Up to a third of friendly societies could be forced to close if a Government proposal to drop qualifying policies goes ahead under its Sandler proposals.
Druids Sheffield Friendly Society chief executive Colin Paskell, who is also on the Association of Friendly Societies policy and public affairs committee, says around 20 out of 64 friendly societies are at risk of closing to new business if the plan goes ahead, as they could no longer sell their main product of tax-exempt savings policies.
The proposal was intended to be included in the last Budget but was withdrawn after lobbying by the friendlies. However, it is still under consideration by the Inland Revenue.
An argument advanced for the change is that the UK needs to abandon qualifying policies to be brought in line with the rest of the European Union under its state aid rules. However, Paskell says its legal advice shows that existing Tesps should not be affected.
Liverpool Victoria technical services manager Richard Nice says some changes may need to be made to comply with the directive but it is hopeful that friendlies will still be able to sell Tesps as they target people on lower incomes. He believes any changes are likely to come into effect in April 2005.
Paskell says: “We are only hoping it will go away. Although it was withdrawn, it is still under consideration so it could pop up again.”
ABI spokeswoman Emma Grainge says: “We are not aware of any initiatives to challenge the UK qualifying policy rules as state aid.”