Qualifying policies and life assurance premium relief: introduction
Significance of a qualifying policy
The distinction between qualifying and non-qualifying policies was introduced in 1968 - see IPTM1310. Qualifying policies are still of importance for two reasons
- in relation to life assurance premium relief available to policyholders on policies running off, see IPTM2100
- in determining what events are ‘chargeable events’ giving rise to gains treated as income chargeable, as a rule, on persons beneficially interested in the policy rights, see IPTM1550.
Life contracts frequently run for a very long time. Contracts made on or before 19 March 1968 and not subsequently varied so as to increase the benefits or extend the term will continue to attract relief irrespective of their qualifying status as that concept did not exist then.
Contracts made, or varied so as to increase the benefits or extend the term, after 13 March 1984 may still be qualifying but do not attract life assurance premium relief. In 2005 the relief still cost in excess of £50 million for older policies running off.
Both qualifying and non-qualifying policies can give rise to chargeable event gains, but in practice most gains arise on non-qualifying policies. This is because qualifying policies - typically, endowment policies - are usually retained for long enough to avoid giving rise to a chargeable event. The relevant rules are considered in detail in IPTM3000 onwards.
‘Running off’ in this context means the continuation of policies issued at a time when relief was available. An insurer may also use the term where it is no longer writing new business on a class of policies but is continuing to meet its obligations under them.
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