Sovereign to shield customers from tax increases
Sovereign is mobilising to ensure that its customers are shielded from the immediate impact of life tax changes that take effect on July 1.
Friday, April 30th 2010, 4:43PM
The changes affect the way in which life insurers determine the tax they pay in respect of life insurance business.
Sovereign has confirmed that it will be forced to increase its life insurance premiums when the new tax law comes into effect on July 1.
However, under certain circumstances the new tax law will allow Sovereign to defer tax change related premium increases on policies existing at 30 June for up to five years.
Sovereign chief executive Charles Anderson says the significant tax increase makes a premium increase inevitable.
"We acknowledge that this change comes at a difficult time, and we are working hard to minimise the effect of these changes on our customers.
"Premiums will not therefore be increasing for existing life cover polices in place prior to July 1.
"As well as ensuring our existing customers are protected from any immediate impact, we have taken steps to fairly balance the future cost by increased taxation between Sovereign, our advisers and our customers."
The legislation, which was introduced around two years ago, will significantly increase tax paid by life insurers.
Sovereign will announce the amount of the consequent increase to its premiums in the coming weeks. The increase will apply immediately to all life insurance policies issued from July 1.
The new tax rules include transitional provisions. This means the old tax rules will continue to apply to most life cover policies existing at 30 June, therefore shielding these policies from the related premium increases for up to five years.
"Sovereign is endeavouring to ensure that as many of our customers as possible are eligible for the transitional provisions" says Anderson.
"For people considering buying a life cover policy, or in need of a top-up to an existing one, now would be a good time. Premiums will never be lower than they are right now."
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