Norwich Union Life Insurance sees new stealth tax on pensions

New Government proposals amount to a "piggy bank raid" on investors, savers, and pension holders Norwich Union has said.

Last week Chancellor Gordon Brown revealed his Pre-Budget Report, which outlined the Government's economic policy ahead of the full Budget in spring.

Norwich Union has said certain measures, described as "the closure of a tax loophole", will lower returns to policy holders and people with investment, pension, and with-profit policies.

"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 the changes increase the amount of tax paid on the free reserves supporting with-profits policyholder funds.

"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," Mr Withers added.