Our view

Dec 04 - UK: Pre-Budget tax proposals treat policyholders unfairly

New stealth tax on with-profit funds must be scrapped

Norwich Union, the UK’s largest insurer, is calling on The Treasury to scrap the latest stealth tax proposals, announced in the pre-Budget statement on 2 December. These proposals will impact on customers’ with-profits savings and have been described as "the closure of a tax loophole." The consequence of these proposals is potentially lower returns to policyholders in with-profit pension, investment and endowment policies.

The detailed implication of these new proposals is an increase in the amount of tax that has to be paid on the free reserves supporting with-profits policyholder funds. This could limit the freedom of these funds to invest in equities, which are likely to offer better long-term investment prospects.

Gary Withers, chief executive of Norwich Union Life, said: "This is simply a piggy bank raid on the funds which support our customers savings policies – there is no other description for it. While this may look like a tax on the company, it is essentially a policyholder tax.

"This proposal seems completely inappropriate at a time when we are trying to rebuild trust in the savings industry and get people to save. It is very difficult to see how this is consistent with the principle of treating customers fairly which is actively promoted by the FSA and Government.

"There has been no warning of this proposal whatsoever and we are calling on the Treasury to scrap this latest proposal."

-ends-

Press office contacts:
Louise Soulsby 01904 452617 / 07800 699526

Notes to editors:

• Norwich Union is the UK’s largest insurer. It is a leading provider of life, pensions and investment products and one of the leading IFA providers. IFAs provide around 75% of the company’s long-term savings business
• Norwich Union has strategic alliances with building societies and other leading UK brand names including Tesco Personal Finance and The Royal Bank of Scotland Group
• Norwich Union’s news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.