RPSM05101225 - Technical Pages: Contributions and tax relief: Member contributions: Entitlement to tax relief: Premiums paid to a non-group life policy

What are life assurance premium contributions?

Life assurance premium contributions are contributions paid by or on behalf of a member to a registered pension scheme on which tax relief is not given because either

• the payment of the contributions constitutes the payment of premiums under a non-group life policy, or
• the person by whom the contributions are paid intends the contributions (or an amount equivalent to them) to be applied towards paying premiums under a non- group life policy.

Contributions to a non-group life policy will not be treated as life assurance premium contributions for as long as the policy is a protected policy (see RPSM05101235 for occupational pension schemes and RPSM05101240 for all other schemes).

Contributions treated as life assurance premium contributions

Contributions can also be treated as life assurance premium contributions even if the payer did not intend them to be so treated. Where

• the amount of the premiums under the non-group life policy in a tax year is more than the amount of contributions intended to be applied towards paying the policy premiums, and
• other contributions (not intended to pay the policy premiums) have been paid by or on behalf of the member to the scheme in that tax year

all or part of those other member contributions are treated as life assurance premium contributions up to the value of the policy premiums.

So where the contributions paid to the scheme by or on behalf of the member in a tax year are less than the amount of premiums under a non-group life policy in the tax year, all those contributions are treated as life assurance premium contributions and so are not relievable pension contributions.

Where the contributions paid to the scheme by or on behalf of the member in a tax year exceed the amount of premiums under a non-group life policy in that tax year, the contributions up to the amount of the policy premiums will be treated as being life assurance premium contributions and so are not relievable pension contributions. The contributions which exceed the amount of the policy premiums will not be treated as life assurance premium contributions and so may be relievable pension contributions.

Where the benefits under the non-group life policy relate to the death of one or more of a group of individuals a contribution paid by or on behalf of more than one member should be apportioned between each member (based on the particular circumstances) on a just and reasonable basis.

Where part way through a tax year a policy ceases to be protected these rules only apply to contributions paid after the date the policy loses protection.

Employer contributions

For the avoidance of doubt relief for contributions paid by an employer in respect of a non- group life policy is not affected by these restrictions