Money News
In recent weeks insurance brokers have been getting enquiries from clients looking to exercise the GIO (guaranteed insurability option) under their existing pension term assurance (PTA) policy. This is where a customer may increase their existing amount of life cover, without underwriting, in the event of a major change in their lives, such as marriage, a new mortgage, or the birth of a child.
However, policyholders should beware of exercising this option until Treasury decides whether or not any increases to existing policies will incur the loss of tax-relief.
Despite the name, pension term assurance is not a pension. It is life cover, as most people know it, with a few additional rules and the added value of tax relief on the premiums at either 22% or 40%, depending on your tax rate.
New rules governing pension term assurance came into force on 6 April 2006. They were then suspended in the December 2006 Pre Budget Report. This move resulted in PTA policies being pulled by all providers. However, nothing was said about GIO options, which has resulted in the current confusion.
Consumers and advisers are waiting for the chancellor to end the current confusion surrounding the flexibility of pension term assurance. Some clarification should come with the Budget although it is unlikely that new PTA policies will be allowed to be marketed.
13 March 2007 © Moneyextra.com
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