Following the Chancellor’s Budget Statement on Wednesday 27 October, the Association of British Insurers (ABI) comments on the measures within the Budget and Comprehensive Spending Review, related to the insurance and long-term savings industry:
On the freeze of Insurance Premium Tax (IPT), which the ABI called for in this Budget, James Dalton Director of General Insurance Policy said: Millions of insurance customers who do the responsible thing by taking out insurance will be pleased to see that the rate of Insurance Premium Tax has not been raised in this Budget. It will help ease the squeeze on households and firms’ tight budgets as they recover from the pandemic.”
On changes to the Net Pay Anomaly, which the ABI has long called for, Yvonne Braun, Director of Long-Term Savings and Protection Policy said: We welcome the positive step towards fixing the net pay anomaly through HMRC. The change will make a big difference to 1.2 million lower earners, three quarters of whom are women, as they will no longer lose out on pensions tax relief. This will improve the financial situation for lower earners.”
On the increase in the charge cap, Yvonne added: UK pension savers should be able to benefit from the greater return potential of investing in illiquid assets, such as infrastructure and renewable energy projects. Many of these assets are held in funds managed by private equity and venture capital firms, where performance charges are commonplace, and providers and pension schemes have historically shied away from investing in such funds because of concerns they would breach the 0.75% cap.
We welcome a review of the scope of the charge cap to give UK pension savers greater access to funds that invest in the green economy, whilst continuing to ensure pensions provide value for money for savers. We will study the detail of the consultation and work with Government to ensure a balance is struck between pension savers continuing to benefit from value for money charges whilst having access to the greater return potential of illiquid investments.”
On the tax impacts from the introduction of the IFRS 17 insurance accounting standard, Mervyn Skeet, Head of Taxation said: We welcome the announcement of regulations for insurance companies to spread the transitional impact of IFRS17 for tax purposes. The introduction of IFRS 17 from the start of 2023 will significantly change the way that insurance technical provisions are valued. It’s important that the change in accounting standard does not lead to inequitable tax outcomes. Allowing insurance groups to be able to spread the transitional impact still meets the objectives of Government by mitigating any significant short-term Exchequer risk whilst ensuring insurers don’t face potentially permanent tax disadvantages.”
Find out more about ABI’s Budget positions on their Budget Hub page.