For the third consecutive Budget and Autumn Statement the Chancellor has announced an increase to insurance premium tax - this time raising the level from 10% to 12%. This means the rate of insurance premium tax has doubled in the past 18 months.
"The average rate of insurance premium tax in Europe is between 15% and 20% and I fully expect the UK to creep up towards these levels over the coming years."
The motor insurance industry is likely to be the most vocal about the latest increase. However, employers should take note as once again they will be expected to swallow an increase in the cost of providing some employee benefits such as private medical insurance (PMI) and dental insurance.
PMI is an extremely valuable benefit and can support a business by assisting attraction and retention of staff and importantly cutting incidence and duration of absence. However; for the vast majority of employers we are reaching a point where the cost of providing such cover puts into question whether the benefits outweigh the cost. I believe we have reached a critical point where in a lot of cases the juice is no longer worth the squeeze; this latest increase in IPT only adds further weight to this argument.
All is not lost though and it is possible to structure PMI in such a way that a true return on investment is again achievable. Employers must start looking at targeted prevention strategies, holistic intervention strategies utilising all of the health related products at their disposal and not just PMI; and finally they must start exploring alternative funding methods such as trust based arrangements which are exempt from IPT and provide more freedom and flexibility than conventional fully insured PMI.
The average rate of insurance premium tax in Europe is between 15% and 20% and I fully expect the UK to creep up towards these levels over the coming years; therefore the time to act is now and at the very least exploring what other options are available is something every employer should be looking.
This blog post was written by Carl Chapman. For further enquiries please contact Damian Stancombe, Head of Workplace Health and Wealth.