Pension Term Assurance
What is it?
Stand-alone Pension Term Assurance (PTA) is term assurance which uses the rules for pension schemes to provide life cover. You do not have to pay any pension contributions and you can just take out life assurance cover.
Stand-alone PTA pays out on your death. It will not give you an income in retirement. PTA won't necessarily be called pension term assurance; firms can use their own marketing names for it, so make sure you read the policy documents to make sure you understand what you're buying.
Tax relief
Changes to the tax rules in 2007 means that stand-alone PTA no longer has a tax advantage over ordinary term assurance products. However, if you already have a PTA policy that gets tax relief you will not be affected. If you are considering PTA you should also look at ordinary term assurance and decide which product best meets your needs.
Policy options
If you have an existing policy where you can increase your cover by paying higher premiums, you will still get tax relief on those increased premiums.
However, if your policy doesn't include this option, you won't be able to increase cover and get tax relief on higher premiums.
Points to consider if you are switching to a PTA from a term assurance:
- Make sure you don't lose out by switching. Your current term assurance policy may include cover options which are not offered under the PTA policy you are considering.
- Remember that new PTA policies will not qualify for tax relief on the premium, and so will no longer have a tax advantage over ordinary term assurance policies.
Point to consider if you are switching to a term assurance from a PTA:
- Remember that PTA policies in force before 31 July 2007 will still get tax relief on the premiums. Switching to an ordinary term assurance will mean you lose this advantage.
Remember, if you are switching either way:
- Don't cancel your current policy until you are sure you have another policy in place - you could leave yourself uninsured.
- If your health has deteriorated since taking out your existing policy, this may mean that the premiums for a new policy are more expensive and you might be better off not switching.