Today’s Pre-Budget Report includes a number of proposals based on discussions with the industry over the past year.  They include:

 Alternatively Secured Pensions

The Government has announced changes to the tax regime for ASPs to ensure that pension saving is used to provide an income in retirement.  First is a requirement to withdraw a minimum annual level of income from an ASP fund.  If the minimum income is not withdrawn then a scheme sanction charge will apply to the difference between the actual income drawn and the minimum amount. Secondly, the facility to pass on funds on death as a transfer lump sum death benefit will be removed from the authorised payment rules.

Chris Kenny, the ABI’s Director of Life and Pensions, said:

 “The decision to retain ASPs, in a modified form, is a good one.  We argued that ASPs are a useful, but niche, product, and the Government has listened to us.  The modifications announced today will ensure that ASPs fulfil the purpose for which they were intended.”

Annuities

The Pre-Budget Report document on the annuities market is an important statement. 

 Helen McCarthy, the ABI’s Assistant Director, Pensions and Savings Development, said:

 “Annuities are often poorly understood by consumers. As the membership of defined contribution pensions grows, it is increasingly important to improve both understanding and the way the market works. We have been working with the FSA on this and look forward to working with the Government and others going forward.”

 ISAs

Peter Vipond, the ABI’s Director of Financial Regulation and Taxation, said:

“We welcome the Government’s recent improvements to the ISA, and also the statement in the PBR that it is the ‘primary savings vehicle’ outside of pensions.  The next step, if the Government wants to promote savings, is a real increase in the ISA limit, something they could do in the next Budget.”

Tax treatment of General Insurers’ Reserves

The Government proposes to simplify the tax treatment of general insurers’ reserves. 

 Peter Vipond, the ABI’s Director of Financial Regulation and Taxation, said:

 “Whilst we support the reduction in the administrative burden, this reduces the flexibility for insurers to manage their tax losses.  We will continue to discuss this with the Government.”

Pensions Term Assurance

Peter Vipond, the ABI’s Director of Financial Regulation and Taxation, said:

 “Our customers have bought products in good faith following the introduction of the new pension rules in April this year; and any changes therefore should only apply to policies sold after the effective date.  We also ask the Government to proceed quickly, but fairly, in reaching a conclusion to limit uncertainty.  We look forward to working closely with the Government on this.”

Simplification and Modernisation of the Life insurance tax rules

The Government proposes to introduce a number of measures in the coming year to simplify and modify the life insurance tax regime.

 Peter Vipond, the ABI’s Director of Financial Regulation and Taxation, said:

 “We broadly support these proposals, which follow extensive consultation with the industry.  However, we will need to work with the Government on the detail.”

 - ENDS -

Notes

Notes for Editors

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2.            The ABI is the trade association for Britain’s insurance industry. Its nearly 400 member companies provide over 94% of the insurance business in the UK. It represents insurance companies to the Government, and to the regulatory and other agencies, and is an influential voice on public policy and financial services issues. ABI member companies hold up to a sixth of all investments traded on the London Stock Exchange, on behalf of millions of pensioners and savers.

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