(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
[PN17.13-14]
It is not considered appropriate that continued life cover
should be allowed to build up from funds which are exempt from tax
on investment income and capital gains. So generally speaking we
expect the policy providing such cover to be issued or assigned to
the retiring employee personally at the time of his or her
retirement. Note that since the policy belongs to the member and is
not subject to the scheme's trusts it does not need the usual
restrictions on assignment. Alternatively, where a number of
retired scheme members have continued life cover, they may be
covered by a group policy held by the employer instead of separate
policies being issued to each of them. In these circumstances the
employer is only a nominee or bare trustee and ownership of the
policy remains with the members covered by it. In either of these
situations the premium or premiums paid under the policy do not
qualify for "pension business" (see
PSI17.1.7-9). Where on the
other hand the continued life cover is provided under a term life
policy, we do not object to the scheme administrator holding the
policy and the premiums thereunder being referred to "pension
business". This is simply because it is not administratively
worthwhile in view of the low cost of term life cover.
