Wholesale and outsourcing protection specialist, Direct Life, has welcomed life insurance and permanent health insurance’s continued exemption from Insurance Premium Tax – after UK Chancellor George Osborne announced in his summer Budget that the tax will be hiked.
Neil McCarthy, director of Direct Life, which is owned by Cardif Pinnacle Insurance Holdings and part of the BNP Paribas banking group, made the comment following the UK’s 2015 summer Budget on 8 July.
In the budget, Chancellor Osborne said from 1 November 2015, the standard rate of Insurance Premium Tax will be increased from 6%to 9.5%.
He said the Insurance Premium Tax standard rate will remain lower than that of many other EU member states, and will, for example, continue to be much lower than the 19% tax rate that applies in Germany.
In the budget, Chancellor Osborne said the amount people with an income of more than £150,000 can pay tax-free into a pension will be reduced.
Most people in the UK can currently contribute up to £40,000 a year to their pension tax-free.
From April 2016, UK Chancellor George Osborne said this amount will be reduced for individuals with incomes of over £150,000, including pension contributions.
Chancellor Osborne added that the government is consulting on whether there is a case for reforming pensions tax relief to strengthen incentives to save, offering savers greater simplicity and transparency, or whether it would be best to keep the current system.
He said the government is interested in views on the various options that have been suggested for how the system could be reformed.
These range from a fundamental reform of the system (for example moving to a system which is "Taxed-Exempt-Exempt" like ISAs and providing a government top-up on pension contributions) to less radical changes (such as retaining the current system and altering the lifetime and annual allowances), as well as options in between.
Commenting on the Chancellor’s announcement of a consultation to the pensions tax regime, Tony Stenning, Head of UK Retail, at BlackRock, said: "As people take more individual responsibility for their retirement it’s vital the system is simple and transparent.
"More than half of Britons surveyed (52% as part of the BlackRock Investor Pulse survey, said they would be encouraged to save more if the government provided a stable pensions system and one in five (20%) supported the introduction of a Savings Minister tasked with protecting the interests of savers.
"Furthermore, a third (35%) would go one step further and advocate the creation of a simple, tax efficient pot that all their savings, investments and pensions."