Think Tank: Delegates debate the likelihood of PTA surviving beyond A-day
Pension term assurance (PTA) will not survive the next budget, according to half of the delegates at COVER's latest Think Tank.
Discussing the protection market in 2005 and beyond, Tom Baigrie, managing director of LifeSearch, questioned the likelihood that the Government would allow PTA to remain unchanged post A-day. Estimates made by actuaries suggest that PTA could cost the State up to £250m in tax relief. Asking the guests for their opinion on whether the cover is likely to make it through the April 2006 budget, Baigrie found that six of them did not think so.
Disagreeing, Nick Kirwan, protection market director at Scottish Widows, said he thinks PTA will last, arguing the cost would only be minuscule compared with the tax-relief from pensions.
"I estimate that the net cost would only be about £12m a year. That said, even if the true sum were ten times bigger, it would still not account to much compared with over £1bn tax relief on pensions each year," he said.
Moreover, Kirwan also thinks fewer consumers are likely to change their policies in favour of PTA than what the industry has estimated. "There is a lot of inertia and an awful lot of people that could save money on term assurance right now by changing to a cheaper premium for example, but they don't," he added.
Nigel Bradshaw, managing director of Redmayne Consulting, on the other hand, said he was more interested in intermediaries' reactions to the opportunities the PTA market offers. "In due course, pension term assurance will settle for a share in the market. What is more interesting is what will happen with people churning, and with more business moving into pension term assurance. I think we are going to see a lot of that happening and in a short space of time," he said.
The roundtable debate also discussed whether the effort, which has been put into reshaping critical illness insurance, should be put into improving income protection instead. "I would like to see the huge amount of industry creativity that the Association of British Insurers currently is putting into remodelling critical illness cover be put into improving income protection," said Baigrie.
For the full debate, please see the Think Tank supplement free with this issue of COVER.
