IPTM2081 - Assignments from 6 April 2013

ICTA88/SCH15/PARAB2

General Rule

If the rights (or any share in the rights) under a qualifying policy are assigned to someone else before 6 April 2013 there will be no change in the status of the policy in the hands of the assignee so it will remain a qualifying policy.

If the rights (or any share in the rights) under a qualifying policy are assigned to someone else on or after 6 April 2013 the policy will automatically become a non-qualifying policy apart from certain exceptions.

For these purposes the assignment of legal as opposed to beneficial ownership is ignored.

Exceptions

The following assignments are excluded from the general rule applying to assignments after 6 April 2013. These assignments also require a statement to be made (see IPTM2090):

  • assignments as part of a divorce settlement or dissolution of a civil partnership
  • assignments as a result of a court order
  • assignments between husband and wife and between civil partners
  • assignments into or out of a trust
  • assignments as a result of a deceased beneficiary event (see below).

The following assignments have no impact upon a policy’s qualifying status (and do not require a statement to be made):

  • assignments as a security for a debt or on discharge of a debt
  • assignments as part of legally enforceable obligation relating to a divorce or dissolution of a civil partnership if the policy assigned is to pay off an interest only mortgage
  • assignments to personal representatives of a deceased individual
  • assignments following the death of an individual if the beneficiary was a already a beneficiary prior to death
  • assignments of legal ownership where beneficial ownership does not change.

In the instances noted under the first set of bullets above, for the purposes of the annual premium limit, the assignee must consider the assigned policy together with all their other qualifying policies already subject to the annual premium limit rules.

This means that they must aggregate the total annual premiums payable in respect of existing qualifying policies that count towards the annual premium limit.

If the premiums payable under the assigned policy, when aggregated with the assignee’s other qualifying policies, do not lead the assignee to breach the annual premium limit of £3,600 the assigned policy will remain a qualifying policy in the hands of the assignee.

If the premiums payable under the assigned policy, when aggregated with the assignee’s other qualifying policies lead the assignee to breach the annual premium limit of £3,600 the status of the assigned policy will be as follows:

  • a qualifying policy issued on or after 6 April 2013 will become non-qualifying
  • a qualifying policy (whether RRQP or not) issued on or after 21 March 2012 and before 6 April 2013 will become non-qualifying
  • a qualifying policy issued before 21 March 2012 will become a RRQP.

Capital sum payable

ICTA88/SCH15/PARAA1

Premiums payable under a policy following a mortgage endowment assignment in pursuance of a legally enforceable obligation relating to a divorce or the dissolution of a civil partnership do not count towards the beneficiary’s annual premium limit.

A mortgage endowment assignment is defined at ICTA88/SCH15/PARAA6(3). An assignment is a mortgage endowment assignment if the policy to which the assignment relates secures a capital sum payable either:

· on survival for a specified term or on earlier death or disability, and

· the policy is issued and maintained for the sole purpose of ensuring that a borrower under an interest-only mortgage will have sufficient funds to repay the capital lent under the mortgage, and

· when the assignment occurs, it is intended that the policy will continue to be maintained for that sole purpose.

This will include part repayment and part interest only mortgages and mortgages where other investments are being used to make up any shortfall.

Deceased beneficiary event

ICTA88/SCH15/PARAA6

Broadly, such an event occurs if, in connection with the death of one individual beneficiary under a policy, another individual who was not a beneficiary under the policy becomes a beneficiary under the policy. When the policy rights pass to the new beneficiary, the annual premium limit will then be tested in respect of that new beneficiary.

This contrasts with the case where the policy passes to someone who was already a beneficiary under that policy (e.g. a joint life policy). No statement (see IPTM2090) is required and the annual premium limit is not retested.