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Brown announces some good news for insurance

Date: Fri, 11 Apr 03 Analysis

The Budget 2003 might have contained surprisingly good news for insurance customers, according to the Association of British Insurers.

In its response to the Chancellor's annual Budget, delivered on Wednesday, the ABI commented, 'The Government has very sensibly decided to re-examine Ron Sandler's recommendation on qualifying policies and the tax treatment of the 5 per cent withdrawal in the context of a wider look at the taxation of savings.'

'The ABI has emphasised to the Chancellor the dangers of making piecemeal changes to the tax system without ensuring that there is a genuinely level playing field in tax terms for all kinds of saving. We would, for example, want to see the full ISA limit applied to insurance as well as to mutual funds.'

A review of the current taxation on insurance has been something the ABI has campaigned for and could signal a levelling of tax on investments.

The ABI has also expressed relief that the Chancellor appears to have dropped plans to introduce tax of life insurance and savings policies saying, 'Today's announcement will reassure many thousands of pensioners and savers whose income would have been at risk. We are pleased that the Government has taken this view.'

However the insurers' body insisted that the Chancellor could still go further, adding, 'It is disappointing that the Government has not yet increased incentives for savers more generally. The ABI has put forward a number of concrete proposals in our response to the Pensions Green Paper. It is vital that measures are introduced to help close Britain's savings gap.'

There has been some criticism levelled at Gordon Brown for introducing savings incentives for children and the elderly, but nothing for those adults in employment.

On the decision to freeze the rate of Insurance Premium Tax the ABI welcomed the decision to freeze the tax, while also arguing that there is a case to remove it, calling it 'a tax on prudent behaviour.'

Also welcoming efforts by the Chancellor to reduce barriers to competition in financial services within the EU, the trade organisation stated, 'The ABI has been lobbying hard to create a more open market for insurance and financial services within the EU. For this, it is important that there is free and fair competition between companies, wherever they are based and whoever owns them. European consumers can only benefit from greater and fairer competition in financial services.'

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