Pension Term Assurance / life quotes

payless

I am getting increasingly concerned at the number of websites offering life cover:-

1. No mention of whether advice is being provided or not ( and if it is , when ? - as they are allowing quote, print and send in application all from the site ) and of course no explanation of the differences of buying without advice.

2. Inclusion of Pension Term products , again without any comments to its suitability / special notes


The following is a list of notes/ warnings I would suggest :- ( would welcome others comments / changes)

Pension Term Assurance (PTA) - Notes and warnings

The gross cost of PTA can be higher than the cost of ordinary term assurance.

Relief at higher rate will usually require completion of a self assessment form.

Waiver of premium and critical illness cover are not permitted in a PTA ( some providers have introduced ways to try and combat this)

Generally needs to be written on single life basis

Different companies have a different approach to whether policies are automatically in trust ( nomination) and if not, which trusts are best suited

PTA is subject to the standard individual lifetime allowance for pensions set by the Government; this currently stands at 1.5 million pounds, if your pension benefits on death plus the sum insured from a Pension Linked Life Insurance exceed the standard individual lifetime life time allowance then the excess amount will be taxed by the Inland Revenue (55% )

Tax relief on the aggregate of personal contributions to all an individual's pensions (including Pension Linked Life Insurance premiums and pension contributions) is limited to the higher of 100% of UK earning or £3600.

There is an annual allowance currently £215,000 which applies to all Pension Linked Life Insurance premiums and pension contributions. Any contributions (including any by your employer) above the annual allowance will be subject to tax.

If you take out a Pension Linked Life Insurance and subsequently make a claim for terminal illness benefit from the policy and then don't die within 12 months then there may be a tax charge.

If you have applied for or intend to apply for primary or enhanced protection for your existing pension benefits you may not be eligible for Pension Linked Life Insurance contributions. This is a very complex area of the new legislation .

Inland Revenue tax relief may be subject to change in future which could affect the net premium payable.

A change to your personal circumstances may make for you ineligible for the product in the future, for example if you were to move overseas and become a non UK resident.

Circumstances change (for instance the lifetime limit is breached or near to breaching) contracts without a replacement option could need to be terminated, (leaving a someone in declining health with potentially higher premiums or unable to insure themselves) or the lifetime limit could be breached incurring a tax charge of 55% on the excess.

Remember PTA does not provide a regular pension- it’s a protection policy

Cancellation and replacement of existing term assurance benefits will require careful consideration before proceeding.

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Would you really want to buy this without advice ?

dunstonh

If you have applied for transitional protection for your pensions, commencing a pension term assurance would invalidate that protection which could cost you tens of thousands of pounds (hundreds even in extreme cases). The warning you have says you are not eligible. However, that is not the case now. You are eligble and can be allowed to do it but it will overide the transitional protection. We now have the "do you have.... enhanced/primary protection" on our factfinds to make sure we dont mess up.

A number of providers are not allowing their pension term assurance product to be sold on non advice basis. You can see why.

payless

dunstonh wrote:

A number of providers are not allowing their pension term assurance product to be sold on non advice basis. You can see why.

thanks for comments ... anything esle that you think needs adding ?

Do you have a list that won't allow " non advised sales" , as a fair few came up on a "direct buy" site I looked at

dunstonh

One that comes to mind is Bright Grey but there were others but cannot recall which.

Under FSA rules on pension term assurance, the sites are meant to add a compliance warning on non-advised sales of pension term assurance. It isnt a good time to have your websites showing incorrect information with the FSA contracting companies to trawl the web to find non-compliant websites.

payless

now thats interesting as thats the one that shows up...

dunstonh

I'm looking for something that confirms the Bright Grey stance but I did find the two others.

Scottish Equitable & BUPA

Both life insurance offices confirmed this week that they will not allow their Pension Term Assurance products to be sold without advice. Whilst this is of course an initial decision, which can change in the future, we have long believed that the manufacturers of complex products should take responsibility for those who sell their products and there is no doubt that Pension Term Assurance is potentially very complex indeed.

Despite the perceived attraction of tax-relief Pension Term Assurance could still be unsuitable for a range of consumers, including anyone who is unsure about their future employment or tax status. There is also unlikely to be an income option, such as Family Income Benefit, which is often the most suitable form of life cover for young families.

Before buying Pension Term Assurance we believe consumers should first consider a number of important points including the pension issues regarding the lifetime limit, the potential loss of enhanced protection, the potential loss of tax-relief, the potential for Terminal Illness Benefit to become taxable, the likelihood that new premium rates will apply should Pension Term Assurance become unsuitable and what trust arrangement will apply.

There is a danger that non-advised pension term assurance sales will be driven by profit before suitability and in order to treat customers fairly we believe that sellers of Pension Term Assurance post A-day should explain these issues to their customers before they consider switching. This raises the question of non-advised sales and we question how a non-adviser would be able to ensure that their customers understand these risks before buying and ask what responsibility, if any, will be placed on non-advisers should they encourage consumers to switch based upon the initial price alone.

Should any non-adviser fail to sufficiently inform their customers of these issues they may be failing to disclose a material fact.

payless

suppose the likes of the webline and exchange client facing systems won't know its being used on a " no advice" site

dunstonh

Bright Grey has launched its pension term assurance with single-life plans on level, decreasing and increasing terms.


The product will only be available through IFAs.
Products director Roger Edwards says: "We have designed our plan to be very flexible and it can be used to mix mortgage and individual and family protection. Cover increase options are available for mortgage, marriage and childbirth. We believe people should seek advice when it comes to protection so it will only be available through advisers."

That was from the article in money marketing titled "Bright Grey to sell PTA only via advisers" on 25th May.

Quote portals will only quote what is available on their quote engine but the companies selling these products are meant to state if they are on advice or non-advice terms. I wonder how many are ticking the box incorrectly.