It is designed to inform members about the opportunities for arranging PTA which have arisen as a result of the pension simplification changes which came into effect on 6 April 2006.
PTA is a term assurance product written under pension legislation, which currently allows tax relief on the premiums. The pension simplification changes, which came into effect in April 2006, mean that mortgage intermediaries who hold general insurance mediation permissions are now able to provide access to PTA under the Insurance Code of Business (ICOB) rules. The changes will allow PTA to be sold on a stand-alone basis without the requirement for the client to also be contributing to a pension arrangement.
The effect of tax relief on PTA means that net premiums for PTA are more competitive than for ordinary term assurance. For a high rate taxpayer, the difference in premiums could be significant.
The factsheet provides information on the ICOB rule requirements for PTA, as well as outlining other areas of the FSA handbook that will need to be considered before deciding whether or not to offer PTA.
Rob Griffiths, associate director of AMI, commented: “It is estimated that 54.5 per cent of all term assurance sales are made with a mortgage, and the pension simplification changes mean that mortgage intermediaries who hold general insurance mediation permissions will be able to provide access to PTA. This factsheet is essential reading for any members considering offering PTA to their customers, and for all those members who currently offer term assurance contracts on the basis of ‘fair analysis’ under ICOB.
“Although PTA could provide members with business opportunities, there are also risks associated with the sale of these products, and members will need to put systems and controls in place to address and manage these risks should they decide to include it in their firm’s product range. The factsheet will help members consider these issues, and includes a checklist to help ensure that all the key points are considered.”
