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ABI says Sandler tax move will hit three million savers

The Treasury is running the risk of penalising up to three million

savers, many of whom are on modest incomes, if it implements tax

proposals recommended in the Sandler report, according to the ABI.

The trade body has written to Chancellor Gordon Brown arguing that

the Sandler rep-ort&#39s tax proposals would create further disincentive

for people to save.

In his report published last July, Ron Sandler calls for the

scrapping of the 5 per cent tax-free withdrawal on life bonds,

claiming that if the only reason pro-viders sell them is to take

advantage of tax breaks, they should not be sold in the first place.

The ABI warns that the move would reduce the personal tax allowances

for up to three million investors, particularly those over 65 with

incomes ranging from £16,500 to £21,000 who currently get

additional allowances.

It says many pensioners buy a bond with their retirement lump sum and

rely on the income generated.

But some providers say the ABI&#39s argument does not add up, as life

insurance bonds are a sophisticated product generally not suitable

for those on modest incomes.

ABI director general Mary Francis says: “To tackle the pension

crisis, the Government needs to introduce more incentives to save,

not remove those that already exist.

“Ron Sandler&#39s proposals were intended to make the tax for life

policies simpler but in fact they would make savings more complicated

and less rewarding.”

A Treasury spokesman says: “When Ron Sandler made these recommendations

in his report last July, we said any tax proposals would be

considered as part of the normal Budget process. Nothing has changed

and that remains the case.”

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