Pension Term Assurance for the chop?

Pension term assurance may be scrapped - just eight months after the cover was re-introduced by the A-Day reforms in April. The Pre-Budget Report expressed concern that the wide take-up of PTA may be against the principles behind pensions reform, saying, 'The government has become aware that, as a result of the flexibilities that the new pensions tax regime has brought in, life insurance policies that provide lump sum death benefits alone are being offered as personal pension arrangements eligible for pensions tax relief. This undermines the principles set out above.

"The government will therefore work with the pensions industry to explore in time for the Budget, how the principles can be applied to pensions term assurance contracts. Any changes the Government decides to make will not effect either personal arrangements entered into before 6 December 2006 or existing types of employer arrangements."

Anyone who has bought PTA will not be pursued for unpaid tax. However, several life assurers, including Friends Provident, Standard Life, Royal Liver, Bright Grey, Liverpool Victoria and Bupa have confirmed they are no longer offering pension term assurance with immediate effect.

PTA has been a popular product this year because it can offer as much as 40% off life insurance premiums for higher-rate taxpayers and 22% off the premiums of basic rate taxpayers.

Back to Pre-Budget 2006