The Chancellor has announced in his Pre-Budget report the Government is concerned about life insurance policies being sold as stand alone ‘pension arrangements’ eligible for tax relief, stating that this use of tax relief undermines the principle of tax-privileged contracts being used to provide income in retirement. The Government intends to work with the industry to explore further the PTA regime between now and the effective date of next year’s Budget.
Any changes the Government decides to make will not affect either personal arrangements entered into before 6 December 2006 or existing types of employer arrangements.
All PTA business with a commencement date after 6 December could be subject to a change in tax rules and this should be recorded as part of the advice process. In particular, members with pipeline business who have advised or recommended PTA to clients but have not yet put the policy on risk should advise clients, preferably in writing, of the possibility of this change. In light of this news, members may wish to reconsider recommendations.
Fay Goddard, deputy director-general of AMI, said: "The Government has yet again made an announcement that further undermines confidence in its policy setting. Whilst purporting to encourage individuals to take more responsibility for saving and personal financial security, the constant threat of reversing decisions affecting the beneficial aspects of financial products does little to maintain confidence in the market. We will engage fully in the debate to secure the retention of tax relief on PTA."
