The Individual Savings Account Regulations 1998

Qualifying investments for an insurance component

9.—(1) This regulation specifies the kind of investments (“qualifying investments for an insurance component”) which may be purchased, made or held under an insurance component.

(2) Qualifying investments for an insurance component to which paragraph (1) refers are, subject to paragraphs (4) to (7)—

(a) policies of life insurance which satisfy the conditions specified in paragraph (3), and

(b) cash deposited in accordance with regulation 6(4) to (6) which an account manager holds for the purpose of investment in investments which are qualifying investments for an insurance component.

(3) The conditions specified in this paragraph are that—

(a) the insurance is on the life of the account investor only;

(b) the terms and conditions of the policy provide—

(i) that the policy may only be owned or held as a qualifying investment for an insurance component of an account which satisfies the provisions of these Regulations;

(ii) that the policy shall automatically terminate if the policy ceases to be one, in respect of which the conditions in paragraph (i) are satisfied, or if it comes to the notice of the account manager, in any manner, that they were never satisfied;

(iii) for an express prohibition of any transfer of the policy, or the rights conferred by the policy or any share or interest in the policy or rights respectively, other than the cash proceeds from the termination of the policy or a partial surrender of the rights conferred by the policy, to the account investor; and

(iv) that the policy, the rights conferred by the policy and any share or interest in the policy or rights respectively, shall not be capable of assignment or (in Scotland) assignation, other than that they may be vested in the account investor’s personal representatives, and that the title to the policy may be transferred to a new account manager subject to and in accordance with regulations 15 and 21;

(c) the policy is a policy, the effecting and carrying out of which constitutes long term business of Class I or III, or would constitute long term business of either of those Classes if the Insurance Companies Act 1982(1) applied to the insurer for the time being responsible for the obligations under the policy;

(d) the policy is not—

(i) a contract to pay an annuity on human life, or

(ii) a personal portfolio bond within the meaning given by sub-section (7) of section 89 of the Finance Act 1998, as varied by Regulations made under that section, or

(iii) a contract, the effecting and carrying out of which constitutes “pension business” within the meaning given by section 431B(1) of the Taxes Act(2); and

(e) after the first payment in respect of a premium in relation to the policy has been made, there is no contractual obligation on any person to make any other such payment.

(4) A policy which is a qualifying investment for an insurance component falling within paragraph (2)(a) must not be connected with any other policy (“the linked policy”), held by the account investor or any other person, and for this purpose a policy is connected with another if—

(a) either policy was issued in respect of an insurance made with reference to the other, or with a view to enabling the other to be made on particular terms, or with a view to facilitating the making of the other on particular terms, and

(b) the terms on which the first-mentioned policy in this paragraph was issued would have been significantly less favourable to the holder if the linked policy had not been issued.

(5) References to “the linked policy” in paragraph (4) shall include a contract of insurance, and references to the issuing of the linked policy shall include the making of such a contract.

(6) No sum may at any time, at or after the making of the insurance, be lent to or at the direction of the account investor by or by arrangement with the insurer for the time being responsible for the obligations under the policy.

(7) Where at some time after the date on which the insurance is made, it comes to the notice of the account manager, in any manner, that the policy in question did not satisfy the conditions in paragraph (3)(b)(i) at that date, the policy shall nevertheless be treated, for the purposes of these Regulations, excepting paragraph (3)(b)(ii), as if it had satisfied those conditions at that date.

(1)

1982 c. 50.

(2)

Section 431B was inserted by paragraphs 2, 57(1) and 58 of Schedule 8 to the Finance Act 1995 (c. 4).