Abolition of the Pensions Lifetime Allowance and group life cover
It was great news today that the Chancellor has decided to abolish the Pensions Lifetime Allowance.
The Annual Allowance is to be increased to ￡60,000.
The decision to abolish the Lifetime Allowance completely is the right one. Tax revenues are protected by controlling the amount of the Annual Allowance. ?
The fall in the Lifetime Allowance in real terms since 2011 has been a contributing factor to the growth in Excepted Group Life Policies (EGLP) which operate outside pensions legislation. This is because lump sum death benefits written in pension arrangements have counted towards the individual's Lifetime Allowance since pensions simplification in 2006.
In 2021, the market saw a 42.2% increase in membership of such policies in one year (Swiss Re Group Watch 2022), partly in response to the announcement that the limit was to be frozen until 2026.???
The detail will need to be worked out but this announcement would appear to mean that those group life death benefit policies held within the pension rules will no longer need to consider the alternative EGLP to protect the benefits for higher earners. Indeed, the EGLP model would appear to be tax-disadvantaged relatively given that trusts holding these policies are subject to the Relevant Property Trust regime and potential IHT charges.
Overall, this should remove a burden for employers and trustees and make setting up new group life schemes easier, a welcome move given the important role for employers seen by Government in the Chancellor's Speech.?
Driving Good outcomes for customers and our business.
2 年My concern is the longevity of this stance!
Chartered Financial Planner Working with people and businesses
2 年This does appear to be very good news and rights a few unintended consequences of some previously rushed thinking (or lack thereof). Hopefully a number of employers will be able to now “simplify” their own group scheme structures and remove some of the cumbersome layering that we’ve had to construct over the past few years.
Living a dream life by the sea and back to playing music
2 年You had me at ‘The decision to abolish the Lifetime Allowance completely is the right one’ about time for the group risk industry vs the duality of Excepted vs Registered schemes…. Sanity has prevailed. Finally!
Co-Founder & Chief Customer Officer @ YuLife
2 年Thanks for the quick turnaround and comment ! Will certainly be interesting to see how the market reacts
Risk Consulting Manager - Benefex
2 年Thanks as always for sharing your thoughts Ron. It would certainly seem to be the end of the complexities of Group Life Assurance but I guess the devil will be in the detail. What though for Group protection and PMI pricing with a reintroduction into the work force of older employees?