Savings

Treasury written question – answered on 1st March 2005.

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Photo of Mr Howard Flight Mr Howard Flight Special Envoy To the City of London, Economic Affairs, Deputy Chair, Conservative Party

To ask the Chancellor of the Exchequer pursuant to the answer of 4 February 2005, Official Report, column 1186W, on savings plans, what methodology was used to calculate (a) that the estimated current cost of tax-exempt savings plans with an annual premium limit of £300 is around £70 million per year and (b) that increasing the limit to £600 per annum would cost an extra £30 million; and if he will make a statement.

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

The estimated £70 million annual cost of TESPs is based on assets under management data provided by the Association of Friendly Societies combined with assumptions on average returns and the rate of tax that would have been paid on them in an alternative taxed savings vehicle. The estimated £30 million cost of increasing the limit to £600 is based upon assumptions about the additional number of TESPs that would be opened and additional contributions made to take advantage of the higher limit.

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