With-profit funds get a breather from Government |
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Fri, 08 Apr 2005 01:00
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There’s some good news for with-profit fund holders! The proposed ‘stealth tax’ on with-profit funds in the Finance Bill has been turned down by the Government till the general election.
According to the head of taxation of the Association of British Insurers, Kate Webster, it was a relief that the proposal had been shelved since the government would now have sufficient time to think about any further changes in the tax system and consider opinions of other members and customers as well.
| The tax proposal was being called a ‘piggy bank raid’ on savings as it suggested an increase in the tax paid on surplus funds of with-profit investments, that would only dwindle customer’s gains on investments, pensions and other with-profit policies.
Surplus finds or free reserves were essentially extra assets owned by a company that could be invested wherever the company deemed suitable. Generally, they were used to offset restricted funds with sluggish performances.
The dropping of the proposal received an approval from the Norwich Union also which believed that raised taxes would hamper equity investments and limit investors’ prospects of long-term gains. Mike Urmston of Norwich Union added that had the proposal received a nod by the government, the tax paid by the company on free reserves would have increased three-fold, adding a huge £150 million extra to its tax bills.
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