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Aviva refuses to back down over rivals’ critical illness concerns


Aviva is refuting claims from rival insurers its new protection products conflict with HMRC rules.

In February Money Marketing revealed L&G and Royal London’s concerns over two new products on the Aviva Life Protection Solutions platform including a “market first” relevant life insurance with the option to add critical illness cover.

Now Royal London and L&G have confirmed, following discussions with HMRC, they will not be adding critical illness cover to its relevant life plan.

In addition, Money Marketing understands Vitality has come to the same conclusion as Royal London.

Royal London product Architect Ian Smart says: “In theory, it is possible for Royal London to add critical illness cover to its relevant life plan but only if the payment of benefits was linked to retirement of the employee covered by the policy. Current critical illness definitions do not link payment to retirement and so such a policy would not meet the definition of a relevant life policy.

“There may be no tangible tax benefit to the employer or the employee and this could potentially leave the employee liable to a benefit in kind tax liability on any premiums paid. On that basis Royal London has made the decision that we will not be adding critical illness cover to our relevant life plan.

“My personal opinion is that people would be better to purchase a CIC policy themselves rather than try to take advantage of any tax savings.”

Likewise L&G head of intermediary development Richard Kateley says: “I would have liked to have added CIC to our RLP as I think that this would have added further benefits to clients who already see the benefits of a RLP.

“However, we do not want to do this at the expense of putting our clients or advisers in a position of uncertainty as to whether our plan fully met the rules that govern RLPs and that the benefits that we promote may not actually be available to them.”

However, Aviva says its stance has not changed.

A spokeswoman says: “We are aware of further recent comments relating to the provision of critical illness cover within a relevant life policy, and in particular whether or not the illness/condition resulting in the claim must be linked to the retirement of the individual covered.

“Our commitment to our product has not changed at all following our previous detailed examination of the legislation, which has been confirmed by external QC Opinion.

“We are confident that our product remains viable and complies with the relevant legislation.”



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. So the only way to determine this is a test case. This could get messy at some point, although if Aviva are happy with their policy, and pay out a claim if employee does not need to retire, I wonder how HMRC are ever going to know in order to start “snooping” in the first place?
    That said I don’t believe the same principal applies to a claim under group CI policy. Why should there be any difference under RLP? I am sure there are more knowledgable blogger than me out there that could give me their ideas about any difference as I would be interested

    • That would be one ugly test case, applying anderson rules to a CI payout. Not sure that an Life co. would put their name to that. Imagine the headline “Life co. sues cancer surviving policy holder of rival as they were jealous they didn’t get there first”

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