- Pension Term Assurance pays a lump sum if you die during the term of the plan.
- You can start this plan up to age 70 or 65 if you have a company pension plan.
- You can choose cover from five to 40 years or up to age 75 (70 if you have a company pension plan).
- The cost will depend on your age, your health, options chosen, the term and agreed level of cover.
- Your payments will stay the same unless you choose the inflation protection option. You must keep paying to stay covered.
About Pension Term Assurance
Pension Term Assurance is a life cover plan that you can take out before you retire. It pays your family a lump sum if you die during the term of the plan. They can use this as they want, to pay bills, loans – whatever matters most. It gives you peace of mind in knowing that if you die during the term of your plan, your family could be protected financially.
The advantage of Pension Term Assurance over other life cover plans is that it could cost you less. This is because, if you are eligible, you can claim income tax relief on your payments.
How Pension Term Assurance works
You pay a regular amount of money into your plan. You can make your payment by direct debit every month, three months, six months or every year. Your payment provides the level of life cover you choose until the date you have chosen for your cover to end. When the plan ends, your cover will automatically end, unless you chose the option to continue cover when you took out the plan.
Once you stop making regular payments, the plan will end and you will not receive any refund or benefit from the plan.
The cost of your Pension Term Assurance plan is guaranteed not to increase before the date you choose for your cover to end, giving you added security.
If you want to increase your cover every year to take account of inflation, you can choose the inflation protection option. This option is important as, without it, your cover cannot increase unless you start a new plan.
How much will it cost?
The cost of life cover depends on the following:
> The amount of cover you need.
> Your age and whether or not you smoke.
> Your state of health.
> Whether you choose the inflation protection option.
> Whether you want your cover to be able to continue after you retire (using the ‘guaranteed cover again’ option).
> The age at which you want your cover to end.
Family law and pensions
If you go through a separation or divorce, a court application for a pension adjustment order for the death benefits due under this plan may be made. You can get more information from the Pensions Authority.
Eligibility for Pension Life Insurance
You need to meet certain criteria to be eligible to take out Pension Life Insurance, a special form of life cover with added income tax benefits. These include the following:
Normally you must be aged between 20 and 70 to take out this cover and you cannot have cover under this plan beyond age 75.
- You must take out cover for at least five years.
- The maximum amount of time we will provide cover for is 40 years. If you have a personal Pension Life Insurance plan, you own the plan. If a claim is made, we will pay your benefits to your personal representatives.
Company Pension Life Insurance
Normally you must be aged between 20 and 65 to take out this cover.
- If you qualify for a company pension plan, the expiry date of your Pension Life Insurance plan cannot go beyond your normal retirement age of your company pension plan. This age will be between 60 and 70.
- You must take out cover for at least five years.
- The maximum amount of time we will provide cover for is 40 years and you cannot have cover under this plan beyond age 70.
If you have a company Pension Term Assurance plan, the trustee (normally your employer) owns the plan. If a claim is made, the claim is paid to the trustees.
Your tax situation
Before taking out Pension Term assurance
You must be living in Ireland for income tax purposes; and your income must be from paid work. You cannot take out a plan if your income is from, for example, renting out property, dividend payments or interest on investments.
This is because these forms of income will probably continue after your death. How income tax relief will work for you depends on whether you would qualify for a personal pension or company pension plan.
You can only take out Pension Term Assurance on your own life (single cover) as it is your income that this plan aims to protect. You cannot take it out on your partner’s life or take out joint life cover.
Tax Advantages of Pension Term Assurance
Your payments to your Pension Term Assurance plan qualify for income tax relief up to certain limits. This means that the cost of your life cover will be greatly reduced. Exactly how the income tax relief works depends on whether you qualify to take out a personal pension or join a company pension arrangement.
Personal Pension Life Insurance – Income Tax Advantages
This will apply to you if you are self-employed or an employee who does not have a company pension scheme.
If you are eligible to take out a personal pension plan, you can claim income tax relief on your payments up to a certain percentage of your net relevant earnings in any one year.
Net relevant earnings means your income during a tax year, less allowances, losses and certain charges and deductions, such as mortgage interest for which you can claim income tax relief (if this applies to you).
The maximum contribution you can claim income tax relief on depends on your age and this is outlined in the table below.
These percentages are capped at an earnings limit of €115,000. They include pension contributions to other approved pension arrangements.
Also, if you are in a certain occupation, you may get income tax relief of 30% of earnings, no matter how old you are. In general, these tend to be professional sportspeople who earn their income from a particular occupation such as athletes, boxers, footballers, golfers, jockeys and so on.
If you are an employee and your contributions are taken from your bank account you can apply to your local Inspector of Taxes to have your tax credits adjusted to reflect your pension contribution.
If you are self employed, you must include your pension contributions in your self assessment tax returns in order to get income tax relief.
So, a 45-year-old with net relevant earnings of €30,000 can get tax relief on total payments of up to €7,500 a year (25% of net relevant earnings) towards a pension or a Pension Life Insurance plan (or a combination of both).
If you leave your jobing
With personal Pension Life Insurance, you could become ineligible for the income tax relief on your plan if you no longer have an income from being self-employed or from non-pensionable employment. If this happens, you can continue to pay your plan contributions but you cannot claim income tax relief. Your plan will not stop if you continue to pay contributions.
Company Pension Term Assurance - Tax Advantages
This will apply to you if your company will cover the cost of your Pension Term Assurance plan. To take out company Pension Term Assurance, your employer must pay the full contribution.
Your employer’s contribution
Employers receive Corporation Tax Relief on the contribution they pay into the plan on your behalf. Employer payments are not considered benefit in kind (BIK), so you do not have to pay income tax on these payments.
How Pension Life Insurance contributions are taxed
- Your employers’ contribution gets Corporation Tax relief
- No liability as a result of benefit in kind
If you leave your job
With company Pension Term Assurance, if you leave your job, the contributions from your employer must end. You or your employer should let us know if this happens. The cover can only continue if your new employer is willing to take it over and make at least the minimum contribution or if you have guaranteed cover again.
These benefits are automatically available to you, at no extra charge, when you take out Pension Life Insurance.
We know that when you take out one of our plans, sometimes your needs and circumstances can change. So, up to the fifth plan anniversary, we have a flexibility option on our Pension Term Assurance plans. This allows you to make significant changes to your level of benefits or the term of your benefits without going through the hassle of cancelling your existing plan and taking out a new one.
There are no extra costs for this flexibility option. However, when you change the benefits or term of your plan we will work out a new plan payment at that time. This means the cost and payments on your plan could go up or down.
With this flexibility option you can:
- Reduce or increase the term of your plan; and
- Reduce or increase your existing cover. The main rules applying to the flexibility option are as follows:
- You can only change the term if the original term you chose was more than 10 years.
- To increase a benefit or extend the term:– you must be aged under 50;– your current life cover must not be more than €500,000 for each life covered, and €300,000 for specified illness cover.
- You cannot increase your benefit by more than 20% of the current benefit.
- You cannot extend the term by more than five years.
- You can only increase a benefit, or extend its term, or a combination of both, once.
If you take out Pension Term Assurance and before the age of 55 you then get married, have a child, take out a new or increase your existing mortgage or get an increase in salary, you can ask us to set up a new life cover plan for:
- half of your current benefit; or
- half of your original benefit; whichever is lower.
You won’t have to provide any information about your health. This option is only available twice.
Inflation protection (Indexation)
This option allows you to increase your cover every year (to keep in line with the cost of living). And, you do not have to provide evidence of your health. This is often called ‘indexation’.
Why do you need inflation protection?
This option protects the real value of your cover as time passes. If you do not take this option, your cover will stay the same throughout the term of your plan. How inflation protection works
- You will have to pay an extra charge for this benefit. This extra charge will depend on your age and the term of your plan. It will be included in the contribution if you have chosen this option.
- At the moment the amount you are covered for will increase by 3% a year to protect against the effects of inflation. Your payment will go up by 4.5% each year to reflect the extra cover and the fact that you are older.
- If you refuse this option two years in a row, we will not offer you any further increases.
Guaranteed cover again (conversion option)
Guaranteed cover again, also known as a conversion option allows you to convert your cover to another plan at any stage throughout the term of your plan.
You have the choice of two types of plan when you exercise this option, assuming we have such products available at that time:
- Take out another fixed term protection plan which will provide cover for a specified term, after which your cover will end.
- Take out a whole of life protection plan with Irish Life which will provide life cover for the remainder of your life, as long as you continue to pay the premiums.
There is no Specified Illness Cover available on a whole of life plan.
If you wish to avail of Guaranteed Cover Again, you must take it at the start of your plan.
When you use the conversion option you will not have to provide any new evidence of health for the new plan you convert to. You can avail of this option more than once. The payments you make will reflect this.
Depending on the option you choose, the plan you convert to will be subject to the terms and conditions of that plan. The benefits on whole of life protection plans may be different to the benefits on fixed term protection plans.
This option is especially useful on Pension Term Assurance if, at a later date, you want to extend your cover beyond retirement. You must be aged between 20 and 65 to take it out.
How guaranteed cover again works
- If you want to convert your cover, you can take out a new plan with guaranteed regular payments.
- The option to convert cover does not include any inflation protection on the extended cover. The payments you make will reflect this.
- You will have the option to add guaranteed cover again to the new plan you convert into, once you are aged between 20 and 65 at the time of setting up the plan you are converting into.
- Guaranteed Cover Again applies to a life cover sum assured of no more than €5,000,000 and
- A specified illness sum assured of no more than €1,000,000 for conversion to another fixed term protection plan. The maximum sum assured limit available on a fixed term protection plan available at the time you convert your cover may be different to the limit available on a whole of life protection plan. These limits apply to the total cover extended across all the plans you have with us. The payments you make will reflect this. Please see your terms and conditions for more details.
- Your smoker status and any special conditions which apply to your existing benefit will also apply to your converted benefit.