IPTM7810 | Personal portfolio bonds (PPB): policies made before 17 March 1998: transitional period: policyholder resident in UK on 17 March 1998

A policy that was taken out before 17 March 1998, and allows selection of assets by the policyholder to determine the benefits under the policy, was likely to satisfy the criteria to be a PPB at 17 March 1998. This is because the terms of the policy were unlikely to restrict selection only to the permitted categories listed in IPTM7795, since the policy will have been written before the PPB legislation was introduced.

Transitional provision and condition for it to apply

A transitional period is allowed by the PPB legislation for policyholders and insurers to vary the terms of a policy taken out before 17 March 1998 so that only permitted property or indices listed in IPTM7795 can be selected following the introduction of the legislation.

This transitional provision only applies if at no time since 5 April 1994 have benefits under the policy actually been determined by reference to property or an index other than in the permitted categories listed in IPTM7795, even though the terms of the policy provided for this possibility.

The transitional period where the policyholder was resident in the UK on 17 March 1998 is described below. The position for policyholders returning to become resident in the UK after 17 March 1998 is described in IPTM7815.

Transitional period: policyholder resident in UK on 17 March 1998

If the policyholder was resident in the UK on 17 March 1998, the policyholder and insurer had until the end of the first insurance year to begin on or after 6 April 1999 to make the necessary variation to the policy.

For instance, if the policy was taken out on 5 September 1993, the policyholder had until 4 September 2000 to agree with the insurer to vary the policy to limit the scope of the property that may be selected to the categories listed in IPTM7795.

In many cases, insurers will have notified policyholders during 1999 and 2000 to inform them that their pre-17 March 1998 policies would be PPBs unless the policies were varied to restrict the property and indices that may be selected by the policyholder. Provided that the policyholder agreed to the necessary variation before the time limit, normally by way of a simple endorsement to the policy, such a policy is unlikely to be a PPB.