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Slash the cost of your life cover
By Rachel Williams
With so many of our household bills rising it's always refreshing to find an opportunity to save. So it comes as no surprise that so many of us have jumped at the chance to slash the cost of life cover by up to 35% by opting for pension term assurance (PTA).
Following the introduction of new rules in April, you can now buy life cover that works in exactly the same way as traditional plans, but with tax relief on the premium.
But as always you shouldn't let the opportunity to save a bit of money dictate your decision on something as important as protection for your family. Bear in mind there is no guarantee that the 'loophole' that permits this tax saving won't be plugged. Likewise, your own tax situation could change and if you were to lose the tax relief you'd be left paying a higher premium than you would with a conventional plan.
Tax sting
Some insurance companies - including Friends Provident, Legal & General, Liverpool Victoria and Norwich Union - do allow you to switch back to a standard plan if this happens, but these rates may not be as competitive as they were at the time the policy was taken out. It's also worth knowing that as yet only Liverpool Victoria offers joint life policies. Wealthy people should think twice too as the sum assured contributes to your 'lifetime allowance' on your pension (currently £1.5 million) and if you exceed this you'll be stung by tax at 55%.
Finally, if you are thinking about switching plans, don't cancel your existing cover until the new plan is arranged - if you've put on weight or suffered health problems, you may not be able to beat your current premium, even with the tax relief.
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