Life Exit Tax Query

[Devrozex]

Hi all,

I just have a query in relation to exit tax that I'm wondering if someone could help with?

My mother holds an annuity with Irish Life and is currently charged 41% on all profits of the policy when she is making any withdrawals on same.

This policy was originally held with Canada Life and was taken out in joint names with my father in 1997. My father passed away in 2011 and last year the policy moved across from Canada Life to Irish life (alongside all other existing Canada Life policies).

As far as I am aware, this exit tax should only effect policies or plans issued AFTER the 1st of January 2001.

My mother has only noticed the exit tax in the last few years and I was just wondering would the passing of the other policy holder (my father) have meant that the annuity is now subject to exit tax?

It just seems a little strange to me and just wanted to check had anyone experienced anything similar or even a pointer in the right direction!

Any help / guidance would be greatly appreciated.

Many thanks,

 

[Steven Barrett]

Was your mother issued with a new policy when your father died? If not, it shouldn't be taxed on withdrawal. You do know that the pre 2001 policies were taxed within the fund though?


Steven
www.bluewaterfp.ie

 

[Baracuda]

Eh think you might be getting a little confused Devrozex? An annuity is not an investment and does not provide a profit. An annuity is where a person gives their fund of retirement savings to a life company and the company pays the person an income for the remainder of their lives. If the person dies then the annuity dies with the annuity holder. There is an option to have the payments guaranteed for a period of years eg 10 years or to pay a spouses pension.

If it is the case that your Mum is in receipt of a spouses pension and she did not allocate her tax credits to Irish Life when your Dad passed away Irish Life would deduct tax @ 41%. You should get your Mum to check this out as she may be paying too much income tax.

Regarding Exit Tax you are right in that all investment and savings policies taken out after the 6th April 2001 are subject to Gross roll up exit tax where the tax is deducted on any with drawls or on the 8th anniversary.