§ I now pass to another aspect of saving. I propose to give effect, though in a simplified and modified way, to the recommendations of the Second Millard Tucker Committee on relief to the self-employed in respect of provision for retirement. This will grant relief from Income Tax and Surtax, within certain limits, in respect of premiums paid to provide a deferred annuity on retirement. The relief will apply to professional men in practice, to individuals and partners in businesses which are not companies, to controlling directors of companies and finally, to employees who are not entitled to any benefit under schemes set up by their employers. It will be a condition of relief that the benefits secured by the premiums shall be payable as annuities and not as lump sums.
§ The relief will be limited to premiums not exceeding £500, or 10 per cent. of earned income in any one year. The cost to the Revenue of this relief will be small in the first year, perhaps £7 million, but may rise to about £30 million to £50 million in subsequent years, according to the extent to which advantage is taken of the relief. But, as I expect it to lead to a large amount of new savings, the effect on the economy should be the reverse of inflationary.
§ I would remind the Committee that the scheme covers a very wide range. The potential beneficiaries will be numerous. The self-employed themselves number perhaps 1½ million. They range from the city accountant to the village grocer. Then there are the many employees whose jobs are not pensionable. For all of these—whether the self-employed or the people who are not in some scheme in a business in which they are employed 879 —the scheme will be a measure of fiscal justice. It will also increase the savings that we want.
§ As a corollary of this new relief, I propose to carry out a related recommendation of the Tucker Committee and to relieve from Income Tax the annuity funds of life assurance companies, in so far as they represent invested premiums arising from deferred annuity business for the self-employed or from the reinsurance of approved superannuation funds. This will cost about £½ million next year, but the cost, of course, will increase later.
§ I also propose to give effect to the Tucker Committee's recommendation that purchased life annuities not connected with a pension scheme should no longer be taxed in full, but that the part representing a return of the purchase money should be exempt. This will be of considerable benefit to those—and there are many—who are too old to secure any great advantage from the deferred annuity scheme. It will cost about £1 million this year and about £2 million in a full year. So much for that class of saving.