Government should maintain the '5% rule' on bonds - Norwich Union

Article date: 21 March 2003

Norwich Union, the UK’s largest insurer, today added itsvoice to the debate surrounding the 5% rule on bonds, ahead of theBudget on 9 April.

Commenting, Willie Mowatt, Director of Product Development atNorwich Union Life, said: "Of course we need to wait to see whatchanges, if any, are actually made in the Budget. However, we wouldbe very concerned if the Government were to announce that it wasremoving the 5% rule as an isolated measure. This would certainlycontribute to a reduction in the attractiveness of life bonds,serving to redirect savings rather than attracting newbusiness.

“In the current climate, where savers are cautious aboutinvesting in equities, the Government should not be removingvaluable benefits from those who choose bonds as long term savingsvehicles, many of whom are older investors.

“Rather than tinkering with elements of taxation we wouldfavour sweeping changes to taxation across all savings products tocreate a level playing field where product choice is influenced bycustomer 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 tothe savings environment.”


Notes to editors

Background to ‘Gross Roll Up’

  • Gross roll up is the term used to describe the process bywhich growth and income on an investment can grow withoutdeduction of tax until the end of the term of the investment. Inother words, being able to defer any tax charge on an investmentuntil it is encashed.

    Such investments can, therefore, be left to grow in avirtually tax- free environment and thus achieve the maximumreturn. All other things being equal, the investment should growat a faster rate than a taxed investment.

  • Norwich Union is the UK’s largest insurer. It is aleading provider of life, pensions and investment products and oneof the leading IFA providers. IFAs provide around 75% of thecompany’s long-term savings business.
  • Norwich Union has strategic alliances with building societiesand other leading UK brand names including Tesco Personal Financeand The Royal Bank of Scotland Group.
  • Norwich Union’s news releases are available on the Avivaplc website at
  • A selection of images are available from the Norwich UnionNewscast site at

Press office contacts:
James Evans - 08703 66 68 78 / 07790 487105
Ian Beggs - 08703 66 68 71 / 07790 487 533
Louise Goffee - 08703 66 68 70 / 0781

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