Is the 41% Exit Tax Soon to be Scrapped? Michael McGrath to Review

@Duke of Marmalade

What if your choice is 100% /0.75% with company A or 101% / 0.75% with Company B?

You wouldn't buy a 100% allocation with 0.75% AMC if a 101% allocation with 0.75% AMC was available.

Government introduce levy. Providers don't increase their 0.75% AMC. Take the 1% from the punter and pay it to Government.

Time passes and provider says we'll still keep the 0.75% AMC but we'll give you 101% to cover the cost of the levy. That's a hit on the provider bottom line and a benefit to the punter, no?

How would you explain the negative provider costs in year one on the actuarial disclosure of a 101% contract as opposed to a +'ve figure on a 100% contract? All other assumptions on premium/AMC being equal.

If the levy was removed by Government, the Life Assurers would have very little argument against reducing their AMCs by circa 0.15% if they're now giving 101% on a product. I wouldn't mind being able to offer a lump sum life assurance investment with 100% allocation and 0.5% AMC (for €5K/€10k +).
 
Gerard, this is a bit of a rabbit hole. In your example, Company B is clearly offering a better deal than Company A. Historically this may have arisen as you describe it and Company B might see it as it paying the levy. The illusion is for the punter to think the levy therefore doesn't apply to them, but if the levy wasn't there Company B could obviously continue to give a 101% allocation with no change to its bottom line but 1% more to the punter.
As a marketing message it is fine but should not create the impression that the levy does not impact Company B's product offering.

I am surprised at the negative costs after 1 year in the KID, can you attach an example.

Didn't understand your last paragraph.
 
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It's not a rabbit hole at all.

The punter knows the Levy applies to them.

It's deducted from their premium and paid to Government. Meaning that, with a 100% allocation contract, only 99% of their premium is invested to buy units at the ruling bid price. And, with a 101% allocation contract that 100% of their premium is invested to buy units at the ruling bid price.

Where's the illusion in that?

Now, if the levy was removed in the future and say the punter had a 101% regular savings contract, 101% of their premium would be used to buy units at the ruling bid price.

Not sure if you're confusing this with the illusion (on say pension products) where punter has the choice of( or is being sold) a 103% allocation with 0.75% AMC or a 100% allocation with 0.60% and he may think the 103% is better because the 'extra' is being added upfront but doesn't understand the way it's clawed back. Punter pay here in the long term.

Never said the negative costs came from a generic KID. All savings/investment products get a full actuarially calculated disclosure document on total costs and taxes based on a predefined growth rate, specific to their premiums. The negative costs (to the provider) in year one are there in black and white. Surely the actuaries aren't wrong.
 
Fortune said:
Ah yes, from deposit accounts to start ups. The logical next move, and nothing could possibly go wrong
Click to expand...

He's not alone in the general EU thinking/direction on this.

If you have a read of the latest publication from The European Insurance and Occupational Pensions Authority (EIOPA) you'll see reference to taking money off deposit accounts to "....supply vital capital to finance the long-term growth of the EU’s real economy, as well as the green and digital transitions." via the Pan European Pension Product (PEPP), or savings scheme by another name.
 
Oh dear! The illusion is that the punter thinks the levy hasn't affected their deal. It has. If there was no levy they would have 101% allocation all to themselves. The 101% allocation should be seen in the context of overall charges when comparing products and punters should avoid the "illusion" that they suffer a levy with Company A but they do not with Company B. Let's leave it at that. I am responsible for the rabbit hole.
The reason that I am surprised with the negative costs is that it suggests there is no deduction on early encashment, but let's drop that as well.
 
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