poor and elderly.
The decision to scrap the 12.5 per cent LAPR was announced in March’s Budget but the Treasury has been waiting for the results of a consultation before announcing in this week’s finance bill that it will be scrapped from April 6, 2015.
Evans (pictured) says: “This is a cruel move against a soft target. It will hit old people and the poor because that is who tends to have policies eligible for this relief. As policy holders get older and die this would have become less of an issue for the Treasury’s coffers.”
LAPR only applies to policies bought before March 14, 1984 so is not available for people with 25 year policies. The Association of Financial Mutual estimates its removal will still hit around 1.5m people.
Evans, who is also AFM communication group chairman, says people who will be hit by its removal have been paying into their policies for years and will now see them get more expensive, increasing the risk they could stop paying or reduce their cover.
Evans says: “I accept that because it only affects pre-1984 contracts it is a bit of an anomaly but these are generally quite small premiums and if people are on a tight budget we could see large scale lapses in payments. However, there is still a while to go until its cut and we will be communicating with policy holders about the change.”
AFM chief executive Martin Shaw says: “Mutuals will be reluctant to pass on the full cost of this to their customers- though they may be constrained by the rules of the policy, and their general approach to fairness for all policyholders. It is quite likely that some customers therefore will see a reduction in the value of the policy, as this will be easier to administer than to increase premiums.”
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Readers' comments (1)
Julian Stevens | 8 Dec 2011 8:46 pm
This seems to be just a vindictive measure that will affect policyholders retroactively and raise very little in terms of additional revenue for the Exchequer. Another attack largely on people of modest means.
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