55 year old with 300K lump sum to invest.

Marc said:
When an increased allocation is used to reduce charges remember to add the extra to the charge taken.

€100
101% allocation
€101
Charges
1% levy
0.65%amc
€101 x 1.65% =1.665% charge rather than 1.65%
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Wow. Have you prepared a chart to back that up?

In relation to trying to solve the OP’s issues, someone made the very valid point about life cover. That needs to be addressed.

@OP, you must have increased your AVCs to the maximum only recently? At 55, you can get tax relief on up to 35% of all taxable pay, including most non-salary bits and bobs. Are you sure that’s what you’re doing.

At this point, I think you do need to focus on a investment account to supplement your pension fund because time isn’t on your side. The tax treatment of a life company investment isn’t ideal though. Perhaps a portfolio of shares might be better.
 
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GSheehy said:
On every investment/savings contract there is a 1% Government Levy. That levy is on the investor/saver so it's an additional charge and equates to circa 0.15% per annum, as an entry charge, in a Key Investment Document (KID).

With some investments the product provider covers the cost of this by allocating an extra 1% to your investment.

You invest €10,000, the 1% Government Levy is deducted and paid to Revenue giving you a 'premium' of €9,900.

The 101% allocation is applied to this premium and that brings your investment back up to €10,000. That €10,000 is then used to buy units in the fund.

The 101% Allocation is generally stated on the policy schedule.

If the 1% Levy wasn't there, I think that we would have more competitive Annual Management Charges.


Gerard

www.bond.ie
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Hi Gerard
How is the tax element handled within these funds ? Does the investor have to make CGT returns to Revenue ? or is that managed by Zurich when the fund is eventually cashed in and the investor receives the final amount net of any taxes due so doesn't have to worry about filing tax returns ?
 
@meadow

The tax applicable is Life Assurance Exit Tax, not CGT. It's deducted by Zurich Life and paid to Revenue on your behalf.

At all times, on your online account dashboard, you will see your position in terms of:

Current Fund Value (Before Tax):
Current Encashment Value (Before Tax):
Current Encashment Value (After Tax):
Maximum Partial Encashment Value (Before Tax):
Maximum Partial Encashment Value (After Tax):
Valuation Date:06/06/2023


Gerard
 
GSheehy said:
@meadow

The tax applicable is Life Assurance Exit Tax, not CGT. It's deducted by Zurich Life and paid to Revenue on your behalf.

At all times, on your online account dashboard, you will see your position in terms of:

Current Fund Value (Before Tax):
Current Encashment Value (Before Tax):
Current Encashment Value (After Tax):
Maximum Partial Encashment Value (Before Tax):
Maximum Partial Encashment Value (After Tax):
Valuation Date:06/06/2023


Gerard
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Gerard ,If funds rise so you pay tax on a deemed disposal date and then the fund falls and you encash . …,Do you get the tax overpaid already refunded by Zurich ? Or from revenue and if so how !
 
@mtk

If you pay the tax and then funds fall the Zurich System system automatically calculates the overpaid tax and it's added back to your encashment value. So Zurich Life deal with that for you.

It would appear on your account like:

Current Fund Value (Before Tax):158,841.62
Current Encashment Value (Before Tax):158,841.62
Current Encashment Value (After Tax):168,559.02
Maximum Partial Encashment Value (Before Tax):142,957.45
Maximum Partial Encashment Value (After Tax):151,703.11
Valuation Date:06/06/2023

Gerard

www.bond.ie
 
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Duke of Marmalade said:
Look, you said 1.65% becomes 1.665%. BTW I just notice that you meant 0.65% becomes 0.665%, a mistake which I actually followed.
But on the substantial point you made a boo-boo. 'Fess up like a man.
Maybe you're confusing it with a very, very minor discrepancy. If the 1% extra allocation is applied after the deduction of the levy rather than before then the initial fund is 99.99% of the investment. Nuffin' to do with AMCs.
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The levy is deducted first, the additional allocation comes after. One of the life companies got the hump with me a number of years ago when I pulled them up on their assertion of giving an additional 1% allocation to cover the cost of the levy. ;)
 
Steven Barrett said:
One of the life companies got the hump with me a number of years ago when I pulled them up on their assertion of giving an additional 1% allocation to cover the cost of the levy. ;)
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I feel like the guy on the bus talking about tracker mortgages - I don't understand this - what does it mean?
 
Steven Barrett said:
The levy is deducted first, the additional allocation comes after. One of the life companies got the hump with me a number of years ago when I pulled them up on their assertion of giving an additional 1% allocation to cover the cost of the levy. ;)
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Well, I guess it depends on whether the life company adds 1% of the premium net of the levy or 1 percentage point to that amount.

I assume it’s the later (in which case the life company would be correct in their assertion) but it really is a trivial difference either way.
 
Sarenco said:
Well, I guess it depends on whether the life company adds 1% of the premium net of the levy or 1 percentage point to that amount.

I assume it’s the later (in which case the life company would be correct in their assertion) but it really is a trivial difference either way.
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It's 1% to the amount net of the levy.

I am aware it is a trivial difference, but it is still a difference.
 
Robzig said:
I feel like the guy on the bus talking about tracker mortgages - I don't understand this - what does it mean?
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There is a 1% tax on investments (and risk benefits) with life companies. So if you contribute €100, 1% is deducted in tax and €99 is invested.

Under some contracts, the life company say they will invest 101% of your money (this is called the allocation rate). The 101% applies to the €99 and not the €100. So 101% of €99 is €99.99, which is now the amount that will be invested.
 
GSheehy said:
@mtk

If you pay the tax and then funds fall the Zurich System system automatically calculates the overpaid tax and it's added back to your encashment value. So Zurich Life deal with that for you.

It would appear on your account like:

Current Fund Value (Before Tax):158,841.62
Current Encashment Value (Before Tax):158,841.62
Current Encashment Value (After Tax):168,559.02
Maximum Partial Encashment Value (Before Tax):142,957.45
Maximum Partial Encashment Value (After Tax):151,703.11
Valuation Date:06/06/2023

Gerard

www.bond.ie
Click to expand...
After tax greater than Before tax?:rolleyes:
 
GSheehy said:
Absolutely, in the context of a drop in value after a deemed disposal transaction where tax was deducted on a higher valuation and is now due back to the client based on the current valuation.

Gerard

www.bond.ie
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Brilliant, I missed the clarification in the first post, went straight to the Table! I'm glad I didn't accuse you of doing a Marc:)
 
Thanks Steven,

Fair enough, I wasn't especially clear in my question!

I understand the 1.01 * 0.99 ≠ 1.00

What I didn't get is why a financial adviser would get the hump regarding a one-off charge of 0.01% when most financial advisers I've come across have tried to charge me an on-going charge of 0.50% p.a.?! That's the bit I was struggling with.....
 
GSheehy said:
You invest €10,000, the 1% Government Levy is deducted and paid to Revenue giving you a 'premium' of €9,900.
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To avoid any confusion, and the subsequent references to 99.99%, I should have been explicit with my premium figure.

I don't know what methodology other providers use in the way they arrive at the investment 'premium' but the actuarial alchemy used by this provider is as follows :

Divide the €10,000 by 101% = €9,900.9901 and if you then apply the allocation of 101% to that 'premium' you're made whole again.

If you look at the policy cerificate it will state that the Single Premium excluding Levy is €9,900.99

Gerard

www.bond.ie
 
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