Pension Term Assurance
Pension Term Assurance is life cover that pays out a lump sum if you die during the term of the plan.
You pay a regular amount of money into your Pension Term Policy. Your contribution can provide the level of life cover you need until the date you have chosen for retirement. The cost is guaranteed not to increase before that date unless you choose to include the indexation option. No payment is made if you survive to the end of the policy. This type of cover is available to all individuals in employment if they are not currently paying into a pension.
There are two types: Personal or Executive.
Executive Pension Term is for company directors where your company pays the premiums. With Executive Term Assurance you can insure up to four times your salary. If you insure more, only four times is paid out and the balance is then paid out similar to an annuity Pension. With Executive Pension Term your company can claim corporation tax relief (if eligible)
With Personal Pension Term Assurance, you pay the premiums yourself and there is no limit on the amount of life cover that you can take out.
The advantage of this type of life cover is that it costs less because you may be eligible to claim tax relief on your contributions (up to certain limits). To claim income tax relief, you can apply to the revenue to adjust your tax credits.
The Features of Pension Term Assurance is as follows:
You can apply for this cover if you are self-employed or don’t have a company pension scheme
It can only be set up as a single life plan only
The Policy can’t be used as security for a loan and the plan does not accumulate a value
With Personal Term Assurance, the amount of income tax you can claim depends on whether you are eligible and what income tax rate you are currently paying.
You can include a Conversion Option whereby some life companies will allow you to change your Pension Term Assurance to a Convertible Term Assurance beyond retirement age (i.e. 65) – please note no tax relief will be applicable beyond retirement age.
