threesixty Criticises Decision to Freeze Pipeline PTA Cases
threesixty, voted the number one IFA support services provider*, has criticised insurance companies for freezing Pension Term Assurance (PTA) cases that are in the pipeline in response to the Pre-Budget statement.
In its statement on 6th December, the Government suggested that it may withdraw tax relief from PTA policies taken out after 5th December. Insurance companies have responded by closing their quotation systems and are now refusing to accept any new applications until the Revenue is in a position to issue clear guidance on whether these contracts will attract tax relief, possibly on a restricted basis such as by linking it to a pension plan.
However, threesixty says that while the decision to close to new business is understandable, insurance companies should not be freezing cases already in the pipeline.
David Ingram, partner at threesixty, says: “This knee-jerk reaction means that applications received prior to the decision to close to new business will not be processed by the majority of insurers until the position becomes clear. This will clearly disadvantage those clients who are affected, as, in addition to the chance that they may die during the Revenue’s consultation period, if they should suffer an accident or serious illness, they could find themselves uninsurable, or unable to find affordable rates.
“Norwich Union has offered life cover to pipeline cases during the consultation period and this goes a long way towards meeting the need of affected clients, while Liverpool Victoria is proceeding with underwriting and offering terms on a gross basis if revised applications are received within 10 days.
“All insurers should process all such cases now and offer clients the opportunity of proceeding with the contract on a tax-advantaged basis, recognising that there may be a claw back of tax; this is likely to be small anyway since the Revenue is committed to concluding its consultation in time for the Spring Budget in just a few months’ time. Alternatively they should proceed with a gross contract.”
*Source: Henry Samuels Marketing Survey, March 2006