RPSM05101240 - Technical Pages:
Contributions and tax relief: Entitlement to tax relief: Protected
policies under non-occupational schemes
Protected non-group life policies under a scheme that is not an
occupational pension scheme
| [Paras 4 & 5, Sch 18 FA07] |
The normal rule that life assurance premium contributions
cannot receive tax relief does not apply where the
non-group life policy (personal term assurance
policy) is a protected policy.
Protected policies under a non-occupational pension scheme
Unless it has been varied, see below, a non-group life policy
held for the purposes of a
registered pension scheme that is not an
occupational pension scheme is a protected policy
if
- it is issued in respect of insurances made and became held for
the purposes of a registered pension scheme before 6 December 2006;
or
- the policy was issued in respect of insurances made on or after
6 December 2006, and
- the insurer received the application for
the policy before 14 December 2006, and
- the insurance was made and became held for
the purposes of a registered pension scheme before 1 August 2007,
and
- the amount of the benefits and period for
which they are payable is not greater than as set out in the
application; or
- the policy was issued in respect of insurances made on or after
6 December 2006, and
- the application was received by the
insurer after 13 December 2006 but before 13 April 2007 and on the
day the insurance was made the individual also had an actual or
prospective entitlement to a pension under the same scheme,
and
- the insurance was made and became held for
the purposes of a registered pension scheme before 1 August 2007,
and
- the amount of the benefits and period for
which they are payable is not greater than as set out in the
application.
Lapsed policies
The reinstatement of a policy that has lapsed will normally be
treated as a new policy and so will not be protected. However,
where a policy was previously in existence but had subsequently
lapsed a reinstated policy may be treated as a protected policy if
the following conditions are met
- the reinstated policy is made on the same
terms and conditions as the lapsed policy;
- the reinstated policy was merely
re-instated and was not the subject of a new insurance
proposal;
- the lapsed policy would have been eligible
for relief had it stayed in force (i.e. it was a “protected
policy” under the legislation); and
- the reinstated policy is made and held
within the pension scheme before 1 August 2007.
Whether or not an insurance policy can be reinstated and is
reinstated is a decision for the insurer and policyholder.
Variations to a protected policy
A protected policy will cease to be protected only if there is a
variation to the policy terms which
- increases the benefits payable under the
policy or
- extends the period during which benefits
are payable.
Where the policy of insurance was issued in respect of
insurances made before 6 April 2006 only variations made after 20
March 2007 can cause loss of protected status.
Where the policy was issued in respect of insurances made
after 5 April 2006 but before 6 December 2006 only variations made
after 5 December 2006 can cause loss of protected status
RPSM05101245 has more information on
what does and does not constitute a policy variation.
