Life assurance contributions under the new DC tax regime are to be restricted to 10% of the pension contributions paid under that tax regime. Clients with personal pension contracts set up prior to 6 April 2001 will, however, retain the existing 5% of net relevant earnings limit. For most individuals the change to the life assurance contribution rules will mean a reduced maximum life assurance benefit. It will also mean the end of the stand-alone life assurance benefit as any contributions under the DC tax regime will be dependent on falling within the 10% of pension contributions rule.
By setting up a personal pension contract prior to 6 April 2001 this will lock in the ability to pay larger, tax relievable, life assurance contribution.