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Pension Term Assurance – Life Insurance with Tax Relief

save 40% on life insurance

How does Pension Term Assurance Work in Ireland?

 

Can I let you in on a BIG secret?

You can get a refund of 40% of your life insurance premiums.

How?

By using a special type of life insurance called Pension Term Assurance.

I know, pensionszzzzzz, but bear with me, this could save you a  few quid.

Usually, only a select few clever people (who can afford tax advisors) take advantage of this.

Why?

Because they keep it a secret from the rest of us!

What is Pension Term Assurance?

If you’re working but you’re not part of the pension scheme at work, you can take out pension-term assurance. This will pay a tax-free lump sum to your family if you die.

Basically, pension term assurance is life insurance that qualifies for income tax relief at your marginal rate.

What’s the catch with Pension Term Assurance?

No catch but, as above, you can only buy it if you’re

  1. self-employed
  2. a PAYE employee who isn’t part of a pension scheme at work.

Also, you can’t use your policy as security for a loan so you can’t assign it to the bank for a mortgage.

But apart from that, it works exactly like a standard life insurance policy.

Can you get tax relief on Life Insurance?

The major attraction of Pension Term Assurance is you can claim tax relief on your premiums at your marginal rate.

So, if you’re eligible, it will cost you 40% less than a regular life insurance policy

In real terms, a €100 per month premium would cost a higher tax-payer just €60 per month

Example:

Tom runs his own business and pays tax on his earnings at 40%.

He’s self-employed so qualifies for Pension Term Assurance.

At year end, he can claim 40% tax back on his monthly premiums.

So, Tom’s €100 monthly premium actually only costs him €60 after claiming the tax back.

Not too shabby is it?

It’s the most cost-effective way to arrange life insurance.

But as usual, only those in the know take advantage of it.

Isn’t it time you did the same?

Where can you buy Pension Term Assurance?

The five main providers of life insurance in Ireland all offer PTA:

  1. Aviva
  2. Irish Life
  3. New Ireland
  4. Royal London
  5. Zurich Life

As with all type of life insurance, each policy has it’s own nuances so you should take advice before purchasing.

Zurich Life, Irish Life, Aviva, Royal London and NEw Ireland Pensiion Term assurance compared

What is Executive Pension Term Assurance?

Executive Pension Term Assurance is life insurance paid for by the employer. It will leave a lump sum for the family of the employee if they die while an employee.

It’s more commonly called Death in Service.

What are the tax advantages of Executive Pension Term Assurance?

There is no tax payable by the employee and the premiums are normally a tax-deductible expense for the employer so the employer can claim tax relief on the premiums.

Win-win!

Executive Pension Term Assurance

Is Executive Pension Term Assurance the same as Personal Pension Term Assurance?

There is a limit on the maximum amount that can be paid out as a lump sum on employee’s death in service. The lump-sum cannot be more than 4 times the employee’s final salary. Any excess must be used to provide a pension for the spouse/dependent.

e.g Sarah earns €85,000 per annum. She has Death in Service of 6 times her salary (€510,000) The maximum lump sum her spouse can receive is 4 x €85,000. The €170,000 balance buys an annuity for her spouse.

An annuity is a type of retirement income product that pays a regular retirement income either for life or for a set period.

Here are some of the most frequently asked questions…

What if you take out a policy but your circumstances change and you no longer qualify?

For example, you take out the policy as a self-employed person but change jobs and become a PAYE employee.

With some insurers, you can exercise a conversion option so your cover continues but you will lose the tax relief.

Unfortunately, some other insurers will cancel your policy if you move from self-employed to PAYE.

This is why it’s important to choose the most suitable insurer for as your Pension Term Assurance provider

Can you increase your cover in the future without giving medical evidence?

On special occasions, yes, you can increase your cover:

  • marriage
  • birth of a child
  • new mortgage (but remember, you can’t assign Pension Term Assurance for a mortgage)

Can you convert it to a whole of life plan?

No.

Do you pay tax on life insurance payouts?

The life insurance company will make the payout as a tax-free lump sum.

If the person receiving this money is a spouse, then no tax is payable.

Other beneficiaries depending on their relationship to the deceased may have to pay tax according.

Got more questions?

If you’d like some help arranging your cover or you’re wondering whether you qualify, give me a shout.

Complete this questionnaire and I can email you a free, no-obligation recommendation.

Alternatively, if you’d like to discuss this over the phone, click the button to arrange a call-back.

Chat soon!

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Nick McGowan
lion.ie | making life insurance easier

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