The reduction or removal of insurance premium tax (IPT) from health insurance products and tax breaks for employers supporting staff are top of advisers’ wish list ahead of the Budget today.
Reports suggest chancellor Rishi Sunak will announce £5.9bn for NHS England to tackle the backlog of patients waiting for tests and scans this afternoon.
However insurance premium tax and tax breaks were foremost for advisers Health & Protection spoke to ahead of the chancellor’s speech.
Insurance Premium Tax
“I would find it incredibly helpful for the UK public and our sector and our businesses if we could find a way to reduce or take away insurance premium tax (IPT) from health insurance products,” Isaac Feiner, founder and director at LifePoint Healthcare, told Health & Protection.
“Currently it sits at 12%. Given the fact that private medical insurance (PMI) serves an important function, one of which also helps to reduce the overburdened NHS, anyway we can find to reduce the cost for the purchasers is most welcomed. It would reduce premiums substantially and allow for more take up.”
Claire Ginnelly, executive director at Premier Choice Group, echoed that call.
“Now more than ever the advantages of people using the private sector where possible can be seen. If we removed or reduced IPT on this class of business it may well encourage more people to buy the product,” Ginnelly said.
“Also, to start looking at some sort of tax efficiency for people who are buying a protection policy. More than ever, the pandemic has demonstrated the need for this type of policy and we know the state cannot provide in the way we would all like to see.
“If we started to look at some sort of tax benefit for people who took responsibility for their own protection it could really make a difference.”
Andrew Green, director at Craigdallie Healthcare, maintains that PMI, especially in the UK should never have been subject to IPT in the first place.
“The public already funds the NHS through separate taxation and by taking out private medical insurance, in theory, people are removing the burden of treatment from the NHS and transferring it to the private sector. IPT has always been a tax against prudent members of the population and they are being taxed twice over.
“Quite simply, private medical insurance should be categorised as a long-term insurance and not be subject to IPT.”
Steve Ellis, head of employee benefit consulting at Propseris, called for a commitment not to increase IPT for a least five years. “They [government] have to acknowledge the cost and time savings PMI brings to the NHS at a time of crisis,” he added.
Encourage IP uptake
Alan Lakey, director at CI Expert, called on the chancellor to extend the tax-relief at source system that is used for pensions to income protection (IP).
“Most consumers are of the belief that the income is taxed, so reversing the current system would galvanise the take up of IP,” he added.
Steve Herbert, head of benefits strategy at Howden Employee Benefits & Wellbeing, agreed and urged the chancellor to find ways of encouraging greater uptake of income protection.
“In the recent response to the Health is Everyone’s Business consultation the government acknowledged the value of group income protection policies as not only a form of income protection in the event of illness, but also a useful tool to help employers return long-term absentees to the workplace,” Herbert said.
“This was a huge step forward for the industry, and it’s now to be hoped that the government can provide some small incentive to encourage many more employers to consider this option.
“The reality is that greater coverage of group income protection would help employees, employers, and indeed the nation’s finances and productivity in the long run.”
More support for business and families
Charlie Cousins, founder and director at Hooray Health & Protection, echoed this call for more support for businesses choosing to put their hands in their pocket to support their employees.
“Businesses have had a tough few years due to the pandemic but we are still seeing more and more of them putting their hands in their pockets to protect their people,” he said.
“I doubt we will see anything other than tax hikes but I would personally love to see the budget reward these businesses and incentivise others with additional tax breaks for supporting their workers.”
Naomi Greatorex, managing director of Heath Protection Solutions, added: “I think that people’s budgets are getting tighter and tighter as the cost of living soars. More and more people are going to struggle this winter with the cost of utilities, petrol and food all on the increase.
“This causes a huge issue for protection advice, as people will struggle to pay their everyday bills. Insurance can be seen as a luxury that they just can’t afford.
“I would like to see the chancellor address this by offering some tax saving options for people on lower incomes paying protection premiums out of their personal accounts. Some form of encouragement to plan for the future – particularly around family protection.”
Finally, Dave Middleton, executive chairman at the Association of Medical Insurers and Intermediaries (AMII), called on government to engage more with the private sector to help solve issues caused by the pandemic and other long standing problems.
“It makes perfect sense to encourage this by offering incentives for the public and corporates to purchase products from the private sector.
“We will wait to see whether this happens but I have heard very little to suggest this will be the case.”