Income Protection Schemes

All insurance policies that result in an annuity or lump sum pay-out and that are aimed at income or capital protection in respect of life, disability and severe illness events, will from 1st March 2015 conform to the principle of ‘Premiums not deductible, Pay-out not taxed’.

For employers this will mean that:

1. Employer-paid premiums will result in a fringe benefit of the same value being raised on the employee.
2. If the fringe benefit is raised on the employee, the employer-paid premiums will be deductible in full in the hands of the employer.

For employees this will mean that:

1. The above fringe benefit will not be deemed to be a payment made by the employee.
2. The premium (whether paid by the employer or by the employee) will not be deductible.
3. All pay-outs on life, disability and severe illness policies will be tax-free, irrespective of whether the pay-out takes the form of a lump sum or an annuity. The transitional arrangements for the starting date of March 2015 for current policyholders are:
   1. Premiums will no longer be deductible from March 2015 onwards even for pre-existing plans.
   2. All policy pay-outs after 1st March 2015 will be tax-free even if premiums were deducted prior to 1st March 2015.