For the UK government it is currently necessary to balance the strength of the economy against a number of other economic factors, not the least of which are considerations of financial cost to the nation in regard to issues of healthcare, welfare and the environment.
Particularly since scientific and medical advancement has seen the aging of the population due to a greater rate of recovery from illness and a far higher standard of general health, the subject of the financial cost involved in providing welfare and health services for the elderly as they retire from employment, has demanded the introduction of attractive incentives for the self provision of such care and service. Clearly, sensible provision through health and life insurance can only afford an individual support in times of crisis.
Therefore, numerous tax incentives exist for those individuals demonstrating prudence in contributing to their self-funded superannuation funds, or their own private health insurance. This type of personal responsibility relieves public funds of considerable strain, and while certain rules may apply in regard to their use, in the United Kingdom, these accounts are generally rewarded by a tax exemption applying to any earnings that are dedicated to this type of investment.
So it appears that certain types of assets in this context can have a ‘return’ of their own simply by their very acquisition. In addition to their tax exempt status, they will invariably attract a further rate of return based on the manner and place in which these savings are preserved over time. Usually, the return received on an investment is classified as ‘earnings’ itself, and so will be subject to ordinary taxation. However when earnings are derived from these kinds of assets that are exempt of tax, the return is often not taxable and an even higher rate of return is enjoyed.
Certainly, in order to take full advantage of these kinds of investments, they require consultation with taxation professionals who will be able to quantify the real worth of the investment. For example, if a tax free superannuation account is able to receive a deposit of a sum of money earned by the taxpayer, this reduction in taxable income may find the taxpayer paying a lower rate of tax overall. This of course, is in addition to the future benefits of the deposited money.
Due to the fact that assets and liabilities are not entirely severable, the future liabilities of income and insurance that are addressed in the present make assets such as a superannuation fund or a health or life insurance savings plan real assets with a definite value that is not only quantifiable, but one that can be utilized to build a person’s asset base. Should an individual’s asset base be jeopardized, consideration of trust deeds and alternative solutions should be applied.