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Deputy BoE governor warns on oil price correction

The new deputy governor of the Bank of England has warned of the economic impact of a correction in oil prices.

In an oral evidence session to mark his appointment with the Treasury Select Committee yesterday, Professor Charles Bean was quizzed by MPs on whether a correction in oil prices could spark a future credit crunch.

Treasury Select Committee member and Labour MP for Carmarthen West & South Pembrokeshire Nick Ainger said: “Some have predicted that if the market was properly regulated, oil prices could fall 50 per cent to $70 a barrel in 30 days. Would you be concerned about the 71 per cent of futures which are owned by investment banks, pension funds and hedge funds, that it could actually create another global credit crunch because of the damage that they would do to themselves because of their over-exposure?”

Professor Charles Bean said: “I actually think there is good reason to believe in the long term for prices to settle lower than they are now – but it may take us a while to get there as there may be a period where they continue to rise.”

He added: “For some institutions it could generate a not insignificant loss and as with all asset price corrections it may have macro economic implications.”

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Lasting relationship

That meant, broadly, that gains made under UK and offshore investment life insurance contracts will be taxed as non-trading credits under the loan rela-tionship rules. The original position has changed in a number of important areas. Perhaps the most important is that before the changes, all life policies effected by a company before March 14, 1989 (and which had not been subsequently enhanced) were outside the chargeable events legislation and would, in effect, produce a tax-free return for the firm.

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Offshore insurance bonds offer a number of potential tax advantages. These include the fact that capital growth within offshore bonds is virtually free of tax, policyholders can switch between funds within bonds without triggering a capital gains tax liability, bonds can be assigned to lower-rate taxpayers and the policyholder can decide when to cash them in and thus when they face their tax liability.

What are the key changes to transform pensions?

By Fiona Tait, pensions specialist In her final article for Royal London, Fiona Tait reviews key changes she believes have transformed, or will transform, pensions. In my 12 years with Royal London I have been paid to review, study and explain the numerous changes to pension legislation which have transformed our industry in that time. This is […]

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