The Association of British Insurers (ABI) has slammed the government’s proposal of tax-relief abolition on life assurance premiums, saying the move will affect 1.5 million policyholders.
The director of financial regulation and tax at ABI Peter Vipond came down heavily on the government’s report published on Friday saying although the industry strongly supports the government’s move to simplify tax rules; it certainly doesn’t endorse the latest move.
“Insisting on abolition now will affect up to 1.5m people. They may have to pay more into their policies to maintain the level of benefits they have been expecting for the last 30 years. Many of these people will be retired and on low incomes”, said Mr. Vipond.
“It will require new legislation to prevent tax charges arising if policies are changed to reflect the loss of tax relief. It will also cost the industry, as a whole, millions of pounds to make this change”, he added.
The government offers relief to the policyholder at 12.5 percent on premium paid into qualifying life insurance policies taken out before 1984. In 1984 the government abolished the relief, but took a decision to keep it for current customers as it would naturally end with the death of policyholders.
“The people who get this tax relief started paying into qualifying policies taken out before 1984. The decision was made 30 years ago to let these policies run their course with this tax relief in place”, said Mr. Vipond.
“There is no logical reason to change this approach now as this tax relief will end naturally over time anyway without the government doing anything”, he added.