I refer to pension term assurance (PTA). I know memories are ragged after the Christmas and new year shutdown but those who steered clear of the yuletide grog will recall the Treasury announcement in the pre-Budget report.
Since its launch in April 2006, PTA has been a successful product. The reason for this success is the ability to write a product that is standalone with the added benefit of tax relief. Looking at the rules which were in the public domain for a significant time before A-Day it was clear that protection companies, intermediaries and consumers would quickly warm to PTA.
The Treasury knew, or should have known, that these products would be sold as standalone and that the tax advantages would be seen as a substantial benefit. No surprise then that around 100,000 policies worth about 50m have been sold.
The Treasury should not have been surprised at the number of standalone PTA sales. It should have considered this and pulled the product before launch, as it did when it came to residential properties and self-invested personal pensions, if it was concerned about the possible misuse of PTA.
When will the government learn that it must think through the impact of initiatives before, not after launch? Industry can’t afford to change tack at the whim of government officials. In 2006 alone we saw a lot of time and resources going into SIPPS, Home Information Packs and PTA all of which have suffered from the U-turn mentality of this government. The PTA U-turn caused many protection providers to withdraw from selling it.
But from an adviser’s point of view, the job is not yet done and time during the January hangover period should not be wasted. There will be consumers with pipeline cases who are not aware of the implications of the pre-Budget report and are still expecting to receive tax relief on their PTA policies – indeed, they might still if the most recent U-turn is to be believed.
Intermediaries should not rely on protection providers advising their customers. After all, if a consumer feels aggrieved it is the adviser that will face the compensation claim.
Intermediaries must assess which customers this U-turn affects and work with protection companies to make sure clients get advice and notices at the right time. Not only will such activity protect advisers against claims, it might also help build long-term relationships with customers. Not a bad way to start 2007.