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With-profits schemes hit by new stealth tax, Norwich Union reveals

07 December 2004
Norwich Union has said that proposals contained within the Chancellor's Pre-Budget report could hit with-profit policies.

One proposal, branded "the closure of a tax loophole" in the report, will increase tax on the free reserves supporting with-profits policyholder funds.

"This is simply a piggy bank raid on the funds which support our customers' savings policies - there is no other description for it," said Gary Withers, chief executive of Norwich Union Life.

"This proposal seems completely inappropriate at a time when we are trying to rebuild trust in the savings industry and get people to save. It is very difficult to see how this is consistent with the principle of treating customers fairly which is actively promoted by the FSA [Financial Services Authority] and Government."

Norwich Union explains that as things stand the changes will triple the tax it pays on free reserves for its life and pensions with-profits policies.

"While it may look like a tax on the company, it is essentially a policyholder tax," Mr Withers stated.

"There has been no warning of this proposal whatsoever and we are calling on the Treasury to scrap this latest proposal."

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