The Association of British Insurers (ABI) has detailed a five-point plan in a new budget submission setting out how the insurance industry can work constructively with the UK government.

It says freezing the rate of Insurance Premium Tax, maintaining adequate investment in flood defence infrastructure and simplifying pensions tax relief to encourage greater savings would lay good foundations for the UK’s recovery from COVID, and enable the insurance sector to play its fullest part in support.

ABI Director General Huw Evans says “determined reform” of financial services regulation inherited from the EU could unlock nearly a trillion pounds over 15 years.

“It is critical that this potential is not diluted by increases in corporate taxes, either as a result of global agreements or domestic drivers,” Mr Evans said.

The UK Government has a chance to “grasp the nettle of reform,” the submission says, and create a complementary tax and regulatory framework that drives competitiveness, attracts overseas capital and promotes the UK as a place to invest, innovate and inspire.

“The implementation of new global tax rules must not lead to UK insurers incurring a multi-hundred-million-pound tax bill in a year simply because of differences in the timing of the recognition of income and expense under financial accounting and tax accounting rules,” it said.

The ABI says the Insurance Premium Tax (IPT) is a “regressive stealth tax” that drives up the costs of necessary forms of protection, disproportionately affecting the least well-off financially.

It says the rate of IPT should be frozen and the Government should consider changes to the pension tax relief system that “support rather than penalise” increased saving for later life, scrapping the Money Purchase Allowance and fixing the “net pay anomaly” which prevents low-income earners from receiving pensions tax relief on their contributions.

The insurance and long-term savings sector is the largest in Europe and fourth largest in the world, adding £29.1 billion ($54.27 billion) a year to the UK economy and paying over £16 billion ($29.84 billion) in taxes, the ABI says.

See the Budget submission here.