This follows the Government’s initiative to simplify the tax treatment of pensions and remove the restrictions traditionally associated with pension term assurance. It will no longer be necessary for people to have a pension plan to apply for pension term assurance and the new contribution limits will be less restrictive.
Legal & General’s Tax Efficient Life Insurance Plan is a life insurance product which provides life cover in the event of death or terminal illness. Pension Term Assurance differs from other term assurance plans in that tax relief is available on the premiums paid and therefore reduces the cost for the customer. For example, a male who will be 35 next birthday, non-smoker, level sum assured of £100,000 for a 25 year term would pay a premium of £9.75 per month on an ordinary Term Assurance. The same person would pay a premium of £9.06 per month for a Tax Efficient Life Insurance Plan, if they are a basic rate tax payer (7% saving on ordinary Term Assurance) and the net cost is further reduced to £6.97 per month for a higher rate tax payer (29% saving on ordinary Term Assurance).
Initially, the Legal & General Tax Efficient Life Insurance Plan will be available through IFAs and will offer:
- Competitive pricing
- Level or decreasing cover for family or mortgage protection
- Single life cover to ensure simplicity
- Waiver of premium – as a separate policy at no extra charge, subject to eligibility conditions
- Terminal Illness cover
- Standard Guaranteed Insurability Options
- Option to switch to ordinary Term Assurance with no underwriting, if the Tax Efficient Life Insurance Plan becomes inappropriate
- Tax relief on premiums
- Commission paid on the gross premium
Legal & General is providing waiver of premium benefit as a separate policy to give customers peace of mind, if they are unable to work due to illness. Customers applying for Tax Efficient Life Insurance Plan will automatically be included under Legal & General’s separate Waiver of Premium plan at no extra cost, (subject to clear eligibility criteria). Currently Legal & General is the only provider to offer waiver of premium benefit on pension term assurance.
Legal & General believes that the Tax Efficient Life Insurance Plan will bring greater choice for the customer and an opportunity for advisers to source even more affordable life assurance.
Bernie Hickman, protection director at Legal & General said, “In recent consumer research conducted by Legal & General, we found that the majority of people found pension term assurance appealing, particularly those in the higher rate tax bracket where they could potentially save up to 30% on their premiums, compared to ordinary term assurance. However, it is important that customers understand the eligibility terms for this product, the tax position and any potential impact on their pension arrangements.”
