Consolidate investments?

C

Charlie 07

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I have various investments in 3 major financial groups. I have been advised to consolidate my investments into one single investment as it will save on the AMC payable on different investments(. A single investment will reduce the overall AMC payable. )
Whats holding me back is the the exit tax payable to close down and then set up this new investment.
Any advice would be greatly appreciated
 
A Money Makeover might be a better way to deal with this query in my opinion.

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Charlie 07 said:
I have various investments in 3 major financial groups
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You'll need to explain what this means. What exactly do you mean by "financial groups"?
And what are your existing investments, selected funds, AMCs, exit penalties (if applicable), etc.
Charlie 07 said:
I have been advised
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By whom?
 
Charlie 07 said:
I have been advised....
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The advisor has to sign a declaration that they advised you as to the financial consequences of replacing an existing policy with a new policy by cancellation or reduction, and of possible financial loss as a result of such replacement.

The taxation angle would be part of that.

What did the advisor say?
 
Charlie 07 said:
I'll complete a money makeover to give a better picture.
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Probably irrelevant to your question.

What is the value (net and gross) and AMC of each investment? What is the allocation rate and AMC of the new consolidated investment? How long do you expect to remain invested?
 
No need for a Money Makeover to answer this very specific question.

This sounds like churning. The advisor wants you to buy a new product so that he gets commission.

Change your advisor.

Better still - tell him you have acted on his advice and switched the three policies to one policy through LA Brokers or some other execution only broker.

The only way it could be justified is if you have three policies with very high costs. But who sold you them?
 
@Charlie 07

Don't be dissuaded from posting more information. The devil is in the detail on your quandary. I sympathize with your dilemma and the fact that you've brought up the taxation would suggest it's been brought up with you. This has come up multiple times before and there's a rush to blame the product or the advisor when it's the tax regime that's the crux of the problem.

The pricing of these products has come down (same as pensions but you wouldn't think it reading some posts here) and it's unfortunate that there's no tax mechanism in place to smooth a transition from one product to another. I've only ever seen one suggestion from any poster on here on how that might be done. But, it would be at Government level. It didn't get any traction because there's a 'house' bias against the products, in general, even though there's circa 2 billion invested each year in them. The norm is to rail against the product (or advisor) and do nothing to help improve the situation for those that it will come up for again (and again).

No execution only broker in their right mind would sign off on a transaction like this without knowing that there was going to be no comeback or complaint on the myriad of potential negative outcomes that could prevail on the transaction. You'd need the equivalent of a 'Certificate of Benefits Comparison' and that's solely down to deemed disposal and the taxation regime. Doubt you'd find an actuary to do, or could do, that for you though. If only it was as simple as a pension transaction, where the taxation wasn't the issue.
 
Be very careful in how you progress on this.

If you are in an investment with an insurance company, you can switch funds within the product alright. The amc shouldn't change unless you are going from a niche fund (which tends to be higher charges) to something like an index fund (which tend to have lower charges). If however, you move your money outside of that bond and set up a new policy, you will trigger a tax liability. Without more detail, we do not know if this is the case.

You can merge pensions without triggering a tax liability but you certainly cannot merge investments without triggering a tax liability (if there is one).

I agree with Brendan, it does sound like a churn to me i.e. the advisor is looking after their own interests in generating a commission over actually providing you with sound financial advice.
 
I usually leave my judgement on these until after I learn all the facts of the case and who said what and when. And even at that, we're only hearing one side of the story. That's the balanced approach.
 
GSheehy said:
I usually leave my judgement on these until after I learn all the facts of the case and who said what and when. And even at that, we're only hearing one side of the story. That's the balanced approach
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Agreed

the information is lacking and posters can only advise to proceed (or not) with extreme caution

:-(

Details are needed
 
Charlie 07 said:
Whats holding me back is the the exit tax payable to close down and then set up this new investment.
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When is the 8 year anniversary of the funds? If you consolidate near the deemed disposal date then exit tax is less of an issue.
 
Corola said:
If you consolidate near the deemed disposal date then exit tax is less of an issue.
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Sorry, I'm not seeing this.

If the LAET rate goes down, there's then no policy to add it back to as you've moved to a new policy and start all over again.

Same story if value dropped after moving it, the tax deducted on the previous value wouldn't be able to be added back the policy value because it's no longer there.
 
Yes, that's one of the considerations they have to weigh up against the savings from the lower AMC. If the saving is large then it could be worth realising the tax liability.

But the closer they are to the deemed disposal date, the less impact having to pay exit tax on the consolidation is, since they are paying it either way. Whereas the worst time to do it would be at the 4 year mid-point between deemed disposals.

OP you should also tell us the gain/loss currently on each investment.
 
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Thanks for the replies and I appreciate my lack of detail isn't helping the situation.
To move to the recommended Synergy Investment Bond would mean our AMC rate would change from 1.48% (average) to 1.2%. However, the exit tax to consolidate the investments is over 10k. The current deemed disposal dates vary. I understand tax has to be paid at some stage. But with current budget changes, will deemed disposal rates continue to fall in coming years?
 
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