The protection industry has slammed the Government after it gave assurances that it intended pension term assurance to be sold as a standalone product when it was surprisingly included in its A-Day reforms.
The Government’s U-turn on PTA which has killed the new version of the product only eight months after it first appeared, came without warning.
It is the third major U-turn to come out of the Government’s pension simplification A-Day reforms.
Product providers will be hit hardest by the latest move, with over 15 providers having launched PTA products since A-Day and companies spending millions of pounds on developing, marketing and distributing the products.
Royal Liver IFA market manager Andy Milburn says the Government is not treating the industry fairly and says providers will have to decide if they need to withdraw the product from immediate sale or choose to sell it with a caveat.
Lifesearch head of protection strategy Kevin Carr says he is surprised that the Government has only just become aware of its own policies and says the industry has been left in limbo.
Aegon Scottish Equitable protection spokesman Mark Locke says the move is disappointing because the Government was adamant that it was comfortable with funding tax relief on such plans in response to firm questioning by the life insurance industry before A-Day.
The pre-Budget report says the Government will work with the pension industry to explore how the principles can be applied to PTA contracts in time for the Budget.
The report also says that 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.
Prudential head of protection Paul Cowman says he suspected that the Government would do a U-turn on PTA,which was one of the reasons why Prudential did not enter the PTA market.