Insurance experts have given their reaction to the UK Spring Budget 2017 delivered by UK Chancellor Philip Hammond and analysed what it will mean for the British insurance market.
An anti-forestalling measure on Insurance Premium Tax (IPT) has been announced as part of the UK Spring Budget 2017.
The measure, which will have effect on and after 8 March 2017, repeals the IPT anti-forestalling legislation, and introduces new legislation.
Stephen Brown, a partner at Mazars, said: “The anti-forestalling measures reinforces the Chancellor’s determination for IPT raises to be enforced, and most likely in time to continue. Although the industry had been requesting clarity in how to implement in some circumstances, it will now be necessary to carefully consider this new legislation and its impacts.”
Another insurance related item from the UK Spring Budget 2017 refers to rules will be introduced for insurers regarding the calculation of interest on an amortised cost basis to provide a practical alternative to fair value accounting
Commenting on the tax policy measure, Brown said: “There was some potential for insurers to be seen as net interest payers under the previous rules and thus have some of their interest expense restricted. The insurance specific rules outlined today look to better reflect the position for insurers so that they should be less likely to be subject to a restriction.”
No further increase to IPT
No further increase to Insurance Premium Tax (IPT) was announced in the Spring Budget.
The British Insurance Brokers’ Association (BIBA) has noted that IPT has been collected on insurance policies sold in the UK since 1994 when the rate was 2.5%.
This was raised gradually to a previous high of 6% in 2010. In 2015 the Chancellor revisited Insurance Premium Tax and, between then and now, the amount payable to Government coffers has doubled to a rate of 12% on most types of insurance from June 2017.
Channcellor Hammond said the government will provide an additional £2bn to councils in England over the next 3 years to spend on adult social care services.
The Chancellor said £1bn of this will be provided in 2017-18, ensuring councils can take immediate action to fund care packages for more people, support social care providers, and relieve pressure on the NHS locally.
Social care funding
Swiss Re Technical Manager, Ron Wheatcroft, said Swiss Re is pleased to see the announcement regarding additional funding for social care.
Wheatcroft said: “While the Government has developed a model intended to give most citizens a private pension income, funding has been insufficient to plug the long term care gap for far too long. The Government, industry and society as a whole have a responsibility to develop a sustainable solution which establishes the right balance between state and private provision and which does not penalise self-provision. “
He added: “We welcome the announcement that the Government will be publishing a Green Paper later this year. The Green Paper needs to take a rigorous approach to create a sustainable solution where the responsibilities of all are clear but cannot create further delay. For most people, there will be no single product which meets all their needs and we see a role for using savings alongside insurance and equity in property. Alongside this, the Government needs to press ahead with clear messages clarifying responsibilities and growing awareness."
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