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Canada Life launches new whole of life product

Canada Life launches new whole of life product

Canada Life has launched a new whole of life insurance product which it says is designed to protect against inheritance tax liability, as it expects planning for large estates to receive increased attention in the next few years.

In a statement the firm said the CanProtect Whole of Life Plan is currently the only plan of its kind to be sold to the UK from offshore, with a £15m upper limit to cater for owners of large estates and overseas investors.

Since 2006 the number of large estates - those with properties of £1m or more - paying inheritance tax has increased by 16 per cent from 3,352 to 3,876, as the nil-rate band was frozen amid cuts to welfare.

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The Conservatives plan to introduce a new personal allowance to take total IHT exemption to £1m inter-generational inheritance, but this will only apply to property. Outside of this, a surviving spouse can pass on £650,000, double the £325,000 nil-rate band, before the tax applies.

The potential amount of IHT liable on purchased property has also risen substantially in the last 12 months, according to the firm, citing the Office of National Statistics data that in 2013 the number of homes purchased with a value of £1m increased by a quarter to 25,000 properties.

Finally, it pointed out that half of sales in prime central London in 2013, on properties worth more than £1m, were to buyers who reside overseas.

The whole of life plan offers flexibility to meet clients’ ongoing needs, offering reviewable premiums for policy holders after 10 years and every five years thereafter. It also offers the option to increase the amount of the sum insured to respond to changing IHT rules, or to take increased liability into account; for instance if house prices increase significantly.

Other product features include: a maximum permitted increase of £250,000; an option for premium frequency on a monthly or yearly basis; and a final review after the life assured’s 84th birthday, after which the premium level will be fixed for the remainder of the plan.

Last week, FTAdviser reported that financial advisers are paying more attention to tax planning as a direct result of the pension freedoms, with one in particular urging people to consider using trusts to mitigate inheritance tax.

At a Prudential and Unbiased tax action roundtable, a survey conducted by Opinium Research amongst 2,003 UK adults, showed that £550m is set to be wasted in inheritance tax payments this year, with individuals not taking appropriate action, such as placing life protection policies under trust.

peter.walker@ft.com