The FSA has announced it will be proposing that pension term assurance (PTA) should be sold under ICOB rules as well as COB rules. What does this mean for protection intermediaries? Is there a future for PTA, and how long is the product likely to last for?
Market views
Peter Chadborn, Chadborn Baker & Kearle
All advisers operating under ICOB rules must be relieved to hear this news. It would be detrimental to their standing as protection intermediaries to be unable to recommend an important product such as PTA.
PTA will be a new product for many. With the exception of the Association of British Insurers' consultation paper on critical illness, the only product innovations we have heard about of late are rate cuts, which are hardly inspiring.
PTA should be a key factor in reducing the much talked about protection gap, so I hope that life offices will use any possible re-launch for inventive product design.
Attention is going to have to be paid to the way PTA advice could affect areas under which only COB advisers operate. For example, the taxation on death should the lifetime allowance be exceeded and the tax implications of PTA and pension contributions exceeding contribution limits.
Providing there are no changes to the pension simplification rules from A-day, I believe there is a future for PTA. The tax relief on premiums represents a reasonable sum of lost revenue for the Chancellor.
However, as this is insignificant in relation to the tax relief made available via pension contributions, I do not believe it is an issue. A considerable proportion of new PTA business could simply be replacing existing cover for a lower premium, rather than new cover. PTA will be particularly popular in the corporate market where the phrase "tax relief" is always well received.
All advisers operating under ICOB rules must be relieved to hear this news. It would be detrimental to their standing as protection intermediaries to be unable to recommend an important product such as PTA.
PTA will be a new product for many. With the exception of the Association of British Insurers' consultation paper on critical illness, the only product innovations we have heard about of late are rate cuts, which are hardly inspiring.
PTA should be a key factor in reducing the much talked about protection gap, so I hope that life offices will use any possible re-launch for inventive product design.
Attention is going to have to be paid to the way PTA advice could affect areas under which only COB advisers operate. For example, the taxation on death should the lifetime allowance be exceeded and the tax implications of PTA and pension contributions exceeding contribution limits.
Providing there are no changes to the pension simplification rules from A-day, I believe there is a future for PTA. The tax relief on premiums represents a reasonable sum of lost revenue for the Chancellor.
However, as this is insignificant in relation to the tax relief made available via pension contributions, I do not believe it is an issue. A considerable proportion of new PTA business could simply be replacing existing cover for a lower premium, rather than new cover. PTA will be particularly popular in the corporate market where the phrase "tax relief" is always well received.
