The UK government's pre-budget report suggestion that it may be looking to remove tax relief on pensions term assurance policies has left life insurance providers reeling, according to price comparison website Moneysupermarket.com.
Pensions term assurance (PTA) was introduced in April 2006 and, according to Moneysupermarket.com, nearly one in 10 life insurance customers has made the switch to PTA in a bid to save money through tax relief.
Emma Walker, protection manager at Moneysupermarket.com, said: A single, vague paragraph straight out of the blue throws their situation into chaos. It’s clear the tax relief is already costing the treasury too much, hence this thinly veiled crackdown.
Ms Walker commented on the government’s claim that any changes will not affect those who already have a PTA policy, saying that it was unclear as to whether this meant customers will continue to receive tax relief for the term of their policy, or whether it meant that they will not face repayment of the tax relief they have already received.
Moneysupermarket.com has ceased to recommend PTA policies until the industry has a better understanding of the government’s intentions and UK-based independent life insurance specialist, LifeSearch, is taking similar action.
LifeSearch has taken the temporary decision to cease recommending PTA policies with immediate effect as the statement is unclear as to whether or not tax relief will apply after today, the company stated.
Kevin Carr, head of protection strategy at LifeSearch, referred to the announcement as deeply disappointing but admitted, LifeSearch has warned on a number of occasions, both prior and post A-day, that the removal of tax-relief was a realistic option.
The government has stated that it wishes to collaborate with life and pension providers to work through a solution and the industry is now awaiting further guidance from the treasury while considering the potential importance of switch options.