Wednesday, November 14, 2007

Pre Budget Report and Insurance Companies

The pre budget report was a shocker no doubt! The new CGT rules with 18% taxation has received a huge amount of interest and critisism, but the reaction from insurance companies has been particularly strange.

There has been wide ranging criticism of IFA's who make a living from selling insurance company bonds. Is it because they have mythical tax status, additional allocation or is it because they pay advisers up to 7% commission, but the real issue is the insurance companies who push them so hard.

Now along comes the new chancellor and makes collective investments appear much more sensible, with a lower overall tax charge for many people and the ability to use your CGT allowance each year. What do the insurance companies do?

Well, I had one unnamed company in yesterday telling me how good bonds still are. Why I asked? Because you can get a higher allocation and the client doesn't pay up front, he replied.

What about the tax charges, I asked. Ok, maybe offshore bonds then, he said.

Clients and advisers should take care. Insurance bonds may have a limited use unless the insurance companies get the chancellor to make an early U-turn.

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