Life - Articles - 3 key changes for UK Life and Health insurance market


Ron Wheatcroft, Technical Manager at Swiss Re, advocates for the UK Government to push through changes in three key areas – fewer tax charges on life assurance policies, occupational health initiatives to help people stay in the workplace and P11D charges on Employee Assistance Programmes (EAPs).

 1. Fewer charges for life insurance policies held in trust
 
 Currently, a discretionary trust that holds one or more pure protection life assurance policies faces possible tax charges – at entry, periodically through its life, and on closure.
 
 In our view, these charges need to go. They were designed with investments in mind and should have no place when pure protection policies are put into trust. The main reason for doing so is to ensure the policy proceeds are paid promptly at a time when loved ones need them most, not with any investment motives in mind.
 
 Removing the charges would make for a far simpler system, easing the burden of complexity around potential tax charges currently placed on trustees. We calculate that the annual cost of compliance with the Relevant Property Trust regime is approximately £3.1m. In contrast, the maximum amount of tax revenue generated is less than £1million and, in practice, may be no more than half of this figure.
 
 A simpler system would encourage employers to offer more benefits to workers. This could be particularly helpful in encouraging smaller employers, who make up the bulk of the economy, and may otherwise be put off by the prospect of a potential tax liability affecting their business.
 
 2. Mitigate economic inactivity through occupational health initiatives
 
 Some 520,000 more working age adults were economically inactive at the end of last year compared to pre-pandemic according to the Resolution Foundation. It’s a national problem because other developed countries have seen a rise in labour force participation.
 
 Many commentators talk of encouraging people who have chosen to retire early back to work – but sober analysis points to long-term sickness as a more likely root cause.
 
 If the Government is serious about improving economic activity, it needs to shift the focus onto keeping people in work and supporting them back into the workplace through vocational rehabilitation and occupational health initiatives, where it makes sense to do so.
 
 There are huge opportunities for the insurance industry and central authorities to collaborate on these initiatives. It's vital for society that we keep focused on this.
 
 3. Remove potential P11D charges for EAPs
 
 EAPs are cheap - starting at £2.25 per employee - and useful when it comes to supporting workers with their mental health and many other issues they face.
 
 We recommend the removal of all potential P11D charges for EAPs. This would involve no cost or loss to the Treasury - as EAPs currently operate in such a way that P11D charges are not incurred - but would enable employers to extend their support for mental health and productivity in the workplace via EAPs. This issue is even more pertinent with the "Great Resignation" and current cost-of-living issues having exacerbated mental health conditions and relationship difficulties for many.
  

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