The Treasury and HMRC should consider relaxing their rules to allow tax free single insurance premium bond platform transfers, Cofunds says.
It says presently there is a major barrier to moving assets, as the only way to transfer a single premium insurance bond is to cash it and to take out a new contract with the new insurance company, generating tax charges.
As no cash is surrendered to the investor, Cofunds says this process should no longer be taxable, allowing moves to cheaper contracts with greater fund choices.
“Any eventual surrenders would use the cost of the original investment for calculation purposes,” Cofunds says.
“This would be at worst revenue neutral as the base cost of the original investment would be carried through.
“At best, lower costs and better choice of funds in the new contract should improve returns to the investor and, as surrender values rise, so should the government’s eventual tax take.”
Cofunds says it intends to work with the Tax Incentivised Savings Association to take proposals to Treasury and HMRC.
The call comes as the industry formulates its responses to the recent FSA platform discussion paper which many advisers have not fully understood Cofunds says.
In particular, it believes there is a lack of understanding about clause 5.11: “firms will need to consider any constraints on re-registering assets off the platform”.
It says ISA re-registration will cease to be an issue and is a minor problem compared to pensions and insurance bonds.
“While there is little or no difference between one platform ISA and another, huge differences remain between old life and pension products where billions of assets remain trapped in old, and sometimes expensive products with limited choice of investment vehicles,” Cofunds says.
“This is unfair to a considerable number of investors.”
Cofunds also calls for the FSA to examine the problems in the transfer of pension products.
“While some insurance companies provide a good service to their clients when a pension transfer is recommended by an adviser, others can take months to complete a pension transfer,” it says.
“We believe that if pension transfers cannot be completed in a reasonable time, this should be looked at as an issue in Treating Customers Fairly.”
Nucleus chief executive says re-registration reform is a major leap forward for the platform industry.
"It definitely is a step in the right direction, it gives advisers and clients control of their investments," he says.
"It will make adviser lives easier also, as they wont have to spend hours on the phone and spend hours of time re-registering clients."
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