The Chancellor has announced changes to the tax rules for Pension Term Assurance (PTA) plans following the review announced in last December's Pre-Budget report.

No tax relief will be given on personal payments used to fund payments to individual PTA plans.

• For individual PTA plans held under personal pension schemes, the new rules will apply to payments made after 5 April 2007.
• All Standard Life pipeline cases need to be on the books by the 5 April with a start date of no later than the 5 April.

The Chancellor has confirmed the Government will continue to allow tax relief on future payments to existing plans.

• Tax relief will continue if the PTA application was received by the insurer before 14 December 2006 and the plan was taken out before 6 April 2007.

Remember that any existing Standard Life LITR plans, will not have the facility to increase the sum assured or have the term extended. However, any Guaranteed Increase Options (GIO) within the plan can be exercised in the future.

The rate of basic-rate tax is due to be decreased from 22% to 20% in April 2008 and so will affect any PTA plans that are still in force at that date.

Lump sum death benefits from a PTA plan will continue to sit outside the estate on death. This may be an advantage over normal term assurance contracts which are covered by the extensive trust changes announced at the 2006 Budget.

More details can be found on HMRC website.

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