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BLOG: The government must stop penalising elderly travellers

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19/09/2014
Elderly travellers and those with health issues hoping to take a break this year are being doubly penalised through an anomaly in the tax system.

Older travellers, and those with pre-existing medical conditions, already pay a higher premium related to increased risk, but they are also paying a further 20 per cent in an insurance premium tax (IPT) – taking the average cost of a premium to more than £200.

This is despite IPT on ‘general’ insurances of only 6 per cent – an anomaly which, it appears, the Government seems keen to ignore.

The tax was introduced to prevent a loophole being exploited by travel agents who used the commission payments on insurance to discount the overall cost of the holiday on which they were obliged to pay VAT, thereby reducing the total revenues to the Crown. But that was then. In recent years, there has been a radical change in the way that consumers plan and book their holidays, and as such I cannot see why such a high level of tax is still relevant.

Travellers regularly tell us that the cost of insurance for travelling abroad is already high, and that they are penalised simply because of their age or a medical condition. But whereas it is understandable that premiums are weighted according to risk, it is completely unfair that the elderly have to pay even more because of such a punitive and arbitrary tax.

I believe that the Government, and the Chancellor George Osborne, should re-think their position on IPT and its impact on the more vulnerable in society. It is not a party political issue, since successive governments have conveniently avoided the truth. And they appear to be avoiding it now. I have already written to my Local MP, Eric Pickles, who passed my letter on to Her Majesty Treasury (HMT). The Treasury, I am told, will ‘own’ the issue. What that means in practical terms I do not know, but I am determined that it does not simply get kicked into the long grass.

It is simply unfair, and it is about time the Government – who say they are on the side of the elderly and hard-working families – did something about it, either by bringing the tax to be more in line with other insurances, or by waiving the tax for those of a certain age. Retaining IPT on travel insurance at such a high level cannot be justified.

Mike Rutherford is chairman and founder of AllClear Travel Insurance.

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