taxation of investment funds

haroldsxxx

Registered User
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14
First up, a question: is there a likelihood of the 41% deduction on 'profits' from investment funds likely to be reduced any time soon? Or any other lightening of the load on those who invest in such funds. My impression was that there was a discussion in advance of recent budgets about the possibility of converging the funds exit rate with CGT, currently 33% (?).

I have regular savings over 14 yrs in some Irish Life funds (originally Quinn Life). Not unlike many boarders, I'd guess.

The level of expropriation by state (with some help from the investment funds themselves) is really quite ridiculous.
a/ The State takes 1% of all contributions straight off the top.
b/ Profits are calculated without any indexation / allowance for inflation - even with low inflation, this amounts to a significant extra penalty over a period of 10+ years.
c/ If selling, the State then levies 41% on this inflated estimate of profit.
d/ Gross roll up means that if you have managed to make some surplus above your gross nominal investment, 41% of this surplus is lopped off every eight years, smothering compound growth.
e/ There is no provision to cancel off gains on some funds against losses on others. Your losses are yours, your gains are 41% theirs.
f/ Meanwhile the investment funds themselves rely on customer inertia or stupidity (guilty!) charging 1-1.5% or higher rates (on total fund value, every year) - despite management charges for most ETFs or indexed funds having been reduced to a quarter or less of these percentages.

Investing in most ETFs is subject to similar taxation, so also actively discouraged .

So second question: Is there a recommended way of feeding regular money into equity based funds which avoids at least some of the above? Investment trusts? (what platform?). Tks for any suggestions, comments / observations.
 
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The regular savings plans offered by insurance companies aren't that bad. They enable people to save relatively small amounts on a monthly basis. A charge of 1.25% fora €200 a month is €30 in year one. Given the cost of setting up the policy and issuing the documents as well as investing for you on a monthly basis, it will take a number of years for them to start making money. Then they also pay your tax for you so you don't have to worry about submitting a tax return, work out how the deemed disposable system works and calculate the tax due on each of the 84 payments that you made over the previous €84 years. Given an online account with one of the established stockbrokers in Ireland will cost you more than that and won't do your tax return for you, I think it's alright.

The taxation of funds is another thing but that is irrespective of whether you invest in DeGiro or a life company (except the 1% tax that is).

Steven
www.bluewaterfp.ie
 
Extensive analysis here


Originally developed for savings for children (mine specifically) but provides relevant analysis for personal saving.

My own analysis of one life company child saving plan indicated an annual charge of between 3.5%pa and 6%pa. When i factor in that for my son, not unique circumstances by any extent, if his grandparents make the payment then there is no income tax charges on dividends (as they are non-resident) and gains are taxed at 33% rather than 41% then it really is no contest

I accept that the charge in the first month is negligible. My concern is that the charge in year 10 will be 4%pa higher. Even on a modest accumulated pot of say €25k that’s a grand a year in potential additional costs.

Whilst I accept that there is a cost associated with preparing a self-assessment tax return if one is preparing one anyway, it’s not an additional cost and therefore for many people, the convenience of paying the life company to calculate tax for you is a red herring.

So it’s a case of looking at circumstances rather than a blanket statement that life company plans are good or bad or a share portfolio is good or bad. It depends
 
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This thread contains a review of @Marc's guide (which I haven't bought) in case anybody in interested.
 
Extensive analysis here


Marc - sorry for posting here but I cannot see a way contact you via joomag. What's your policy on issuing updated versions of that guide, I purchased an earlier edition but I notice you have a v4 available. Does the initial purchase cover all future revisions? Thanks.
 
This thread contains a review of @Marc's guide (which I haven't bought) in case.
Is there a comparison thread of here of investment trust vs etfs over the long term?

I haven't seen any strict comparison of why one is better than the other and also, which are the best investment trusts because some do well but some really underperform. Thats the problem with active investing, you don't know who will beat the markets and who won't.
 
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