Chancellor urged to abandon pension tax plans
Chancellor Gordon Brown is being urged to steer clear of proposed tax changes to life insurance policies in his next Budget, which would leave up to three million small savers out of pocket.
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In a letter to the chancellor, the Association of British Insurers called on Brown to abandon the pensions tax suggestions in the Ron Sandler report on savings taxation published in July 2002.
The report proposes the abolition of two features of the current tax regime for life insurance savings – qualifying policies and the 5% rule for life policy withdrawals.
The twin effects of putting the proposals into practice, according to the ABI, would be that up to 60,000 pensioners who are currently getting extra personal allowances would face higher tax bills, and saving would get more complicated.
Mary Francis, director general of the ABI said: ‘To tackle the pension crisis, the government needs to introduce more incentives to save, not remove those that already exist.
‘Ron Sandler’s proposals were intended to make the tax for life policies simpler, but in fact they would make savings more complicated and less rewarding.’
