Stand-alone pension term assurance has been stopped dead in its tracks by Chancellor Gordon Brown, with product providers and leading brokers pulling out of the PTA market.
In a shock U-turn on Wednesday in the pre-Budget report, the Chancellor said he was looking at removing the tax relief on PTA, resulting in Hargreaves Lansdown, Lifesearch and Direct Life & Pensions all stopping selling the product immediately. A total of around 100,000 policies are estimated to have been sold.
Standard Life was the first provider to withdraw, followed by Friends Provident, Legal & General and Norwich Union. Zurich, which was set to launch a PTA offering in January, is expected to drop its plans. Aegon has shelved its PTA product until it gets clarification.
The PBR text says any changes the Government decides to make will not affect either personal arrangements entered into before December 6, 2006 or existing types of employer arrangements.
Standard Life head of pensions policy John Lawson says: “It seems clear that life insurance with tax relief cannot be written after December 6, so the only sensible thing to do is not to encourage any further applications until the picture becomes clearer.”
A Treasury spokesman says: “When you introduce a system of rules, you make assumptions about how that system will work in practice. If it works differently in practice, then you revise those rules. I think we have not ruled out keeping the tax relief on stand-alone PTA policies but we are consulting on it.”