Qualifying policy rules

This article looks at the main Qualifying Policy rules and conditions that must be met in order to retain the tax advantages associated with qualifying policies.

What is a 'Qualifying Policy'?

A Qualifying Policy is a life insurance policy whose terms meet a complex set of conditions. These include rules about the policy term, regularity and level of premiums paid and the minimum sum assured.

Originally a policy could not be qualifying unless it had been certified as such by HMRC, but this is no longer required for products launched from 6 April 2013. Where a policy does not meet the qualifying conditions it is commonly referred to as a ‘non­qualifying policy’.

It is tax­favoured, since it does not normally give rise to chargeable event gains.

What are the basic Qualifying Policy conditions?

  • Term of at least 10 years
  • Annual premium must be:

             - < 1/8 x total premiums payable
             - < 2 x premium payable in any other 12-month period
             - Payable annually or more frequently

  • From 6 April 2013 the maximum premium an individual can pay into qualifying policies to remain fully qualifying is £3,600 a year
  • Minimum sum assured test

- The sum assured must be no less than 75% of the premiums payable throughout the term.
- Where the life assured is age 55 or over the minimum sum assured is reduced by 2% for each complete year the life assured is aged over 55. For joint life policies, this age test applies to the elder life on joint life first death cases and the youngest life on last death cases.

- Where the policy is a whole of life cover, the minimum sum assured only needs to be calculated to age 75 of the life assured.

The following Old Mutual Wealth policies are qualifying policies but are not available to new business:

  • Endowments – Maximum Investment Plan (MIP), Skandia Endowment Plan (SEP), Capital Accumulation Plan (CAP)
  • Whole of Life – The Skandia Plan (TSP) , Permanent Protection Plan (PPP)

What creates a chargeable event on a Qualifying Policy?

If within 10 years, or three­quarters of the term if less, there is: An assignment (in full or in part) for consideration

Surrender of the policy (in full or in part)

If within 10 years, or three­quarters of the term if less, the policy has been converted to paid­up and there is subsequently at any time:

Assignment (in full or in part) for consideration

Surrender (full or part) Death of life assured Maturity


A new policy taken out on or after 6 April 2013 can only be a qualifying policy if the premiums paid are within the premium cap of £3,600 per year.

Where a pre 6 April 2013 qualifying policy is brought into the new rules, premiums paid in excess of the premium cap will be subject to chargeable event rules.

For details about changes that will bring a qualifying policy into the new rules please see our separate article.

What changes can be made to a Qualifying Policy?

Any change must be made on a plan anniversary and must be in accordance with the Terms and Conditions to retain the qualifying status of the policy.

If a change was made that was outside the Terms and Conditions it would almost certainly render the policy non-qualifying. Old Mutual Wealth will not allow any change that will do this.

The information provided in this article is not intended to offer advice.

It is based on Old Mutual Wealth's interpretation of the relevant law and is correct at the date shown at the top of this article. While we believe this interpretation to be correct, we cannot guarantee it. Old Mutual Wealth cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.

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