RPSM05101230 - Technical Pages: Contributions and tax relief: Member contributions: Entitlement to tax relief: Non-group life policies

What is a non-group life policy?

A non-group life policy is defined as a policy of insurance under which the only benefits which may become payable are benefits payable in consequence, or anticipation of:

• the death of the individual or
• the death of one of a group of individuals which includes the individual (e.g. a policy that covers a number of individuals but only pays a benefit out on the first death or last survivor’s death), or
• the deaths of more than one of a group of individuals (e.g. a policy that pays a benefit out on the death of each of the individuals)

So a policy that will pay out on the death of only one individual (regardless of how many individuals may be ‘covered’ by the policy) will be a non-group life policy.

A policy that will pay out benefits on the death of more than one individual will only be a non-group life policy where the individuals ‘covered’ by the policy are all connected. (Connected has the meaning as given in section 195A(8) Finance Act 2004, that is broadly as members of the same family.)

Contributions paid by or on behalf of the member to pay premiums for these types of policy (see RPSM05101225) will not be relievable pension contributions and so cannot receive tax relief

A policy that will pay out benefits on the death of more than one individual and where the individuals covered by the policy are not connected will not be a non-group life policy. Contributions made by or on behalf of the member, aged under 75, to pay premiums to this type of policy may be a relievable pension contribution.

Some pension schemes allow members to pay for additional death in service benefits through additional contributions (AVCs). These AVC schemes/sections may have been established with death in service cover provided on a group basis. Where cover is provided on a group basis tax relief will continue to be available for contributions made to such schemes because the policies will not be non-group life policies.

The provider of the life insurance and AVC ‘scheme’ is in the best position to inform employers and trustees how this definition applies to their particular arrangements for AVCs and therefore on whether or not employees can

• undertake new agreements to purchase life insurance benefits with tax relief under the arrangements under applications received by the insurer after 28 March 2007, or
• vary the terms of existing agreements in order to increase such benefits.

It should be clear by comparing the legislation with the terms of the insurance whether or not the policy is a non-group life policy.