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Pensions

Volume 455: debated on Wednesday 10 January 2007

To ask the Chancellor of the Exchequer (1) if he will publish a consultation document on the future of pension term assurance; (110328)

(2) what the original estimate was of the tax cost of introducing tax relief for pension term assurance;

(3) what information became available since A-Day about the take-up of pension term assurances which led to the announcement made in the Pre-Budget Report to suspend tax reliefs for these policies;

(4) how many pension term assurance policies have been sold since A-Day;

(5) what estimate he has made of the cost of tax relief for pension term assurance in 2006-07.

The new tax regime for registered pension schemes included additional flexibilities to make it easier for pension providers to offer lump sum death benefits as part of an individual's overall personal pension arrangements.

By saving in any tax-privileged pension vehicle, individuals are committing to using the resulting fund for the purpose of providing an income in retirement. As part of the Pre-Budget Report, the Government announced their intention to work with the pensions industry to explore, in time for the Budget, the best way to apply this principle to term assurance contracts sold as pension products.

There has been a large growth in sales of pension term assurance since the inception of the new pensions tax regime. According to the new business statistics collated by the Association of British Insurers, 17,090 term assurance policies were sold as pension products in the quarter ended 30 June 2006 and another 44,580 policies were sold in the quarter ended 30 September 2006.

The announcement at Pre-Budget Report ensures that the cost of the new simplified pensions tax regime remains in line with the estimates previously set out in the published Regulatory Impact Assessments for simplifying the taxation of pensions. These are available on the HMRC website at:

www.hmrc.gov.uk/ria/ria-pensions-simplification.pdf