Insurer responses to PHI tax changes

Earlier this month we reminded you of the upcoming tax changes and their impact on income disability premiums and benefits. All of our insurers have now formulated their responses to these changes and below we summarise these for you.

  • Sanlam have introduced a tax modified benefit scale in addition to the old scaled and flat benefits that you can still get from us. All three of these benefit options will be limited to “100% of the member’s average net monthly income before disability”. This limitation is applicable with effect from 01 June 2015.
  • Old Mutual have not added further PHI benefit options but have introduced a benefit limit that is equal to “a person’s total post-tax cost to company”. This will apply from 01 March 2015.
  • Capital Alliance have added a new scale in addition to the flat benefit that we offer of theirs. Both options carry a limit stating that “individual members cannot be insured for more than their net of tax income”. Should a client wish to remain on the old flat benefit then an additional limit has been placed that states that “the risk salary for PHI must be lower than 91% of remuneration”. These changes will only come into effect at the next review of each scheme.
  • Hollard have introduced a new scale as well but at this stage have not introduced a new limit to their benefit options. There will be no effect on existing benefits, besides the tax treatment obviously, until a group moves onto the new scale.

A comparison of the PHI benefit options available can be found here PHI comparisons February 2015. In addition to the new scales this document also shows the limitations and maximums applicable to each insurer’s options.

We will also be sending out emails to brokers listing their schemes that have PHI through us, noting which insurer each is with and providing that insurers communication to be handed on to clients. This should reach you before the end of the week.

Yours sincerely,

The TSA Team

You’ll find all back issues of TSA Connect by visiting our blog and you can do that by clicking here. All information provided in TSA Connect newsletters is intended to inform and explain, but please remember to always check the current terms on policies when considering options and advising clients.

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