What is Pension Term Assurance 

Pensions Term Assurance is life cover, paid by a level guaranteed premium. It is structured as a pension’s product so that under pension’s legislation, tax relief is available at the marginal rate of tax. Pension Term Assurance is a type of term life assurance policy that allows tax relief to be claimed on the premium payments at the policyholder's highest or marginal rate of tax. Premiums will be collected net of basic tax relief. Higher rate tax payers will be able to claim the rest via their annual tax self-assessments return. 

Benefits of getting Pensions Term Assurance 

Term assurance is the cheapest form of life cover because cover is only provided for a fixed period. If the policyholder does not die during the term there is no benefit paid.

Other benefits of term insurance are:

Indexation Option: increases the level of cover by 5% every year

Conversion Option: allows policyholders the option at any time before the expiry of the policy, of changing the policy another policy as offered by Canada Life at that time. 

Will it cover my mortgage? 

Pensions Term Assurance can be bought for amounts that decrease over time in the same way as life insurance, so the level of cover can match the size of an outstanding mortgage.

With this type of contract, the premiums and the sum assured are fixed throughout the term of the policy. However, because the sum assured is fixed at outset and does not throughout the term of the contract the premiums are usually slightly higher than with a decreasing term insurance policy. Both contracts can are regularly used as mortgage life insurance. 

How does the tax relief element work? 

Contributions up to 5% of net relevant earnings are eligible for tax relief. However please note that this tax relief may affect the maximum tax relief that can be obtained on contributions into a Retirement Annuity Contract. What the amount you contribute to your pension plan scheme, the pension provider claims tax back from the government at the basic rate of 22%. This means that for every £78 you pay into your pension plan scheme, you end up with £100 in your pension pot. 

Summary in terms 

Pension Term Assurance is a form of life insurance of U.K lead to savings of between 5% and 15% on life insurance for a standard rate tax payer, and up to 30% for higher rate tax payers. This is because monthly premiums receive 22% tax relief for standard-rate tax payers. Higher rate tax payers can also claim back the extra 18% in their annual tax return form.