As I mentioned back in June, under the new pension simplification rules it looked like PTA was only going to be available to financial advisers regulated under the Conduct of Business Rules.But this now seems set to change, which is excellent news for protection specialists who are only regulated under the Insurance Conduct of Business Rules. This change in direction comes following feedback to the Financial Services Authority from a number of providers and intermediaries. As a result of the feedback it has decided to produce a consultation document which will propose that PTA be available to both COB and ICOB intermediaries. It feels such a move will ensure as many people as possible have access to the product. The consultation is due out this month and I’m sure it will be welcomed by most people in the industry. The initial thinking behind PTA not being available to ICOB-only advisers was that the life insurance payout on PTA would be aggregated with the value of the customer’s pension. And if the two added together took the fund over the lifetime allowance then the amount over the limit would be taxed at 55%. Thus the regulator felt pension knowledge was required to sell the product. It is now clear that this issue is only likely to affect a tiny proportion of people – the highest earners making significant pension contributions -meaning that the average customer’s needs can be met by PTA without causing any tax implications. But to ensure none of these high earners slip through the net by accident the FSA is likely to require advisers to ensure the product is suitable, which means doing a ‘headroom check’ to ensure it’s unlikely the lifetime limit will be breached, including taking account of any existing relevant PTA cover. This headroom check is likely to apply to people earning over, say, 75,000 a year. So anyone below this salary can be advised on PTA by an adviser with ICOB authorisation only and those above this salary would need to see an adviser authorised under COB. By making PTA available under both COB and ICOB rulebooks, the overwhelming majority of consumers would have unrestricted access to PTA through all qualified advisers. The headroom check would ensure high earners who may breach their lifetime pension limit would get specialist pension advice suited to their more complex circumstances. Importantly, it would remove a potential regulatory barrier that could cause significant consumer detriment by restricting many people from the opportunity to be advised on PTA. The other good news is that it looks like providers won’t have to call this product PTA. They can call it what it is, life insurance with tax relief, and not confuse people into thinking the product has to be taken out with a pension. This means you can look forward to having a product which is easy to understand and that can meet your clients’ life cover needs at a reduced cost. Nick Kirwan is protection marketing director at Scottish Widows
Things are looking up for the future of protection specialists selling pension term assurance.