Changes just announced by HM Revenue and Customs to the taxation of purchase life annuities affect the after-tax position on income payable from 5 For Life. They take effect from 6th April 2008.

The changes are minor and the chart below shows the new rates.

Male	Capital content	Capital		Female	Capital	Capital
Age	Before %	content after %		Age	Content before %	Content after %
60	4.64	4.1		60	3.97	3.6
61	4.83	4.2		61	4.12	3.7
62	5.02	4.4		62	4.28	3.9
63	5.23	4.6		63	4.44	4.0
64	5.45	4.8		64	4.62	4.2
65	5.68	5.0		65	4.81	4.4
66	5.93	5.2		66	5.02	4.5
67	6.19	5.4		67	5.24	4.7
68	6.47	5.7		68	5.47	4.9
69	6.78	5.9		69	5.72	5.2
70	7.10	6.2		70	5.99	5.4
71	7.45	6.5		71	6.29	5.7
72	7.82	6.9		72	6.60	6.0
73	8.23	7.3		73	6.94	6.3
74	8.66	7.6		74	7.31	6.6
75	9.12	8.1		75	7.71	7.0
76	9.62	8.5		76	8.14	7.3
77	10.16	9.0		77	8.61	7.8
78	10.75	9.6		78	9.12	8.2
79	11.38	10.2		79	9.67	8.7
80	12.06	10.8		80	10.27	9.3

We have now written to our existing clients to confirm the new exempt capital content figures. We’ve done this because they would have received different figures when they took out their plan and may have different expectations of the level of income they’re due.

Client Scenarios

As your clients may contact you, we’ve summarised the position as follows:

For clients aged under 60

They cannot take income yet. The new capital content percentages will apply when they do take income.

For clients aged 60 and over

Group A. Clients who are already in receipt of payments or will be by 6 April

• The changes will have no effect

Group B. Clients who are not taking payments and have not asked for payments to be made to them

• The new percentages will be in place when they do take income

Group C. Clients who have asked for payments to begin and will receive the first payment after 6 April

• The new percentages will be in effect when they start receiving income.
• They can choose to cancel the request for income to avoid the new percentages being applied immediately. They must do this before the date on which income would’ve been paid.
• By not taking income now, they may reduce the overall amount they will receive from the plan.
• In this case the policy will be treated as if the request had not been made, so the policy will be reviewed annually (and not every three years if payment had been made).

To see copies of the letter issued to your clients, please click on the link at the bottom of this page.

Please remember that despite the changes, the overall income tax charge over the life of the policy will be the same, in most cases. This is because those who have a lower capital content now will pay a correspondingly lower amount of tax on cash–in or death.

Letter 1

Letter 2