PTM044100 - Contributions: tax relief for members: conditions
Source: gov.uk (2025-08-12)


Glossary PTM000001 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm000001)

Contributions qualifying for tax relief (#qualifying)Annual limits (#limits)Making contributions into an employer’s pension scheme (#employer)Earnings that attract tax relief (#earnings)Tax relief on contributions into a personal pension arrangement (#ppa)Tax relief on contributions into a retirement annuity contract (#rac)General practitioners and dentists (#gp)Compensation that qualifies as a pension contribution (#compensation)Relievable pension contribution (#relievable) Relevant UK individuals and active members (#ruki)Members who move overseas (#overseas)Crown employees (#crown)International aspects (#international)Contributions paid for personal term assurance (#assurance)Life assurance premium contributions (#lifeassurance)Non-group life policies (#nongroup)Protected policies under an occupational pension scheme (#protected1)Protected non-group life policies under a scheme that is not an occupational pension scheme (#protected2)Variations to a protected non-group life policy (#variations)

Contributions qualifying for tax relief

An individual can have tax relief in respect of any relievable pension contributions provided the individual is:
- an active member of a registered pension scheme, and
- a relevant UK individual
in the tax year in which the contribution is paid.

Tax relief can only be claimed for the tax year that the contribution is actually made.

Tax on any contributions made by an employer to fund member benefits

Although an employer contribution to a registered pension scheme is being made to fund a benefit in kind, tax will not normally be paid unless the member’s annual allowance is exceeded. More details about the annual allowance are set out in PTM050000 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm050000).

Annual limits

Section 190 Finance Act 2004

The maximum amount of contributions on which a member can have relief in any tax year is potentially the greater of:
- the ‘basic amount’ - currently £3,600, or
- the amount of the individual’s relevant UK earnings that are chargeable to income tax for the tax year.
Where a member’s relevant UK earnings chargeable to tax are less than £3,600, tax relief on the amount of any contribution over the level of their earnings up to the £3,600 limit can only be given if the contribution is paid to a pension scheme that operates the relief at source (RAS) system.

PTM043000 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm043000) gives more information on the methods of granting tax relief.

Unused tax relief can no longer be carried backwards or forwards to other tax years.

The member, the employer and the pension provider can decide how often a contribution can be made, weekly, monthly, annually or at any other agreed time interval. Extra care must be taken to ensure that if contributions are being made towards the beginning/end of the tax year or pension input period that payments are made in the preferred tax year or pension input period. If they are not the desired level of tax relief may not be received.

Effect of Foreign Income claim or Foreign Employment relief claim

Section 845F Income Tax (Trading and Other Income) Act 2005 Section 41S Income Tax (Earnings and Pensions) Act 2003

Where an individual obtains tax relief by making:
- a foreign income claim under the 4-year Foreign Income and Gains (FIG) regime by virtue of section 845A Income Tax (Trading and Other Income) Act 2005 (see RFIG41000 (https://www.gov.uk/hmrc-internal-manuals/residence-and-fig-regime-manual/rfig41000)), or
- a foreign employment claim under the Overseas Workday Relief (OWR) regime by virtue of section 41P Income Tax (Earnings and Pensions) Act 2003 (see EIM43550 (https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim43550)),
the maximum of amount of contributions to a registered pension scheme on which they can have relief in a tax year will be reduced.Individuals cannot obtain relief on contributions based on income that is relieved from tax under a foreign income claim or foreign employment claim. The amount of their relevant UK earnings is reduced by the amount of relief obtained under those claims, so far as that relief reflects income that is relevant UK earnings (but not below the ‘basic amount’).An individual will not be entitled to any relief at all on contributions (including ‘basic amount’ relief) where:
- the amount of relief they obtain under the OWR foreign employment claim is equal to the amount of their relevant UK earnings, and
- they only fall under the conditions to be a relevant UK individual because they have relevant UK earnings chargeable to income tax for that tax year (i.e. they do not also fall under any of the other conditions) - see the Relevant UK individuals and active members (#earnings) section below.
In those specific circumstances, the individual’s relevant UK earnings are reduced to nil and they will not have any for the purposes of sections 189 and 190 Finance Act 2004. Therefore, the individual will not qualify as a relevant UK individual and is not entitled to relief on contributions.

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Making contributions into an employer’s pension scheme

A member of an occupational pension scheme of an employer will have the method of obtaining tax relief on contributions determined for them. Contributions are either made from gross pay using the ‘net pay arrangement’ or alternatively contributions will be from their pay after tax using the ‘relief at source’ method. Whilst the method of obtaining relief on contributions from earnings may differ they will for most people produce the same result meaning an identical level of tax relief on contributions.

If for some reason a member is not able to take advantage of these arrangements they may be able to make an individual claim for relief to their tax office. See PTM044000 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044000).

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Earnings that attract tax relief

Section 189(2)-(7) Finance Act 2004

For most people the amount of tax relief they can have on their pension contributions is limited to 100% of their relevant UK earnings that are chargeable to income tax for the tax year (there is another low limit for some - see Annual limits (#IDAF10KF) above). If relief is sought within the 100% limit an individual may want to establish how the various payments received as part of earnings have been taxed, to see what counts for this limit. The following earnings are examples of relevant UK earnings.

Relevant UK earnings means any one or more of the following types of income:
- employment income, such as: pay, wages, bonus, overtime, or commission - but only if taxable under Section 7(2) Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) - so including:
- the part of a redundancy payment above the £30,000 tax exempt threshold in section 403(1) ITEPA 2003. The first £30,000 of the redundancy payment is not classed as employment income so does not count here. But any amount on top of the £30,000 threshold is classed as employment income and so it is also relevant UK earnings. In making this analysis, care is required not to confuse usual wages or pay, pay in lieu of notice or holiday pay, with the redundancy payment when such elements are bundled into a final payment.
- benefits in kind which are taxable (applies to employees earning over £8,500, and to directors)
- profit related pay (including the part which is not taxable)
- Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP) if paid by the employer and taxable under Section 7(2) ITEPA 2003
- Permanent Health Insurance (PHI) payments paid by the employer whilst you are still in employment
- pay paid by way of Government Securities
- pay in the form of units in an authorised unit trust if taxed on the person receiving it
- amounts taken off pay to buy partnership shares in a share incentive plan in line with paragraph 83 of Schedule 8 of Finance Act 2000
- income from a trade, profession or vocation that is chargeable under Part 2 Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005)(applies if the activity is conducted individually or as a partner acting personally in a partnership)
- patent income, where the individual alone or jointly devised the invention for which the patent in question is granted, in the following categories:
- royalties or other sums paid regarding patent use and charged to tax under section 579 ITTOIA 2005 (intellectual property)
- amounts on which tax is payable under section 587 ITTOIA 2005 (sales of patent rights) or section 593 ITTOIA 2005 (death of seller of patent rights), or
- amounts on which tax is payable under section 472(5) of the Capital Allowances Act 2001 (balancing charge) or paragraph 100 of schedule 3 to that Act (balancing charges)
Relevant UK earnings are to be treated as not being chargeable to income tax if by virtue of section 2(1) Taxation (International and Other Provisions) Act 2010 (double taxation arrangements), they are not taxable in the United Kingdom. To the extent that they are not chargeable in this way, they will also not count towards the annual limit for relief explained in Annual limits (#IDAF10KF) above.

For the avoidance of doubt a pension is not classed as earnings and cannot be included in the definition of relevant UK earnings.

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Tax relief on contributions into a personal pension arrangement

Unless it is a retirement annuity contract, tax relief on contributions to personal pensions is obtained by using the relief at source method, meaning contributions will be paid after deducting a relevant rate of tax equivalent of 20% (the individual gets to keep the deduction). This allows the relevant rate of tax to be claimed from HMRC by the scheme administrator and added to the pension fund.

If the member is a higher rate taxpayer there are arrangements by which the balance of tax relief due can be received (see PTM044200 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044200)).

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Tax relief on contributions into a retirement annuity contract

The member should ask the provider which method they use. If they don’t use the relief at source system (see PTM044220 (https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044220)), the members will need to make a personal claim for relief from HMRC.

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General practitioners and dentists

Certain General Practitioners and dentists are taxed on part of their relevant UK earnings under Part 2 Income Tax (Trading and Other Income) Act 2005 through being self-employed. Consequently, if contributions were to be made based on these earnings into a registered pension scheme which was set up in accordance with various National Health Service Acts, the net pay arrangement would not be able to be used to obtain tax relief on these contributions.

In these circumstances a claim should be made for any outstanding tax relief to HMRC through the self-assessment tax return

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Compensation that qualifies as a pension contribution

The payment of compensation into an other money purchase arrangement after 5 April 2006 could be a relievable pension contribution and so may trigger loss of enhanced protection, fixed protection, fixed protection 2014 or fixed protection 2016. Whether or not it is will depend upon the nature of the compensation.

In general where, as a result of an individual being awarded compensation for poor advice, mis-selling, poor administration of the pension scheme or poor performance of a particular investment:
- the individual receives the compensation and then uses it as the wherewithal to make a payment into his or her pension saving, or
- the individual directs that the compensation is paid directly into his or her pension saving instead of receiving the payment personally, or
- the person paying the compensation is required or otherwise decides to make the payment directly into individual’s pension saving and, in either case, the individual had no choice in the decision,
the payment into the pension saving will be a relievable pension contribution by or on behalf of the individual and may trigger loss of enhanced protection, fixed protection, fixed protection 2014 or fixed protection 2016. See - https://www.gov.uk/guidance/losing-your-lifetime-allowance-protection#applications-before-15-march-2023 (https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.gov.uk%2Fguidance%2Flosing-your-lifetime-allowance-protection%23applications-before-15-march-2023&data=05%7C02%7Cgemma.drew%40hmrc.gov.uk%7Ca5c0c0ccd7ec425a0aaa08ddb7c7ae13%7Cac52f73cfd1a4a9a8e7a4a248f3139e1%7C0%7C0%7C638868790436531665%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=pp5uaANjuo5l3LIsUUkJ25iwPJ%2B9l4FI1IJtsP%2ByF1A%3D&reserved=0)

Alternatively, the trustees of a pension scheme might seek compensation, such as following problems regarding poor performance of a particular investment chosen by the trustees meaning that the value of the investment is less than it should be or because the trustees received poor advice. Where the trustees are awarded compensation, such a payment would not be a relievable pension contribution and protection will not be lost.

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Relievable pension contribution

Section 188(2) and (3) Finance Act 2004

A relievable pension contribution is a contribution paid to a registered pension scheme by or on behalf of a member of that scheme. This means that the contribution can be paid by the individual member or by a third party on behalf of the individual member. A contribution will not be a relievable pension contribution if it falls into one of the following categories.

Contributions after age 75

Section 188(3)(a) Finance Act 2004

Although contributions can be paid after a member has reached the age of 75, they are not relievable pension contributions and cannot qualify for tax relief.

Life assurance premium contributions

Sections 188(3)(aa) and 195A Finance Act 2004

Contributions paid to a registered pension scheme after 5 April 2007 (after 31 July 2007 in respect of occupational pension schemes) that are life assurance premium contributions are not relievable pension contributions and cannot qualify for tax relief. The section 'Life assurance premium contributions' (#lifeassurance) below explains what contributions are life assurance premium contributions.

Contributions paid by employers

Sections 188(3)(b) and 201 Finance Act 2004

Contributions paid by a member’s employer do not qualify for tax relief for the member.

No liability to income tax arises to an individual member in respect of earnings where the individual’s employer makes contributions into a registered pension scheme.

Age related or minimum payments

Section 188(3)(c) Finance Act 2004

Payments of age related rebates or minimum contributions by HMRC to a contracted-out pension scheme under section 42A(3) or section 43 of the Pension Schemes Act 1993 or the corresponding Northern Ireland legislation are not relievable pension contributions (until 6 April 2015 - section 52(2) Finance Act 2013).

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Relevant UK individuals and active members

Section 189 Finance Act 2004

An individual is a relevant UK individual for a tax year if they:
- have relevant UK earnings chargeable to income tax for that tax year,
- are resident in the United Kingdom at some time during that tax year,
- were resident in the UK at some time during the five tax years immediately before the tax year in question and they were also resident in the UK when they joined the pension scheme, or
- have for that tax year general earnings from overseas Crown employment subject to UK tax (as defined by section 28 of the Income Tax (Earnings and Pensions) Act 2003), or
- are the spouse or civil partner of an individual who has for the tax year general earnings from overseas Crown employment subject to UK tax (as defined by section 28 of the Income Tax (Earnings and Pensions) Act 2003).
Relevant UK earnings are explained under Earnings that attract tax relief (#IDAN30KF) above.

Active members

Section 151(2) Finance Act 2004

An active member is an individual who is accruing benefits under one or more arrangements in a pension scheme.

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Members who move overseas

An individual who is a member of a registered pension scheme and is no longer resident in the UK is a relevant UK individual for a tax year if they were resident in the UK both:
- at some time during the five tax years before that year
- when the individual became a member of the pension scheme.
These individuals may also qualify for tax relief on contributions up to the ‘basic amount’ of £3,600.

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Crown employees

A Crown employee or the spouse or civil partner of a Crown employee is a relevant UK individual if the Crown employee has general earnings from overseas Crown employment.

A Crown employee or the spouse or civil partner of a Crown employee who does not have relevant UK earnings in a tax year may also qualify for tax relief on contributions up to the ‘basic amount’ of £3,600.

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International aspects

Migrant member relief

Paragraphs 1, 4 and 5 Schedule 33 Finance Act 2004

Regulation 2 The Pension Schemes (Relevant Migrant Members) Regulations 2006 (SI 2006/212)

Individuals who are members of an overseas pension scheme may claim tax relief on contributions to that scheme if they meet all of the criteria for migrant member relief. These are:
- the member is resident in the UK when the contribution was made, and
- the member has relevant UK earnings chargeable to UK tax, and
- the contribution is paid to a qualifying overseas pension scheme, and
- the member was a member of the qualifying overseas pension scheme before they became resident in the UK, and continued to be a member of that scheme when they became resident in the UK and made contributions to that scheme, and
- the member was at any time in the 10 years before the beginning of residence in the UK entitled to tax relief in respect of contributions to the scheme under the law of the country or territory in which the member was then resident, and
- the scheme manager has notified the member that they will advise HMRC of any benefit crystallisation events in respect of that member
- the member has notified the scheme manager of an intention to claim relief.
If these conditions are met relief on contributions is due under section 188 Finance Act 2004 and the limit on tax relief as per section 190 applies (see Annual limits (#IDAF10KF) above).

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Contributions paid for personal term assurance

Contributions paid by or on behalf of a member to a registered pension scheme to purchase personal term assurance will not be relievable pension contributions, unless they relate to a ‘protected policy’ - see Protected policies under an occupational pension scheme (#IDA4ILKF) and Protected non-group life policies under a scheme that is not an occupational pension scheme (#IDADNLKF) below.

Contributions for personal term assurance that cannot receive tax relief are:
- contributions that are life assurance premium contributions - see Life assurance premium contributions (#lifeassurance) above, and
- which are paid to an insurance company to provide death benefits under a non-group life policy- see Non-group life policies (#IDAXPLKF) below.
However certain policies are ‘protected policies’ and payment of premiums to these policies may receive tax relief. The conditions for whether or not a non-group life policy is a protected policy are different depending on whether the policy is held in respect of an occupational pension scheme or a non-occupational pension scheme.

See Protected policies under an occupational pension scheme (#IDA4ILKF) for an explanation of when a policy held in respect of an occupational pension scheme is a protected non-group life policy.

See Protected non-group life policies under a scheme that is not an occupational pension scheme (#IDADNLKF) for an explanation of when a policy held in respect of a registered pension scheme that is not an occupational pension scheme is a protected non-group life policy.

A variation in the terms of a protected non-group life policy that increases the benefits payable under the policy, or extends the period over which benefits are payable, will cause the policy to lose its protected status. As a result contributions will cease to be eligible for tax relief after the variation to the policy. Variations to a protected non-group life policy (#IDAJUKKF) gives more information on what is, or is not, a variation that would cause loss of protected status.

Any contributions paid before:
- 1 August 2007 to an occupational pension scheme, or
- 6 April 2007 to a scheme that is not an occupational pension scheme
cannot be life assurance premium contributions and so can be relievable pension contributions eligible for tax relief.

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Life assurance premium contributions

Section 195A Finance Act 2004

Life assurance premium contributions are contributions paid by or on behalf of a member to a registered pension scheme on which tax relief is not given because either:
- the payment of the contributions constitutes the payment of premiums under a non-group life policy, or
- the person by whom the contributions are paid intends the contributions (or an amount equivalent to them) to be applied towards paying premiums under a non-group life policy
Contributions to a non-group life policy will not be life assurance premium contributions for as long as the policy is a protected policy (see Protected policies under an occupational pension scheme (#IDA4ILKF) and Protected non-group life policies under a scheme that is not an occupational pension scheme (#IDADNLKF)).

Contributions treated as life assurance premium contributions

Contributions can also be treated as life assurance premium contributions even if the payer did not intend them to be so treated. Where:
- the amount of the premiums under the non-group life policy in a tax year is more than the amount of contributions intended to be applied towards paying the policy premiums, and
- other contributions (not intended to pay the policy premiums) have been paid by or on behalf of the member to the scheme in that tax year
all or part of those other member contributions are treated as life assurance premium contributions up to the value of the policy premiums.

So where the contributions paid to the scheme by or on behalf of the member in a tax year are less than the amount of premiums under a non-group life policy in the tax year, all those contributions are treated as life assurance premium contributions and so are not relievable pension contributions.

Where the contributions paid to the scheme by or on behalf of the member in a tax year exceed the amount of premiums under a non-group life policy in that tax year, the contributions up to the amount of the policy premiums will be treated as being life assurance premium contributions and so are not relievable pension contributions. The contributions which exceed the amount of the policy premiums will not be treated as life assurance premium contributions and so may be relievable pension contributions.

Where the benefits under the non-group life policy relate to the death of one or more of a group of individuals a contribution paid by or on behalf of more than one member should be apportioned between each member (based on the particular circumstances) on a just and reasonable basis.

Where part way through a tax year a policy ceases to be protected these rules only apply to contributions paid after the date the policy loses protection.

Employer contributions

For the avoidance of doubt, relief for contributions paid by an employer in respect of a non-group life policy is not affected by these restrictions.

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Non-group life policies

Sections 195A(2) and (8) Finance Act 2004

A non-group life policy is defined as a policy of insurance under which the only benefits which may become payable are benefits payable in consequence, or anticipation of:
- the death of the individual, or
- the death of one of a group of individuals which includes the individual (e.g. a policy that covers a number of individuals but only pays a benefit out on the first death or last survivor’s death), or
- the deaths of more than one of a group of individuals (e.g. a policy that pays a benefit out on the death of each of the individuals)
- where the group includes the individual, and
- all the other members of the group are connected with the individual in accordance with section 195A (8) Finance Act 2004.
So a policy that will pay out on the death of only one individual (regardless of how many individuals may be ‘covered’ by the policy) will be a non-group life policy.

A policy that will pay out benefits on the death of more than one individual will only be a non-group life policy where the individuals ‘covered’ by the policy are all connected and include the individual. (Connected has the meaning as given in section 195A (8) Finance Act 2004, that is broadly as members of the same family.)

Contributions paid by or on behalf of the member to pay premiums for these types of policy will not be relievable pension contributions and so cannot receive tax relief

A policy that will pay out benefits on the death of more than one individual and where the individuals covered by the policy are not connected will not be a non-group life policy. Contributions made by or on behalf of the member, aged under 75, to pay premiums to this type of policy may be a relievable pension contribution.

Some pension schemes allow members to pay for additional death in service benefits through additional contributions (AVCs). These AVC schemes/sections may have been established with death in service cover provided on a group basis (meaning not non-group of the kind described above). Where cover is provided on a group basis tax relief will continue to be available for contributions made to such schemes because the policies will not be non-group life policies.

The provider of the life insurance and AVC ‘scheme’ is in the best position to inform employers and trustees how this definition applies to their particular arrangements for AVCs and therefore on whether or not employees can:
- undertake new agreements to purchase life insurance benefits with tax relief under the arrangements under applications received by the insurer after 28 March 2007, or
- vary the terms of existing agreements in order to increase such benefits.
It should be clear by comparing the legislation with the terms of the insurance whether or not the policy is a non-group life policy.

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Protected policies under an occupational pension scheme

Paragraphs 6 and 7 Schedule 18 Finance Act 2007

The normal rule that life assurance premium contributions cannot receive tax relief does not apply where the non-group life policy (personal term assurance policy) is a protected policy.

Protected policies under an occupational pension scheme

Unless it has been varied, see below, a non-group life policy held for the purposes of an occupational pension scheme is a protected policy if it is:
- issued in respect of insurances made and became held for the purposes of that registered pension scheme before 21 March 2007, or
- issued in respect of insurances made and became held for the purposes of that registered pension scheme after 20 March 2007 but before 1 August 2007 where:
- the insurer received the application for the policy before 29 March 2007, and
- the amount and term of the payable benefits (tested at the latest of the time the insurance was made, the scheme registered and the policy rights came to be held under the scheme) under the issued policy are no greater than as set out in the application to the insurer, or
- to replace a policy that was previously in existence but had subsequently lapsed, and:
- the new policy is made on the same terms and conditions as the lapsed policy;
- the new policy was merely re-instated and was not the subject of a new insurance proposal;
- the lapsed policy would have been eligible for relief had it stayed in force (i.e. it was a “protected policy” under the legislation); and
- the new policy is made and held within the pension scheme before 1 August 2007.
Variations to a protected policy under an occupational pension scheme

A protected policy will cease to be protected only if there is a variation to the policy terms which:
- increases the benefits payable under the policy or
- extends the period during which benefits are payable.
Where the policy was issued in respect of insurances made before 21 March 2007 only variations made after 20 March 2007 can cause loss of protected status.

In all other cases, it is only variations made after whenever the policy became a protected policy that can cause a loss of protected status.

See Variations to a protected non-group life policy (#IDAJUKKF) below for more information on what does and does not constitute a policy variation.

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Protected non-group life policies under a scheme that is not an occupational pension scheme

Paragraphs 4 and 5 Schedule 18 Finance Act 2007

The normal rule that life assurance premium contributions cannot receive tax relief does not apply where the non-group life policy (personal term assurance policy) is a protected policy.

Protected policies under a non-occupational pension scheme

Unless it has been varied, see below, a non-group life policy held for the purposes of a registered pension scheme that is not an occupational pension scheme is a protected policy if it was issued in respect of insurances made and held for the purposes of a registered pension scheme before 6 December 2006.

If a non-group life policy was issued in respect of insurances made on or after 6 December 2006, it can still be a protected policy if:
- the insurance was made and became held for the purposes of a registered pension scheme before 1 August 2007, and
- the amount of the benefits payable under the policy and the period for which they are payable is not greater than as set out in the application, and
- the insurer received the application for the policy before 13 April 2007, provided that on the day the insurance was made the individual also had an actual or prospective entitlement to a pension under the same scheme, or
- the insurer received the application for the policy before 14 December 2006 in any other case.
Lapsed policies

The reinstatement of a policy that has lapsed will normally be treated as a new policy and so will not be protected. However, where a policy was previously in existence but had subsequently lapsed a reinstated policy may be treated as a protected policy if the following conditions are met:
- the reinstated policy is made on the same terms and conditions as the lapsed policy;
- the reinstated policy was merely re-instated and was not the subject of a new insurance proposal;
- the lapsed policy would have been eligible for relief had it stayed in force (i.e. it was a “protected policy” under the legislation); and
- the reinstated policy is made and held within the pension scheme before 1 August 2007.
Whether or not an insurance policy can be reinstated and is reinstated is a decision for the insurer and policyholder.

Variations to a protected policy under a non-occupational pension scheme

A protected policy will cease to be protected only if there is a variation to the policy terms which:
- increases the benefits payable under the policy or
- extends the period during which benefits are payable.
Where the policy of insurance was issued in respect of insurances made before 6 April 2006 only variations made after 20 March 2007 can cause loss of protected status.

Where the policy was issued in respect of insurances made after 5 April 2006 but before 6 December 2006 only variations made after 5 December 2006 can cause loss of protected status.

In all other cases, it is only variations made after whenever the policy became a protected policy that can cause a loss of protected status.

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Variations to a protected non-group life policy

Only a change to the policy conditions that either:
- increases the benefits payable, or
- extends the term over which benefits are payable
under the policy will cause a non-group life policy to lose its protected status.

A change to the policy terms that is needed to comply with either:
- The Employment Equality (Age) Regulations 2006 (SI 2006/1031), or
- The Employment Equality (Age) Regulations (Northern Ireland) 2006 (SR 2006/261)
will not cause loss of protected policy status.

Options under contract wording

Where a change in the policy terms is due to the exercise of a policy option this will not be a variation that would trigger loss of protected status. An option is a change in the benefits or the term of the policy that applies without the need for any further agreement. For example the policy may set the level of benefits as a percentage of earnings, or increasing in line with inflation. Where the level of benefits is increased in this predetermined manner this is not a variation, as the insurer cannot refuse to increase the cover. Another example is where the policy may give the member the choice to increase the level of cover by up to 5% of the original benefit level and the insurer must provide the increased benefit.

Where the insurer has the right to refuse to increase cover under the policy on the same underwriting terms this would not be an option but a variation. Any increase in benefits would trigger loss of protection.

If a policy allows an individual to reduce cover and then increase it back to its original level with no further checks this would be the exercise of a contractual option and not a variation triggering loss of protected status.

Where the terms of a policy are altered because of a dependency on another contract this would not be a variation. However the substitution of a protected policy by another policy would be a new policy that would not be a protected policy. For example where one insurance company takes over another and wishes to replace legacy policies with one of the new insurer’s policies, albeit on the same terms, this would be a change that triggers loss of protection.

If a policy allows for a contribution holiday whilst cover of the same level and term remains in place then the restart of contributions will not trigger loss of protected status.

The insurer providing the policy is in the best position to advise a member, trustee or employer if a change is due to the exercise of a policy option. If you are uncertain of the situation in relation to a particular policy you should ask the insurance company that provides the relevant policy.

Errors in setting up the policy

An error may have been made in setting up the insurance policy. Whether or not correction of the error is a variation causing loss of protected status depends on the nature of the error.

Where the error is not connected with either the policy term or the amount assured, e.g. a misspelt name, correction of the error will not trigger loss of protected status.

If the mistake was made on the application form, e.g. the applicant said they wanted insurance of £100,000 when in fact they intended to apply for £200,000 the ‘correction’ would be a variation that triggers loss of protected status. Another example of a variation that would trigger loss of protection is where the date of birth was incorrectly stated on the application, and use of the correct date of birth gives a longer term to the policy. This is because the acceptance of the original application by the insurer constitutes a binding agreement which can only be altered by a variation of the terms of that agreement.

Where the mistake is made by the insurance company in setting up the policy by keying in the wrong information onto its systems the correction would not normally be a variation where the insurer’s intention was to accept the application on the terms applied for. The policy as set up would not reflect the contract entered into by both parties and the change would simply be to correct that.

Lapsed policies

When a protected policy lapses, for whatever reason, this will normally trigger loss of its protected status which cannot be restored if the policy is later reinstated. The only exception is where the policy was reinstated before 1 August 2007 and all the conditions described above are met.

Change of premium payer

Where a member takes over responsibility for the payment of premiums to a protected policy from their employer, and there is no other variation that increases the amount or term of the benefits, the policy will retain its protected status.