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Could you save 35% on your life cover?
By Hannah Ricci
Following the A-Day pension changes it has emerged that you could save up to 35% on life cover.
Tax Deductible Life Cover, or Pension Term Assurance (PTA) as it is formally known, is similar to term assurance in that it pays a lump sum if you die within a set period. However, following changes in pension legislation contributions can now be made with tax-relief - and you don't even need to have a pension.
Anyone with earnings can make PTA contributions of up to £215,000, or 100% of their salary, with full tax relief. Basic-rate taxpayers could save 10% to 15% on premiums, while higher-rate taxpayers could save 30% to 35%.
However, PTA is not for everyone, warns Kevin Carr, head of protection strategy at LifeSearch. 'It's a great product for the right person. However, it's not a no-brainer and there are lots of factors to consider, so it's important to seek independent advice,' explains Carr.
Benefit for high earners
Unlike normal plans, the sum assured with PTA forms part of the £1.5 million lifetime limit, so if you have a large pension pot the tax implications could make it unsuitable. Likewise the tax savings aren't guaranteed. 'It's effectively a tax-break which benefits high earners, so it won't last forever,' says Carr. 'It's hard to stipulate when, but we're pretty sure the government will pull the plug at some point in the future.'
Without the tax-break, PTA would be more expensive than ordinary plans.
Liverpool Victoria, L&G, Royal Liver, Scottish Equitable, Friends Provident and Standard Life have all launched PTA products, with more insurers expected to follow.
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