The Treasury is understood to have offered the industry a lifeline on pension term assurance which could see the revival of the product.
In a surprise move, the Treasury is thought to be seeking consultation from some quarters of the industry about a proposal to allow consumers to take out PTA if they self-certify that they have some form of pension provision.
The proposals are believed to be that consumers would not have to prove they have a pension in order to take out PTA policy in line with the strategy employed under the self-assessment tax regime.
A Treasury spokesman says: “The Treasury has not released a document of any kind on this matter although we continue to consult informally in the industry.”
In a further unexpected move, the Treasury has suggested capping the maximum sum assured at 30 per cent of the Lifetime Allowance which currently stands at £1.5m, meaning customers would be able to take out up to £450,000 of life cover with tax relief.
The average amount of life cover taken out currently sits at about £150,000 and sources say that 90 to 95 per cent of current PTA cases would still be eligible for tax relief if the limit was capped at £450,000.
It is not clear what type of pension provision would be required in order to take out PTA, but sources say it would not be formally linked to a pension if it was self-certified.
This would overcome a lot of the potential issues raised when the Treasury originally indicated that it may link PTA policies to pensions.
Consultation with the industry is currently underway but no formal announcement is expected until the budget in March.
Aegon Scottish Equitable head of individual protection Alun Beynon says: “We have had no confirmation that this is the case, however if the details are accurate, we would certainly welcome this result. Of course, we would still require details of the pension self certification aspect before we
would be happy to comment in detail on the future viability of PTA.
“However, this information would indicate the Treasury has listened to the
concerns of the industry and has found a way to maintain the broad
principals of pension term assurance. Again, if accurate, PTA will now
remain an affordable and tax efficient way of meeting the life protection
needs of the mass market. We look forward to hearing more details as and
when they are announced.”