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Govt says scrapping stamp duty on UK funds will boost pension pots by 1.3%

The Government estimates its abolition of the schedule 19 stamp duty reserve tax on investment funds could boost retirement pots by 1.3 per cent.

In this year’s Budget Chancellor George Osborne said the 0.5 per cent special stamp duty reserve tax, which applies to collective investment schemes when investors sell units that are then re-issued within a two-week period, will be scrapped on 1 April 2014.

The Government says the move will save the asset management industry £145m in the 2014/15 tax year, £145m in 2015/16, £150m in 2016/17 and £160m in 2017/18.

Asset managers have consistently flagged schedule 19 as one of the main obstacles to establishing new funds in the UK and one reason the country is increasingly losing business to international rivals such as Dublin and Luxembourg.

Labour has attacked the move as an attempt to “subsidise the richest” and says it showed the wrong priorities. It has promised to reinstate the tax if elected in 2015.

Conservative MP George Freeman asked the Treasury what calculation it had done on the impact of the tax in a written parliamentary question.

Treasury financial secretary Sajid Javid says the Government actuary’s department had made an independent assessment of the tax.

He says: “They calculate that a typical 22-year-old currently earning average weekly earnings and investing the equivalent of 10 per cent of gross income each year over a 45 year period would see a fund value £11,200 greater at retirement as a result of these changes.

“This is equivalent to approximately a 1.3 per cent uplift in their total fund at retirement. In current money terms that is equivalent to an additional £4,600.” 

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Not really a life changing improvement.

    How much would reinstating the 10% tax credit on dividends boost people’s pensions by?

  2. Yeah, right, as if a 1.3% boost to a pension pot decades hence is really going to turn round public distrust of an antipathy towards locking away money into a pension plan. It’s such a pitfully minute concession as to be almost laughable. Or is this the Conservatives’ idea of honouring its pre-election manifesto pledge to undo all the damage inflicted by 25 years of prejudicial government meddling with the pensions framework and “reigniting the UK’s savings culture”?

    Apart from restoring the 10% tax credit reclaim (as mentioned above), how about restoring Contributions Insurance, how about restoring life insurance as an integral element of a retirement savings plan (subject to a minimum level of ongoing contributions towards retirement benefits), how about addressing the annuity rates trap at retirement, how about removing the punitive 55% death tax on unspent funds, how about allowing unspent funds to pass down tax free into PP’s for the next generation. How about admitting that the administrative burden (and fast approaching log-jam) of AE schemes are going to achieve very little beyond millions of people accumulating relatively piddly pension pots (PPP’s) locked into the same old annuity rates trap? How about meaningful measures to reverse the relentlesly destruction of public appetite for anything to do with pension saving? How about some truth in politics? How we wish.

    And as for Labour ~ they say they’ll reinstate even this trivial concession if they’re re-elected in 2015. Not with my vote they won’t be.

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