What's changing - Overview

Fundamental changes in the way life insurance products are taxed, which means all life insurers will pay more tax on term life business
- There'll be changes to the way tax is calculated for life insurance savings products, but unlikely to materially change the amount of tax life insurers pay on this business
- Insurers will continue to pay tax on behalf of policyholders.
PIE (portfolio investment entity) tax benefits extended to tax paid on behalf of policyholders
New taxation rules are effective from 1 July 2010, which means that policies issued from that date will be subject to the new rules unless Sovereign receives an application and a deposit before 1 July 2010
Grandparenting provisions reduce the immediate impact on existing life risk business
Tax treatment of premiums and claims in policyholders’ own tax returns doesn’t change.

What Products are affected?

The table below relates to changes in the tax treatment of policies post 1 July 2010.

Significant changes in tax treatment

Moderate changes in tax treatment

No changes

Term life - rate for age policies, level policies

Accidental Death Benefit (ADB) - standalone

Term life component of all unit linked, traditional & Universal Life contracts

Workplace group life

Savings component of all unit linked, traditional & Universal Life contracts

Health

Disability Income Protection

Living Assurance

Total Permanent Disablement

ADB that is incidental to another contract other than term life

Pure savings & investment contracts

Updated category 1 & 2 product listings

4/08/2011

The new legislation has categorised financial products into two categories (Category 1 and Category 2), and sets out which type of adviser is qualified to advise and sell. Many advisers are wondering if the products they sell or have on their books are Category 1 or Category 2 products.

Asset Magazine - A Dummies Guide to QFEs

18/01/2011

Asset Magazine look at the QFE space and what it means for advisers.

This article outlines what a QFE is and what options there are for advisers in the new regulated environment.

Asset Magazine - QFE Article Dec 2010

When do financial advisers have to register?

19/11/2010

After consultations with the Ministry of Economic Development this morning, we received clarification on who needs to be registered by 1 December.

Sovereign takes the lead in a new regulatory world

16/11/2010

Sovereign is embracing legislation that will set new professional standards for financial advisers by applying to become a Qualifying Financial Entity (‘QFE’).