View more on these topics

Things are looking up for pension term assurance

Things are looking up for the future of protection specialists selling pension term assurance.

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

Recommended

BM Solutions announces Sandy Lane winner

BM Solutions has announced David Wood of Castle Mortgages, in Milton Keynes is the winner of the luxury break to Sandy Lane, Barbados. David was picked at random from all brokers who have submitted cases on the one minute mortgage application system since January.Martin Reynolds, head of sales at BM Solutions took David out to […]

The Mortgage Mole

NEAR MISSWorking at the weekend isn’t so bad, as MS editor Robyn Hall and hackette Rebecca Atkinson found out when they attended the premiere of Wallace & Gromit: The Curse of the Were Rabbit on Sunday courtesy of those kind folk at Bradford & Bingley. The pair got a taste of how the other half […]

TMBC to do commercial packaging for Sesame

The Business Mortgage Company has signed an exclusive commercial mortgage packaging agreement with Sesame. The deal means the network’s appointed representatives can package commercial mortgages and still use their Initial Disclosure Documents and the Sesame letterhead when dealing with the applications. While ARs will be able to go off-panel and use other packagers for commercial […]

Mortgage applications more than double at Leeds

Leeds has seen an increase of more than double the amount of mortgage applications in September 2005, compared to the same period last year.The UK’s eighth largest building society has recorded its biggest month for applications since May 2002, with over 252m applications received. The Council of Mortgage Lenders recently reported only a slight increase […]

Trouble ahead - thumbnail

Pensions: trouble ahead?

The pace of change in the pension’s space has been little short of astonishing, and has left thousands of employers struggling to keep their pension policy compliant, and also on the right side of current best practice and governance. Many employers, and indeed many in the pensions industry itself, would like to see a period of no change during the next term of government. This would give all sides a chance to catch up and draw breath. 

Newsletter

News and expert analysis straight to your inbox

Sign up