Pension Term Assurance

Protect and Save with Pension Term Assurance: Your Tax-Efficient Life Insurance.

Pension Term Insurance is a type of life insurance designed specifically to provide an affordable means of protecting your family’s financial future while maximising the benefits of pension-related tax reliefs.

What are the types of Pension Term Assurance plans?

There are two types of pension term assurance: Personal and Executive.

Personal Pension Term Assurance

Personal Pension Term Assurance is designed specifically to offer financial protection through life assurance until the policyholder retires. Key features of this type of policy include:

Guaranteed Premium: Your life insurance premium is determined from the beginning, so there are no unexpected changes.

Defined Term: You establish the policy for a specific duration, known as the term. If you pass away before this term concludes, a lump sum is paid out to your estate, providing your loved ones with financial security.

End of Policy: The policy must terminate upon retirement if that happens before the maximum retirement age of 75 outlined in Revenue Regulations. Or if you retire before the policy’s term ends, it must be cancelled.

Eligibility: The minimum age requirement is 18, and the policy is designed for self-employed people or those in non-pensionable employment. It is available on a single-life basis only.

Tax Relief: Premiums may be eligible for income tax relief, subject to not exceeding maximum Revenue limits when combined with your pension contributions. This means that a taxpayer with a higher tax rate may be able to reduce the cost of the premium by 40%.

Executive Pension Term Assurance

Executive Pension Term Assurance is distinguished by its setup and premium payment structure while it is similar in its fundamental purpose of providing life assurance until retirement.

Guaranteed Premium: Just like with Personal Pension Term Assurance, your life insurance premium is fixed from the start, so there are no unexpected changes.

Company-Set Term: Your company establishes this policy for a specific term. In the event of your death before the term’s end, a lump sum is paid to the trustees of your pension plan, who then distribute it to your dependents or estate.

Employer-Paid Premiums: A notable difference is that your employer covers the premiums for Executive Pension Term Assurance, providing an additional layer of financial planning facilitated by your workplace.

Eligibility: This policy is available to anyone taxed in Ireland under Schedule E (PAYE) or part of a company pension plan, with an age requirement of at least 18. It is also solely available on a single-life basis. 

Tax Benefits: Companies can claim full tax relief at the corporation tax rate on premiums, which are considered alongside pension contributions for tax relief purposes. According to revenue regulations, the policy must be concluded by age 70 unless retirement occurs sooner.

Maximum Lump-Sum Payment: When an employee passes away while employed, the policy allows a lump-sum payment that can potentially amount to up to four times the employee’s final salary.

Any remaining balance may be used to purchase an annuity, fund dependents’ pensions, or invest in an Approved Retirement Fund (ARF). 

If the employee’s accumulated pension contributions already amount to four times their salary, the entire benefit may be directed towards purchasing an annuity, funding dependents’ pensions, or investing in an Approved Retirement Fund (ARF).  

This can differ depending on the type of pension arrangement you have in place, e.g., PRSA vs. Master Trust/Occupational Pension Scheme. You will need to get individual advice on this.