If you go direct to Zurich, you will pay much, much higher fees than going via a low-cost execution-only broker.
(This is old news, and has been stated and established over and over on AAM)
Article - the (depressing) reality of Irish investment options.
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If you go direct to Zurich, you will pay much, much higher fees than going via a low-cost execution-only broker.
(This is old news, and has been stated and established over and over on AAM)
What's the rationale behind it?
The underwriters don't want the hassle/cost of dealing directly with clients so charge more in order to push clients to deal with brokers and let them deal with the hassle at a lower kickback?
If you are a supplier, depending on hundreds of retailers/brokers to distribute and sell your product, then selling the same product directly to the final customer will undermine the brokers that you depend on.
Life cos. don't want to compete against the retail brokers who deliver them most of their business.
So if they do sell direct, then they use staff/tied agent who charge as much fees/commissions as any broker.
There is no saving from cutting out the broker.
I learnt this the hard way.
In my naivete, 20 years ago, I bought a pension from a branch of Hibernian Insurance. Unknown to me, and this was not disclosed, the staff member got 8% commission on all contributions.
Life cos. don't want to compete against the retail brokers who deliver them most of their business.
So if they do sell direct, then they use staff/tied agent who charge as much fees/commissions as any broker.
There is no saving from cutting out the broker.
I learnt this the hard way.
In my naivete, 20 years ago, I bought a pension from a branch of Hibernian Insurance. Unknown to me, and this was not disclosed, the staff member got 8% commission on all contributions.
Pick any fund with any of the players, find out what the charges and fees were for 2022. Because the funds are closed traded, there is room around allocation rates and spreads too.
Before signing up, the responses we got were all we don't have to publish that when asking for figures. But I will hand it to Zurich who have start publishing more detailed figures such as https://www.zurich.ie/-/media/proje...ite/files/regular-savings-form/fund-guide.pdf
While that doesn't have a full figure, their notes say you can add things together to get to a TER equivalent figure.
The broker that I deal with explains these things to me clearly and transparently.
@ryaner
Part of the problem with product providers giving anyone absolutes on charges (other than allocation rates, exit charges & AMCs - which are on a policy schedule) is that OOCs/CIVs & PTCs change. All the time. The latter ones are included in past performance / unit prices.
If you compare the OOCs on the upated document for 2023, to the one in your link, you'll notice that they've come down (most popular funds would be Mixed or Multi Asset). Yes, they might be more next year. Same would apply to PTCs if any company ever decides to publish those.
Gerard
www.bond.ie
Part of the problem with product providers giving anyone absolutes on charges (other than allocation rates, exit charges & AMCs - which are on a policy schedule) is that OOCs/CIVs & PTCs change. All the time. The latter ones are included in past performance / unit prices.
If you compare the OOCs on the upated document for 2023, to the one in your link, you'll notice that they've come down (most popular funds would be Mixed or Multi Asset). Yes, they might be more next year. Same would apply to PTCs if any company ever decides to publish those.
Gerard
www.bond.ie
Crippling 41pc exit tax on funds to be reviewed, says Michael McGrath
Finance Minister Michael McGrath plans to review the 41pc exit tax charged on life-wrapped funds sold by life assurance companies and from exchange-traded funds.
www.independent.ie
Duke of Marmalade
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Interesting. Below is a table of the equivalent DIRT rate assuming encashment after 8 years. It depends on the growth rate as well as the Exit Tax rate. So the different rows are different growth rates and the columns are different Exit Tax rates. For example, at 9% p.a. growth rate the 41% Exit Tax is equivalent to a 32.9% DIRT rate.Crippling 41pc exit tax on funds to be reviewed, says Michael McGrath
Finance Minister Michael McGrath plans to review the 41pc exit tax charged on life-wrapped funds sold by life assurance companies and from exchange-traded funds.
Of course, this is the best case scenario for the Exit Tax as earlier encashments will have a higher equivalent DIRT and if there is a loss there is no compensation.
Attachments
That’s not what equivalent means
i wonder is there an issue with US multinationals being unable to persuade senior executives to move to Ireland due to the investment taxation issue. Maybe even attracting doctors and specialists from abroad that might have built up a substantial ETF holdings in other countries is a difficulty. I know some people posting on these blogs have been caught out by this but there is probably more awareness and maybe this is now feeding its way back to governmentCrippling 41pc exit tax on funds to be reviewed, says Michael McGrath
Finance Minister Michael McGrath plans to review the 41pc exit tax charged on life-wrapped funds sold by life assurance companies and from exchange-traded funds.
Hi Marc,
Thanks for the feedback. My conclusions were based on the guidelines published in the Revenue website , reported below for convenience (point 2.)
1.Prior guidance confirmed that investments in ETFs domiciled in the USA, the EEA or in an OECD member state
(other than the USA) with which Ireland has a double taxation treaty, follows the treatment that would apply to
share investments generally. That confirmation does not apply to such investments with effect from 1 January
2022.
2.Where following an analysis of an ETF that was covered by the previous guidance it is found to be equivalent to
an Irish ETF, then the 8 year “deemed” disposal rule will apply as follows: while the actual acquisition cost of
the ETF will remain unchanged, the 8 years should be counted from 2022 meaning the earliest deemed disposal
will be in 2030
So the way that I read it is that for example if you buy the U.S. domiciled ETF VOO that tracks the S&P 500 index that
would be equivalent to the Irish domiciled (UCITS) ETF VUAG which tracks the same thing. Because in this case we have
an equivalence (they track the same thing) then the U.S. domiciled ETF would follow the 41% tax and 8 years deemed disposed tax rule.
If this is not the case could you explain what the point 2. above mean please ?
Thanks for the feedback. My conclusions were based on the guidelines published in the Revenue website , reported below for convenience (point 2.)
1.Prior guidance confirmed that investments in ETFs domiciled in the USA, the EEA or in an OECD member state
(other than the USA) with which Ireland has a double taxation treaty, follows the treatment that would apply to
share investments generally. That confirmation does not apply to such investments with effect from 1 January
2022.
2.Where following an analysis of an ETF that was covered by the previous guidance it is found to be equivalent to
an Irish ETF, then the 8 year “deemed” disposal rule will apply as follows: while the actual acquisition cost of
the ETF will remain unchanged, the 8 years should be counted from 2022 meaning the earliest deemed disposal
will be in 2030
So the way that I read it is that for example if you buy the U.S. domiciled ETF VOO that tracks the S&P 500 index that
would be equivalent to the Irish domiciled (UCITS) ETF VUAG which tracks the same thing. Because in this case we have
an equivalence (they track the same thing) then the U.S. domiciled ETF would follow the 41% tax and 8 years deemed disposed tax rule.
If this is not the case could you explain what the point 2. above mean please ?
AAAContributor
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Equivalence has nothing to do with tracking the same thing.
It's defined in paragraph 2.1 here:
I tend to think this is more likely to be due to lobbying from industry than anything else, they've been raising the 41% rate for years. That being said, you would also hope there is also greater realisation of the need to entice people to invest for the long term to provide sufficient income later in life, and an appreciation of how out-of-sync Ireland is on taxation of such investments compared to our European peers/competition.
AAAContributor
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My own view on this area is that the rules and guidelines originally evolved in a world where there was a need to prevent Irish high net worth individuals rolling up income in structures like Luxembourg-incorporated limited liability companies (SICAVs), Channel Islands structures etc prior to the onset of the now commonplace ETFs and the like.
The financial world has moved on and there are all sorts of fund investments available to the man on the street. The area of fund taxation is far too arcane as a result of these rules and does not serve the Irish taxpayer well.
An Irish investor should not have to employ a tax adviser to dig into the prospectus of each individual fund to determine if an investment is taxed under fund rules or general tax principles. Or at least if it's an esoteric investment that an ultra high net worth investor is considering structuring, then yes, but not for garden-variety stock exchange listed products where the investor has no say in the investment decisions etc.
There should be a single CGT, DIRT, Funds tax rate.
There should be similar tax treatment on death for shares and funds.
There should be similar loss treatment for shares and funds.
There should be similar remittance basis of taxation treatment for shares and funds.
I would say that the rules create a needless rod for Revenue's back given the amount of queries and uncertainty they create, but it's more a rod for the Irish taxpayer's back trying to navigate this area.
Hopefully some common sense will prevail in the review into this area mentioned in the article referred to earlier.
Duke of Marmalade
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Good luck with that.
There are reasons why the separate treatments developed, some to do with practical considerations. The most logical would be that all gains, whether income or capital should be taxed as income and losses should be allowed to be carried forward. But that would be unwieldy for the woman on the 46a. Thus we have a composite DIRT rate. The Exit Tax rate is also composite and should for consistency be higher than the DIRT rate due to gross roll up.
No loss relief on Exit Tax is illogical.
CGT exemption on death is illogical.
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While that's true, ETFs barely existed in 2005 when Revenue were coming up with this. It's quite likely the finance minister and revenue staff were unaware of them, and were certainly unaware they were about to become so popular and the recommended investing option for people worldwide.
In 2005 there were 453 ETFs worldwide, in 2022 there were 8,754. https://www.statista.com/statistics/278249/global-number-of-etfs/
The reason ETFs are taxed as they are is not due to careful consideration on Revenue's part, it's just the pigeon hole they've found for them. When Revenue need a pigeon hole - by default it will always be the highest tax one.
Duke of Marmalade
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Absolutely, Exit Tax was not designed for ETFs. It was designed for life companies after the EU forced Charlie McCreevey to put domestic life policies on the same footing as other EU policies i.e. gross roll up. UCITS or Unit Trusts were put on the same basis. And when ETFs came along it was clear that they too should be on the same basis albeit they may be structured as SICAVs or SICAFs. In essence it is a question of substance over form. ETFs offer essentially the same product as life companies and so should be taxed similarly, although the insurance levy is discriminatory against the latter.
Originally Exit tax was set at 3% above DIRT to balance the advantage of Gross Roll Up. But that was before Deemed Disposal so maybe it should be set at 2% above.
Originally Exit tax was set at 3% above DIRT to balance the advantage of Gross Roll Up. But that was before Deemed Disposal so maybe it should be set at 2% above.
but is that just the interpretation that the irish revenue have come up with that ETFs are equivalent to life policies. Because at the end of the day no other european country seems to have this type of taxation for ETFs , only Ireland. Therefore there must be some factor that revenue are interpreting differently to every other country, therefore that needs to be drilled down into surely?