for financial advisers only
This article looks at the main Qualifying Policy rules and conditions that must be met in order to retain the tax advantages associated with qualifying policies.
A Qualifying Policy is a life insurance policy whose terms meet a complex set of conditions. These include rules about the policy term, regularity and level of premiums paid and the minimum sum assured. Also a policy cannot be qualifying unless it is certified as such by HMRC, although this is no longer required for products launched from 6 April 2013. Where a policy does not meet these conditions it is commonly referred to as a ‘non-qualifying policy’.
It is tax-favoured, since it does not normally give rise to chargeable event gains. In addition, where the policy was taken out on or before 13 March 1984 and has not varied since then, life assurance premium relief continues to be due on the premiums paid.
The following Skandia policies are qualifying policies but are not available to new business:
If within 10 years, or three-quarters of the term if less, there is:
An assignment (in full or in part) for considerationSurrender of the policy (in full or in part)
If within 10 years, or three-quarters of the term if less, the policy has been converted to paid-up and there is subsequently at any time:
Assignment (in full or in part) for considerationSurrender (full or part)Death of life assuredMaturity
Premiums paid to qualifying policies under the new rules that are in excess of the premium cap will be subject to the chargeable event rules.
Any change must be made on a plan anniversary and must be in accordance with the Terms and Conditions to retain the qualifying status of the policy.
If a change was made that was outside the Terms and Conditions it would almost certainly render the policy non-qualifying. Skandia will not allow any change that will do this.
This article is based on Skandia’s interpretation of the law and HM Revenue & Customs practice as at April 2013. We believe this interpretation to be correct, but cannot guarantee it. Tax relief and the tax treatment of investment funds may change.
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