Another Nail In The Endowment Coffin
Gordon Brown has managed to bang another nail into the endowment coffin, by adding a new tax on with profits funds.
If this tax is implemented, it will reduce the sums of money available to pay bonuses on with-profits policies.
In other words the already useless endowment policies will be further undermined, and pay out even less money to the hapless holders of these policies.
Gary Withers, chief executive of Norwich Union Life, is reported to have said:
"As we said to the Treasury in December, this is simply a piggy bank raid on the funds that support our customers' savings policies. One of the most effective ways to destroy confidence in savings is to introduce arbitrary tax raids on savings vehicles. We will continue to oppose this stealth tax in the interests of protecting our customers. I would again urge the Treasury to review their proposals in order to promote confidence in long term savings."
Brown started his assault on Britain's savings, when he made a £5BN a year charge on pension funds in 1997.
The new tax will lead to an increase in the tax burden on the free reserves supporting with-profits policyholders' funds.
Peter Vipond, head of financial regulation and taxation at the ABI, is quoted as saying:
"We remain very concerned about the government's intentions in this area. This proposal would represent a significant extra charge on with-profits policyholders and contradict the government's desire to encourage more saving in Britain...We are currently in detailed discussions with the government and negotiations have not concluded. We are determined to do all we can to prevent a rise in taxation on these savings products..".
Up until now, life companies have paid a 20% tax on life fund surpluses and no tax at all on pension fund surpluses. The chancellor is proposing to impose a 30% tax on both these surpluses, which means that there will be less money available to pay bonuses to policyholders.
The bottom line is that we, endowment policy holders, are screwed!