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Stakeholder waiver fears over tax and cost threats

Pension experts fear thousands of stakeholder policyholders could miss out

on waiver of premium cover under current Government proposals.

Providers and IFAs are concerned that because waiver of premium contracts

will become separate from stakeholder schemes from next April many

policyhol-ders will either struggle to find a waiver provider or will find

the cost of getting a waiver prohibitive.

Waiver of premium is an insurance policy that payspension contributions if

a person cannot pay the premiums due to ill health.

As a separate contract, waiver will become a general insurance accident

and sickness product, leaving many product providers unable to offer cover

as they are life offices and not general insurance providers.

Life offices may have todo a deal with general insurance providers by

rebranding their products.

As it is general insur-ance, waiver premiums will become liable to

insurance premium tax.

Clerical Medical pensions strategy manager Nigel Stammers says: “Waiver

will form separate accident and sickness cover and, being a general

insurance, it will be subject to 5 per cent IPT and possibly separate

administration and collection. I cannot see many providers rushing to offer

this type of product on stakeholder.”

Life offices have also highlighted how employees could face a tax bill for

advice received on stakeholder.

Scottish Equitable pension development director Stewart Ritchie says if an

employer were to pay for the cost of stakeholder advice given to an

employee, this would be seen as a benefit in kind and leave the employee

liable to income tax.


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