ABI chairman and Scottish Widows chief executive Archie Kane has made a last ditch attempt to persuade the Government to revise the planned changes to capital gains tax rules by writing an open letter.
In the letter, published in the Financial Times today, Kane argues that the CGT changes pose “a serious threat to long-term savers and the long-term savings industry” in their current form.
Kane urges the Chancellor Alastair Darling to act now to protect savers and the savings industry and says he is pressing for a meeting with Darling to discuss the issue in more detail.
The insurance industry has been lobbying the Government to revise proposals to introduce a flat rate of CGT because it will significantly skew the marketplace.
Investors taking out investment bonds will have a 40 per cent tax rate applied if they are higher rate tax-payers.
By contrast, investors in unit trusts and open-ended investment companies will only be subject to a CGT rate of 18 per cent which means they will be more attractive.
Kane says: “The impact on the savings industry cannot be underestimated as, once again, savers’ plans for the future are disrupted by government changes. This unfortunate tilting of the playing field away from a popular long-term savings product is another example of the unintended consequences of CGT simplification.
“However, if left unchanged it is bound to look like a move against the concept of long-term savings. There is also a danger that foreign investment in UK financial services will be adversely affected by disadvantaging the bond product market.”