Tax relief may be available
on the premiums
for your new Life Insurance policy. 

Read this page
to find out if you qualify.

In Spring 2006, Gordon Brown put back the clock some twenty years or more by bringing in regulations that enables tax relief to be claimed on a specific new type of life insurance policy.

Standard taxpayers can save around 15% and higher rate taxpayers can save around 30% of the cost of their life insurance premiums. And experience to date indicates that up to 50% of all new policyholders could qualify for these savings!

All the major insurance companies have introduced these new qualifying policies and market them under a range of names ranging from Level Term Pensions Life Insurance to Pension Term Assurance or just plain Pensions Life Insurance .

But don't let the word " Pensions " panic you! You won't have to buy a pension and neither do you have to have an existing pension! These life policies include the word "Pensions" in their title because the legislation that introduced the tax break, was part of new legislation which related primarily to inheritance tax and pensions.

need information to help you to decide whether a Pensions Life Insurance policy is for you.

And because of the special nature of these policies, you can't get a live quote on your computer screen - ClickLife will have to get competitive quotes for you and phone you back.

So is the insurance cover provided by Pensions Life Insurance different in any way to ordinary life insurance? The answer is no, it's exactly the same.

All life insurance, including Pensions Life Insurance, pay out the lump sum you've insured for if the policyholder dies before the policy's termination date. And if the policy includes terminal illness cover, and virtually all do, the policy will also pay out if the policyholder is diagnosed with a terminal illness from which the policyholder is expected to die within the following twelve months.

Now you may wonder why the savings you'll make are less than the top rate of tax you pay. It's because, on average, Pensions Life policies are some 10% to 15% more expensive than a directly comparable "conventional" life policy. The insurance companies are imposing a higher price for them because they have to reclaim the standard rate tax relief and this involves them in extra work. But net of the tax relief, you'll still make a good saving.

And if you're "lucky enough" to be a higher rate taxpayer, your insurer will adjust your premium to reflect relief for the standard rate of tax and you'll have to reclaim the difference between the standard rate and your higher rate tax via your Annual Tax Return. However, once you've claimed your extra relief, H M Inland Revenue will automatically award the relief for the rest of the policy's duration.

But Pensions Life Insurance has got some limitations and restrictions.

First of all, you can't add critical illness cover onto a Pensions Life Insurance policy.

Secondly, there can only be one policyholder - joint policies aren't available. If you want to insure two people, you'll have to buy separate Pensions Life policies for yourself and your partner - but make sure that both of you each meet the qualifications explained later in this article.

Now for some of the other restrictions which the Chancellor of the Exchequer threw in!

You won't qualify for a Pensions Life Policy if the combined annual value of your pensions contributions and your life insurance premiums, is greater than a set limit. During the 2006/2007 tax-year the limit is set at £215,000. So that won't worry too many people!

On death the lump sum payment from a Pensions Life Insurance policy will be tax-free provided that the value of all the pension funds you have built up plus the value of your life cover is below the standard lifetime allowance. This is currently £1.5 million but is likely to be increased in line with inflation. Currently, your estate will have to pay tax at 55% on any excess over this limit. (Conventional life insurance policies are excluded from this calculation.) Once again this restriction shouldn't concern too many people - but you have to be aware of it.

If you buy a Pension Life Insurance policy and later become ineligible, you may have to cancel the policy and take out an ordinary life insurance policy. We say "may have to cancel" because some insurers are offering Pension Life Insurance policies which allow you to convert back to 'normal' life insurance. If you don't have this conversion option, you would have to cancel your existing Pensions Life Insurance policy and buy a new "non tax relief" replacement. This could mean that with your increased age and any health issues which have arisen in the mean time, your premiums could be more expensive. In a worst-case scenario, if you are suffering major health problems you could be unable to get any life cover.

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