Budget announcement confirms Treasury's intention to press ahead with stealth tax on with-profit funds

Article date: 17 March 2005

The Treasury confirmed yesterday its intention to press aheadwith unfair proposals to tax the funds supporting customers’with-profit savings policies, originally announced in the Decemberpre-Budget statement.

Norwich Union still fundamentally opposes the proposals whichwhen implemented will lead to an increase in the tax burden on thefree reserves supporting with-profits policyholders’funds.

One of the Chancellor’s themes from the Budget was aboutencouraging savings and restoring trust and confidence – thistax proposal is inconsistent with this.

Norwich Union is also concerned about the way these changes arebeing introduced - through secondary rather than primarylegislation. In effect secondary legislation enables the Treasuryto implement new tax laws in this area, bypassing the normalParliamentary review process.

Gary Withers, chief executive of Norwich Union Life, said: "Aswe said to the Treasury in December, this is simply a piggy bankraid on the funds that support our customers’ savingspolicies.

"One of the most effective ways to destroy confidence in savingsis to introduce arbitrary tax raids on savings vehicles. We willcontinue to oppose this stealth tax in the interests of protectingour customers. I would again urge the Treasury to review theirproposals in order to promote confidence in long term savings."

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Notes to editors:

  • Norwich Union is the UK's largest insurer. It is the UK'slargest provider of life, pensions and investment products and oneof the leading IFA providers. IFAs provide around 75% of thecompany's long-term savings business in the UK.
  • 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 newsreleases and a selection of images are available from Aviva'sinternet press centre at www.aviva.com/media.

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