BENEFITS TO THE COMMUNITY

Life assurance can encourage long term saving. The money paid in premiums is not like deposits in a bank or building society which can be withdrawn quickly. Recognising this, in the past governments have encouraged saving through life assurance by giving a degree of tax relief on premiums paid. Relief on new contracts was abolished in 1984 although policies issued before that time continue to benefit from tax relief. These are often referred to as 'qualifying' policies, but this term also includes newer policies whose proceeds are not regarded as income for the purposes of calculating income tax, even though the premiums do not attract tax relief. Currently a qualifying policy has to ensure that the amount of the annual premium does not exceed one seventh of the of the return on survival and/or one-sixth of the policyholder's annual income. As the chapter on the future taxation of life policies shows the position is liable to change significantly in the future.

As shown previously most of the premiums paid are not needed immediately to pay claims or expenses and are therefore invested. These investments, of huge amounts of money, help to expand and modernise industry and commerce, assist governments when they want to borrow to finance national projects of all kinds, and all help to provide finance for the building of shops, offices, factories and homes. The activity, financed by the invested money, creates jobs and salaries, which in turn add to the demand for goods of all kinds. In general the money invested from life assurance plays a large part in maintaining the prosperity of the country.