"It is encouraging that the Government has recognised the importance and value of life insurance as one of the components for the new individual savings account" said Mark Boléat, Director General of the Association of British Insurers, in his initial response to the consultative document published today by the Government on the new individual savings account (ISA).

The Association will be carefully studying the consultative document and responding fully before end January. In particular, ABI will be looking at the implications of the proposed £1,000pa insurance limit within an ISA to determine whether this should be set at a higher figure and to consider the implications for existing life business and new business.

"The proposals for ISAs are likely to have a significant effect on the market place for financial services products over the next 18 months and a dramatic effect on the management of PEPs after April 1999 when people will have up to six months to decide on a single ISA manager for all of their existing PEP and TESSA business" added Mark Boléat. The Association will also be considering this aspect as part of its response to the consultative document.

Members of the Association share the Government's aim of raising levels of long-term savings and extending the take-up of savings to those with more modest incomes. Life insurance is the most popular form of planned long-term saving in the UK and the Association believes that this was one of the main reasons for the decision to include life insurance as a key component of the ISA. "It is a very welcome development for life insurance companies but as well as presenting a major opportunity for the industry it will present major challenges" said Mark Boléat.

Notes

1. "The new Individual Savings Account" was issued by the Inland Revenue on 2 December as a consultative document. ABI will be responding in detail before the end January 1998 deadline.



2. In its earlier submission to the Inland Revenue on Individual Savings Accounts the Association had called for a strategic and coherent approach to long-term savings and a re-addressing of the question of how best to use tax credits to encourage uptake. ABI pointed out that life insurance is the most popular form of planned long-term saving in the UK. It offers a good blend of simplicity, security and investment performance, while still being flexible enough to appeal to a wide range of individuals with different needs. The industry has experience in selling to those on lower incomes as well as the better off. For all these reasons it was suggested life insurance should be one of the types of saving which qualify for ISA treatment.





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