The Association of British Insurers (ABI) says total ISA limits should be increased, stamp duty on shares removed and UK corporate tax rates lowered in a bid to improve financial security and savings levels in the UK.
The proposals, which also include ensuring Personal Accounts do not undermine existing pension provision, form part of a raft of measures the ABI says the Government should implement in its next Pre-Budget Report (PBR).
Its suggestions have been collated in a paper - 'Safeguarding the future: protecting consumers and promoting UK business'
Reduced savings and increased debt, limited Government resources and coping with living longer post retirement are the issues the ABI says have sparked it into action.
It says insurance “is a business” and “can only succeed if shareholders continue to see value in investing capital”.
It points to what it calls “major disincentives” to long-term saving including means tested state benefits and the cost of stamp duty on pension fund transactions. It calls them “Government-led distortions to consumers’ financial decisions”.
“The Government for its part can empower individuals to take responsibility for their longer-term financial needs,” the report adds.
“We need an open debate about what the state can provide, and how private sector provision could complement the state by providing protection beyond the basic state provision.”
The ABI says the Government must encourage saving through longer-term investments, not just short-term cash deposits, by increasing the total ISA limits to £9,600 a year but with no more than £3,600 in cash.
It also says the Government must work in partnership with the industry to improve financial literacy in the UK via Money Guidance and generic advice.
Means-testing systems must be reformed, it says, to reduce the impact on the value of savings for the long term, and stamp duty removed from shares, pointing out it “erodes value for consumers holding pensions and savings investing in equity-based products”.
The ABI says the Government needs to re-evaluate the value of the insurance industry to the UK economy. It says the industry invests heavily in the UK but remains the third highest payer of corporation tax.
It adds the Government should not underestimate what it calls the “real risk” that future investment will go overseas if the tax regime is uncompetitive, ever-changing or excessively policed.
“[The Government must limit] regulation to when it is necessary to protect consumers from harm, so allowing the industry to retain the flexibility to develop products and manage risks without excessive and expensive Government intervention,” the report reads.
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