Revenue relents on policing term cover premiums

The Inland Revenue has thrown the pension term insurance market a lifeline by climbing down on providers&#39 resp-onsibilities to police new contribution rules.

The Revenue has agreed to take responsibility for checking policyholders make sufficient pension contributions to cover their life insurance premiums. The only responsibility for life offices will be to get a letter from the policyholder committing them to make sufficient contributions.

The industry had predicted the death of the pension term insurance market under the proposed rules. The old rules for pension term insurance permitted regular premiums of up to 5 per cent of relevant earnings. The new rules link term premiums to pension contributions but these can be irregularly paid under stakeholder, leading to an admin nightmare.

The Revenue stipulates premiums should be no more than 10 per cent of the pension contributions, leaving providers with the headache of unscrambling the 10 per cent chunk at the end of the tax year.

The Revenue concession follows lobbying by the ABI and providers.

Swiss Re Life & Health technical manager Ron Whe at croft says: “It looks like pension term insurance is back on the menu.”

Permanent Insurance sales and marketing manager Rod Macdonald says: “This looks like a backdown. We had tho ught that the pension term insurance line of business was closed from next year but the move by the Revenue simplifies the process at the end of the year and makes it easier up front. It would be good to have an industry standard letter to go to the Revenue, which would need to be fully explained by IFAs.”