Annuities Purchased Where Certain Claims or Actions are Settled

Part of New clause 13 – in the House of Commons at 5:15 pm on 3rd April 1995.

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Photo of George Young George Young The Financial Secretary to the Treasury 5:15 pm, 3rd April 1995

I beg to move, That the clause be read a Second time.

The object of this clause is to simplify the administration of the payment of agreed damages in cases of personal injury, where the damages are to be paid to the victim of the injury in instalments over a period or for his or her life. It will make it possible for the victim of the injury to receive the damages as an annuity directly from a life insurance company without turning a non-taxable capital sum into income chargeable to tax.

The payment of an annuity directly to the victim of the injury will bring the advantage of protection under the Policyholders Protection Act 1975. Uncertainties as to the long-term financial stability of the payer of the damages will no longer be a significant obstacle to the acceptance of damages in a form which meets the long-term financial needs of the victim.

The clause achieves the objectives of the measure tabled by the hon. Member for Oxford, East (Mr. Smith) in Committee and will, I know, have the support of the whole House. It also represents a first step towards realising our intention, announced to the House on 23 March, of implementing the recommendations made by the Law Commission in its report on structured settlements and interim and provisional damages.

Additionally, the clause breaks new ground by making it possible for existing structured settlements to he renegotiated to come within the new framework. This offers the advantages of long-term security for the individual receiving the damages by instalment payments and of administrative savings for the insurance company paying them. The removal of the territorial restrictions from the measures previously proposed will, we hope, make it easier for an individual suffering an injury when overseas to obtain damages payable through life without taxation disadvantages.

I hope that the measure commends itself to the House.