Pension term assurance

Using the rules for pension schemes to provide life assurance

Pension term assurance is a type of term assurance which uses the rules for pension schemes to provide life assurance. You do not have to pay any of your contributions towards an income at retirement, instead contributions can be paid to provide life assurance cover.

This type of term assurance may have an impact on any other pension arrangements you have or take out. Stand-alone pension term assurance is term assurance which uses the rules for pension schemes to provide life assurance. You do not have to pay any pension contributions and you can just take out life assurance.

Stand-alone pension term assurance pays out on your death. It will not give you an income in retirement. Changes to the tax rules in 2007 have resulted in stand-alone pension term assurance no longer having a tax advantage over ordinary term assurance products. However, pension term assurance policies in force before 31 July 2007 still receive tax relief on their premiums. Switching to an ordinary term assurance will mean you lose this tax advantage.
If you have an existing policy where you can increase your cover by paying higher premiums, you will still receive tax relief on those increased premiums. However, if your policy doesn’t include this option, you will not be able to increase the cover and receive tax relief on the higher premiums.