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ABI leads orphan tax protest

The ABI is lobbying the Government over plans announced in the Budget to tax orphan assets used by life offices to help support life offices’ with-profits funds.

The Government originally flagged up this proposal in its pre-Budget report but vowed to defer any decision to a later date.

Norwich Union chief actuary Mike Urmston says the company is particularly aggrieved that the Government is aiming to go ahead without industry consultation.

Urmston says if the Government thinks this is a victimless tax raid, it is wrong because these assets are used to support with-profits funds and taxing them would cost NU around 140m on its 2bn-3bn surplus assets over 10 years. This, he adds, would reduce the investment freedoms of the fund and result in lower equity exposure for with-profits portfolios.

Both NU and the ABI say the measures fly in the face of the Government’s longer-term goal of encouraging people to save.

Urmston says: “We thought this would go into consultation but it is very worrying the Government is giving itself powers to make regulations without referring back to Parliament or without the voice of the customer being heard.”

ABI director of financial regulation and taxation Peter Vipond says: “We remain very concerned about the Government’s intentions in this area. We are determined to do all that we can to prevent a rise in taxation on these savings products.”


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