Millions could be affected by life assurance going

Tuesday, January 24, 2012

Life insurance premium relief (LAPR) will disappear from April 2015, causing an immediate increase in premiums of 12.5% for anyone with a qualifying life policy.

The announcement was made in the Finance Bill this week and comes after the abolition was mooted in the Budget and then put out to consultation.
People who will be hit by the abolition took out qualifying life insurance policies before 14 March 1984. They are currently receiving 12.5% tax relief on their regular premiums.

Figures suggest that there could be around 1.5 million people, many of whom will be elderly, who could be affected by the abolition.

According to specialist newspaper Financial Adviser, in the overview of its draft financial bill, HM Treasury claimed that the relief is becoming obsolete but it "still requires long and complex legislation although the average value of the relief per policy is minimal".

It says that getting rid of LAPR will save the Treasury £5 million in 2015/16 and that the average amount claimed per policy per year is £14.

However the paper adds that the cost of repealing LAPR could hit insurers to the tune of £100,000 to £200,000 each as they will have to change systems and tell policyholders about the relief going.