Norwich Union, the UK’s largest insurer, today added its voice to the debate surrounding the 5% rule on bonds, ahead of the Budget on 9 April.
Norwich Union, the UK’s largest insurer, today added its voice to the debate surrounding the 5% rule on bonds, ahead of the Budget on 9 April.
Commenting, Willie Mowatt, Director of Product Development at Norwich Union Life, said: "Of course we need to wait to see what changes, if any, are actually made in the Budget. However, we would be very concerned if the Government were to announce that it was removing the 5% rule as an isolated measure. This would certainly contribute to a reduction in the attractiveness of life bonds, serving to redirect savings rather than attracting new business.
“In the current climate, where savers are cautious about investing in equities, the Government should not be removing valuable benefits from those who choose bonds as long term savings vehicles, many of whom are older investors.
“Rather than tinkering with elements of taxation we would favour sweeping changes to taxation across all savings products to create a level playing field where product choice is influenced by customer suitability, not tax breaks. We believe moving to a ‘gross roll up’ system, used commonly across Europe, would be the most appropriate vehicle and bring real simplicity to the savings environment.”
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Notes to editors
Background to ‘Gross Roll Up’
- Gross roll up is the term used to describe the process by which growth and income on an investment can grow without deduction of tax until the end of the term of the investment. In other words, being able to defer any tax charge on an investment until it is encashed.
Such investments can, therefore, be left to grow in a virtually tax- free environment and thus achieve the maximum return. All other things being equal, the investment should grow at a faster rate than a taxed investment.
- 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 are available on the Aviva plc website at www.aviva.com
- A selection of images are available from the Norwich Union Newscast site at www.newscast.co.uk
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