Life sentenced
HERE is a new use for life assurance. From now on, it is for insuring your life. For years it has been for regular saving — with the life cover serving as the effective ingredient to secure the tax benefits — but those years are over. The Budget opens better ways. Regular saving through Per- sonal Equity Plans will now let married couples put aside up to £9,600 a year — out of their taxed incomes, but thereafter never subject to any tax of any kind. Half of that amount can go into unit or invest- ment trusts. Units will be strongly mar- keted, but investment trusts are the better bargain — lower charges, and prices at a discount to the value of the stocks which the trusts own. Already PEP mortgages are on offer, to compete with endowment mortgages. Instead of taking out an en- dowment policy which, when it matures, pays off the mortgage, you start a PEP. Than all you need is a term life assurance policy, tailored to the PEP, so that the amount and the cost of the policy reduce as the PEP swells up. Another better way from the Budget comes with the new rules for Additional Voluntary Contributions. AVCs let you top up your share in your pension fund, and get tax relief. Free standing AVCs let you make the top-up payments into other pension arrangements of your choice. Until now these arrange- ments have been hamstrung by the Inland Revenue, which said that if you inadver- tently paid for a bigger pension than the tax rules allowed you, your payments would disappear into the general pool of the pension fund and be lost to you. Nonsense, Mr Lawson now says — you will just get a refund. At the same time he has put up the taxes on life assurance com- panies and the companies are paying out more in commission — guess who pays that. This follows the fatuous 'polarisation' ruling from the Securities and Investment Board, which, as the Director-General of Fair Trading has ruled, materially dimi- nishes consumer choice in life assurance. You need to insure your life, but other- wise, why bother?
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