Discussions are set to take place in the next few weeks between insurer CGNU and the Treasury over a...
Discussions are set to take place in the next few weeks between insurer CGNU and the Treasury over a proposal to introduce so-called cash-back annuities into the market before the end of the year.
A spokesman for the company says that timetable will only be kept if the government agrees that CGNU's reading of the rules and guidance in place concerning annuities is correct and will not necessitate a change to the law.
He says the idea behind a cash-back scheme is to combat the perception among consumers that they get a rough ride if they build up a substantial capital reserve but die soon after taking out an annuity, thereby leaving the capital to the insurance company.
Broadly speaking, the cash-back guarantee would enable any outstanding capital to be returned to the estate of the deceased, minus tax, enabling the money to be returned to the customer's heirs.
There would be a quid pro quo in the system, which might put stricter limits on the amount that could be drawn each year in return for the guarantee, and CGNU is aware that it would have to spend time communicating the limits of the new product to consumers.
"The key question is whether there are any legal or other obstacles to putting such schemes in place," the spokesman says.
"There is some very complicated guidance on annuities. We don't think there is a need to change the legislation and if the Treasury agrees we could bring it to the market by the end of this year. We think it overcomes one of the big objections to annuities, but does the government also believe the rules do not have to be changed?"
CGNU says it hopes to be able to put out a statement on the talks with the government sometime in the next few weeks.
However, it remains to be seen whether the product in its final guise is something that everybody wants.
Rising house prices are already posing problems for those seeking to avoid IHT, while adding a large sum of cash from a deceased's annuity pot would create a bonanza for the Inland Revenue.
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