Any Other Information I Need To Consider?
There are one or two factors that you need to consider before replacing your existing life insurance policy with a pension term policy.
Lifetime Pension Allowance
Firstly, the payout from the life insurance counts towards your total pension fund value. If the amount of payout given by the policy when you die takes your pension pot over the Lifetime Allowance of £1.5 million, you'll be charged a massive 55% tax.
Also, at the moment there are only a few life insurance providers who have pension term products. Although more and more are coming out with these products all the time, the premiums might not be as competitive at the moment as they might be once the product has had time to mature.
Life Insurance with Critical Illness
If your current policy includes critical illness, then you would not be able to replace this. Current rules state that critical illness cannot be included with these policies, although the life insurance companies are working on ways of packaging critical illness with pension life insurance in some way.
Joint Life Policies
Also, if you currently have a joint policy with your partner, this cannot become a pension term policy.
High Pension Contributions?
Although this probably doesn't affect too many people, those lucky enough to be able to contribute more than £215,000 per year into their pension (with pension contributions plus life insurance premiums combined) will not be able to take out a pension term policy.