Life Insurance Quote Listings

The Inland Revenue has only been prepared to approve policies which obliged the policyholder to take his annuity from the life office with which he had placed his premiums. The new rule allows approval to be given to a policy which gives the policyholder the right to have the accumu­lated fund transferred to another life office if he wishes. This enables him to obtain the best pension possible by taking advantage of the highest annuity rates on offer.

At the time of writing details of the Revenue practice have not been published, but several life offices have already announced that the option will be included in existing policies as well as new ones. However, no benefit can accrue to those who have already begun to draw their pensions.

The earnings to which the 15% rule applies are “net relevant earnings”, defined as those from a non-pensionable occupation (excluding any pension payments) reduced by any deductions which are allowable for income tax, e.g. interest. Thus, if an individual had self-employed earnings of £10,000 and paid mortgage interest of £1,000 his net relevant earnings would be £9,000 and his maximum contribution £1,350. A contribution to a pension plan may be made for any past year up to six months after the tax assessment for that year has become final.

The contribution for the relevant past year must be based on earnings in that year, but may be paid out of a later year’s earnings, which provides a useful element of flexibility. For example, if Mr. Green’s earnings are normally about £10,000 but in 1975/76 his earnings drop to £5,000 and he cannot afford to make any pension contributions, then he can make his £750 contribution for 1975176 in 1977 when his earnings are up again and his 1975/76 tax assess­ment is made final. Many regular premium pension plans allow a contribution to be delayed for a year to allow for this sort of fluctuation in the earnings of the self-employed. Tax relief on the contributions is allowed at full marginal rates on the earned income.

Tags: life insurance, life insurance cover, life insurance quote, term life insurance

This entry was posted on Friday, November 21st, 2008 at 12:15 pm and is filed under Life Cover. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.