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Transatlantic tax deal for insured pension funds

Insured pension funds will no longer be taxed on dividend income from US equity holdings after the Inland Revenue struck a deal with the US authorities.

This means that most investment funds which insurance companies manage on behalf of pension trustees will receive dividends on US investments free of taxation. With-profits funds will still have to pay the tax but unit-linked pension policies and investments in Sipps will no longer be hit.

The withholding tax levied by the US government on dividends from US-listed companies was 15 per cent. The ABI has been lobbying the Govern-ment for several years over the tax. The UK Govern-ment continues to levy a 10 per cent tax on UK equity dividends earned by pension funds.

ABI director of financial regulation and taxation Peter Vipond says: “It will put most insured pensions on a par with stand-alone schemes in respect of US dividends and provide incentives to keep this growing business onshore in the UK. The third-party management of pension funds by insurance com- panies, including the ins- urance subsidiaries of fund managers is a growing business and a real area of success for the insurance industry.”

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