Calculation of gains on group life policies
Group life policies and the chargeable event regime
A group life policy is a policy that insures the lives of more than one individual andpays benefits on the death of each of those individuals. A group life policy that onlyprovides death benefits is taken outside the chargeable event regime, provided it meetsthe conditions to be an excepted group life policy - see IPTM7025 to IPTM7050.
Where a group life policy does not meet the conditions to be excepted, the chargeableevent gain rules apply to the policy and each death is a chargeable event requiring a gaincalculation to be made.
Application of the chargeable event gain rule on deaths
The chargeable event gain on each death is calculated using the normal formula TB TD TG described in IPTM7510. It is possible forgains to arise on the second and subsequent deaths under a group life policy even if thepolicy is a pure protection policy with no surrender value.
- TB is total benefit value. On the death in question, the surrender value immediately before death is included in TB, which will be nil for a pure protection policy. But any capital sums paid before the death in question must also be included in TB and these include any sums paid on previous deaths.
- TD is total deductions, which will be the total of premiums paid up to the date of the death in question, even if some of these premiums have already been taken into account in calculating the gain on an earlier death.
- PG is total of the gains on previous calculation events. It does not include gains on earlier deaths so on a pure protection policy, where there will have been no previous part surrenders or assignments, PG will be nil.
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