LAM17070 | BLAGAB or eligible PHI business - societies with no provision for assuring gross sums exceeding £2,000 or granting annuities of more than £416 per annum: FA12/S156

Where a friendly society has no provision in its rules to carry on BLAGAB or eligible PHI business, or other long-term business consisting of

(a) the assurance of gross sums exceeding £2,000, or

(b) the granting of annuities of amounts exceeding £416

contracts made by the society before 14 March 1984 will not be non-qualifying (i.e. they will be exempt) as per FA12/S156(1) and (2). This is referred to as “the £2,000/£416 test” below.

These policies will continue to be exempt even if the society later amends its rules so that it no longer meets the £2,000/£416 test (FA12/S156(3)).

Friendly societies can acquire business from other societies by way of transfer of engagements or amalgamation. The legislation ensures continuity of treatment for acquired business:

• If a friendly society which does not meet the £2,000/£416 test amends its rules so as to meet it, any existing policies which were not exempt prior to the change will remain not exempt (FA12/S156(4)).

• If a friendly society which does not meet the £2,000/£416 test acquires business from another friendly society which relates to contracts predating the acquisition and which were exempt at the date of acquisition, that business will continue to be exempt (FA12/S156(5)).

• If a friendly society which does meet the £2,000/£416 test acquires business from another friendly society which relates to contracts predating the acquisition and which were not exempt at the date of acquisition, that business will remain not exempt (FA12/S156(6)).