The Financial Services Authority has been consulting on allowing ICOB intermediaries as well as those registered under COB to sell PTA. The outcome of this consultation isn’t known yet but it would be surprising if it doesn’t go ahead as nobody will want to restrict the access consumers have to the product.These changes could pave the way for many people to benefit from the cost savings of PTA. These could be especially significant for higher rate tax payers, but even basic rate tax payers could see some small savings. As we near the end of the year we will all be thinking of our plans for 2006 and it is likely PTA will feature in them. But we be clear that although there are cost benefits to taking out PTA, there are other things to consider. For example, PTA is life insurance only and does not cover any other protection needs. So if the best product for your client is a combined life and critical illness insurance policy, you cannot use PTA to meet this need unless you set up two contracts. This might not be the best value option. And you can’t set up PTA on a joint life basis. For a couple, separate policies would have to be set up. This could be more expensive than a joint policy, though it would carry greater benefits. And what if your client would like to cancel their existing life insurance to take advantage of the reduced cost of PTA? If they’ve had their existing cover in force for quite some time the saving on premiums could be small if any, as the new product will be taken out when they are older so the rates will be higher. But more importantly, if their health has changed during this period it could have implications for the new policy. It is important that any health issues are disclosed on the application for a new policy. There was a case recently which provides a shining example of this not happening. The policy holder had cancelled his old policy and taken out a new one but, when a claim was made, the replacement policy didn’t pay out due to non-disclosure of an intervening medical issue. The original policy would have paid out had it still been in force. Of course, in today’s regulatory environment, such a case could (and probably would) be referred to the Financial Ombudsman Service which could find against the advice of the adviser in recommending the change. This, of course, could lead to the adviser having to pay compensation (up to 100,000) to the client. One final consideration concerns the future of PTA, as there is no guarantee tax relief will remain in force for the longer term. If it is removed, your client could end up tied into a more expensive product, the reason being that PTA without tax relief is likely to be more expensive than a normal life insurance as the tax treatment of life offices means that the gross premiums are likely to be higher. By thinking now about how PTA will affect you and your clients you can be prepared to make the most of the opportunities it brings come A-Day. And you can be safe in the knowledge your clients will have the best product to suit their needs, not just their wallet.
- Top trends
As part of an ongoing major investment program to develop the support services to its national network of building surveyors, Habitus has made plans to launch an internet-based system to assist in the management and scheduling of Building Surveys and Home Condition Reports.The system is being developed for Habitus by xit2, and is based on […]
Mortgage Trusts latest survey reveals that 46% of landlords are not aware of the Houses in Multiple Occupation regulations due to come into effect in April 2006. Of those landlords who were aware of the licensing requirements, 44.2% became aware as a result of media coverage of the regulations whilst 21.6% of landlords became aware […]
Peter Hamilton has joined Zurich as protection management director. Joining from Friends Provident where he was head of protection marketing, he is responsible for managing and developing Zurich’s business protection proposition.
Orchard & Shipman, the London and Edinburgh property services group and community housing specialists, has appointed Paul Nye as financial director.Previously financial director of Dreams plc, the furniture retailer, Nye was responsible for the growth of that business from 13 branches and sales of 4m to over 100 branches with a turnover of 100m.Chris Shipman, […]
Every day a quick scan of the news reveals some new horror that will change the lives of those involved forever – the unlucky accident on the way to work, a tragic illness that cuts a young life short or the holiday accident that leaves more than just a scar to cope with. We barely […]
News and expert analysis straight to your inboxSign up