LAM17100 - BLAGAB or eligible PHI business - maximum benefits payable to members: FA12/S160

In addition to the limits imposed on the policies any friendly society can write (LAM17060), FA12/S160 imposes restrictions on the entitlement of any person to have at any time outstanding exempt contracts with any one or more friendly societies, registered branches or insurance companies (relevant persons). These apply the limits in the table at FA12/S155 to the policies held by any person, even where the policies are with more than one relevant person. There are some minor variations with relation to “old societies” (LAM17120).

If a person’s outstanding contracts with relevant persons were contracts which were all made before 14 March 1984, the maximum benefit of all policies combined cannot exceed £2,000 and the maximum combined annuities from all policies cannot exceed £416 (FA12/S160(9)).

In the case of contracts for the assurance of gross sums made before 1 September 1987 (but not all before 14 March 1984), a person is not entitled to have outstanding at any time with relevant persons contracts which, taking them all together, are for the assurance of more than £750 (FA12/S160(2))

In applying the limits at FA12/S160(2) and (9) ignore:

(a) any bonus or addition which is declared in addition to the gross sum assured or which accrues by reference to an increase in the value of investments. This applies both to any bonus declared during the life of the policy and to any terminal bonus declared on maturity,

(b) any policy or annuity contract which secures benefits under an occupational pension scheme (within the meaning of FA04/S150(5)),

(c) any annuity contract which either is issued or held with a registered pension scheme other than an occupational pension scheme,

(d) any increase in a benefit under a friendly society contract resulting from the rounding up of contributions on decimalisation in 1969 in line with Decimal Currency Act 1969/S6(3) (FA12/S160(6)).

Where at least one of the contracts for annuities was taken out after 1 September 1987 the person assured is not entitled to have outstanding at any time:

(a) contracts under which the total premiums payable in any period of 12 months exceed £270,

(b) contracts made before 1 May 1995 under which the total premiums payable in any period of 12 months exceed £200,

(c) contracts made before 25 July 1991 under which the total premiums payable in any period of 12 months exceed £150, or

(d) contracts made before 1 September 1990 under which the total premiums payable in any period of 12 months exceed £100 (FA12/S160(3)).

However, for contracts for an annuity taken out before 1 June 1984 by a friendly society other than an old society, the tests should be applied as if the contract was for a gross sum (FA12/S161(4)).

In applying these limits, where the premium payable under a contract for assurance of a gross sum made on or after 1 September 1987 but before 1 May 1995 is increased as a result of a variation made:

(a) in the period 25 July 1991 and ending 31 July 1992 – both dates inclusive

(b) in the period 1 May 1995 to 31 March 1996 – both dates inclusive

the contract is to be treated for the purpose of the limits outlined here as if it was made at the time of variation (FA12/S160(7) and (8)).

If the premium is payable more frequently than once in a year, then an amount equal to 10% of the premiums is ignored (FA12/S160(5)(a)).

If the reason for the premium exceeding the limits in FA12/S160 is exceptional risk of death or disability, the part of the premium relating to that exceptional risk can be ignored in applying those limits (FA12/S160(5)(b)).

In the case of contracts for annuities made before 1 September 1987 (but not all before 14 March 1984), a person is not entitled to have outstanding at any time with relevant persons contracts which, taking them all together, are for the assurance of more than £156 (FA12/S160(4)).

In applying these limits ignore:

(a) any bonus or addition which is declared upon an annuity, or which is calculated by reference to an increase in the value of any investments,

(b) any annuity contract by means of which the benefits to be provided under an occupational pension scheme (within the meaning of FA 2004/S150(5)) are secured,

(c) any annuity contract which constitutes, or is issued or held in connection with, a registered pension scheme other than one within paragraph (b), and

(d) any increase in a benefit under a friendly society contract resulting from the rounding up of contributions on decimalisation in 1969 in line with of the Decimal Currency Act 1969/S6(3).