CIC replaced by 'employee significant illness cover' to meet HMRC requirements and remove confusion
Aviva has today relaunched a revised version of its Relevant Life to remove confusion around HMRC requirements.
In January 2016, Aviva launched the first ever relevant life policy with the option to add in critical illness cover (CIC) however this was followed by uncertainty surrounding whether the terms of the policy breached HMRC guidelines.
By allowing policyholders to claim for CIC as part of tax efficient life plans, some providers in the industry argued that the policy conflicted with legislation laid down by the Income Tax (Earnings and Pensions) Act 2003, part 6 chapter 2 and Income Tax (Trading and Other Income) Act 2005 sections 481 and 481.
No partial payments
However after working with key stakeholders, including HMRC, to evolve the policy, Aviva has announced that CIC has been replaced by ‘employee significant illness cover' within the new, revised version of Relevant Life - partial payment options have been removed and only the most serious conditions, such as advanced cancer, serious heart attack and stroke, which lead to retirement are covered.
"When we first launched this product in 2016, there was a difference of opinion across the provider community about how this product works and most importantly how it aligned with the tax registration," said Mark Cracknell, head of protection distribution at Aviva. "If you've got product providers with a difference of opinion, it creates uncertainty among advisers - predominantly small adviser firms - who want clarity from a tax and legal viewpoint on how it operates within the financial legislation.
"There was a level of ambiguity and we have gone away to remove that ambiguity, by working with HMRC to evolve the proposition," he added. "We have removed partial payment from the product and focused on the most significant conditions."
The changes will not impact advisers or clients who have an existing Relevant Life policy with CIC or those who have a policy application arising from binding quotations in place by 11 March.
Now with the lack of clarity around the policy removed, it is expected other providers will follow suit with similar offerings.
"Previously, the product was not panelled across the market and you didn't have a situation where financial advisers were recommending it," said Cracknell. "Today it's panelled across the market and you have a situation where financial advisers are recommending it."
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As part of serious illness cover
£570 a month benefit