Chancellor Alistair Darling is to hold further crisis meetings with the insurance industry to address the devastating effect that his capital gains tax changes will have on the insurance bond market.
Darling will meet with representatives from the Association of British Insurers in a bid to find a solution to problems caused by the new CGT regime that will be introduced in April.
Insurers say the CGT proposals will create an unlevel playing field in the savings market because income from insurance bonds would still be subject to income tax rates – 40 per cent for higher-rate payers – while income from other investment products such as unit trusts would be subject to the new 18 per cent rate.
In a speech to Parliament last week, Darling said: “This is a complex area and there are no clear answers but we are ready to hear further representations. The UK business environment remains one of the best in the world and I am determined to keep it that way.”
An ABI spokesman says: “The Treasury has accepted that the announcement on CGT created specific and adverse problems for savers and the savings industry. It is vital the Government now commits itself to resolving these as soon as possible.”
A Prudential spokesman says: “It is encouraging that the Government has recognised the need for further discussion with the industry but any discussion must be open and substantive.
“At present, consumers have a choice of long-term savings products. Government action must not discriminate between different types of saving. If it does, then the Government must explain to consumers why they prefer one form of savings over another.”