If the allocation rate is quoted gross of the levy then they don't interact with each other.
1000 - (1000 * 1%) + (1000 * 1%) = 1000
Life Assurance Exit Tax (LAET) - Changes?
- Thread starter GSheehy
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1000 - (1000 * 1%) + (1000 * 1%) = 1000
Steven Barrett
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It's not. It's net of the levy.
I had this clarified by Zurich Life years ago when my broker consultant said they'd cover the levy. I told him that wasn't strictly true as the 1% is on the net amount after the levy. He double checked it and confirmed it. Below is from the Zurich Life policy schedule on a regular saver plan. Other life companies are the same.
The difference is very small but the additional 1% allocation does not cancel out the 1% levy.
That's not right. This is the calculation if quoted net of levy:
1000 is the total premium paid by the consumer gross of the levy.
So 1000 = 101.00% of Premium excluding Levy
Premium net of levy = 1000 / 101% = 990.10
Levy = 990.10 * 1% = 9.90
Premium made whole again by 101% allocation = 990.10 * 101% = 1000
The 1% allocation does cancel out the 1% levy. The consumer sees the full amount they invested.
1000 is the total premium paid by the consumer gross of the levy.
So 1000 = 101.00% of Premium excluding Levy
Premium net of levy = 1000 / 101% = 990.10
Levy = 990.10 * 1% = 9.90
Premium made whole again by 101% allocation = 990.10 * 101% = 1000
The 1% allocation does cancel out the 1% levy. The consumer sees the full amount they invested.
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That's specific to Zurich though
No,
Levy = amount paid by consumer x 1% = 1000 x1% = 10.
Steven Barrett
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You have your sequence wrong.
The levy is taken from the contribution of €1,000. €990 gets an allocation of 101% = €999.90 invested/
Seems like this was hashed out before without resolution. Is it possible different providers have different rules?
The legislation says the government get 1% of whatever the consumer pays. They don't care beyond that.
This just isn't true. 100% is invested. The allocation cancels out the levy.
How much is collected each year via the 1% Goverment Levy on Life Assurance products? See here
No breakdown of how much of it applies to savings and investment products. Makes you wonder why it just can't be simply removed on savings and investments only. Can't remember the exact history as to why it was introduced in the fiirst place but I'd say it was intended as a tax on the industry that was just passed on to the customer.
Given the magnitude of the proposed change, it is likely that the associated tax measures will roll out over multiple Finance Bill cycles, ensuring each step is properly considered. Any measures undertaken will also be informed by evolving EU priorities, notably the proposed Savings and Investments Union. - Paschal O'Donohue (on Funds Review)
Methinks that Paschal is hiding behind the potential complexities/costs of changes to deemed disposal so as not to have to make a decision on abolishing the Levy on Life Assurance Savings/Investments. I think it would be the easiest of all measures to put in place in the Budget.
No breakdown of how much of it applies to savings and investment products. Makes you wonder why it just can't be simply removed on savings and investments only. Can't remember the exact history as to why it was introduced in the fiirst place but I'd say it was intended as a tax on the industry that was just passed on to the customer.
Given the magnitude of the proposed change, it is likely that the associated tax measures will roll out over multiple Finance Bill cycles, ensuring each step is properly considered. Any measures undertaken will also be informed by evolving EU priorities, notably the proposed Savings and Investments Union. - Paschal O'Donohue (on Funds Review)
Methinks that Paschal is hiding behind the potential complexities/costs of changes to deemed disposal so as not to have to make a decision on abolishing the Levy on Life Assurance Savings/Investments. I think it would be the easiest of all measures to put in place in the Budget.
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@TheJackal posted this PQ in 41% Exit Tax - Will we see Budget 2026 changes thread but as it LAET specific, no harm in incuding it here.
We always knew how much LAET was collected each year.
We now know that DoF/Revenue went to the bother of finding out how much tax was self-assessed/collected via EFTs.
For 2024 - LAET €169m and circa €86m from EFTs.
Based on 2024 figures, the cost of the 3% reduction in LAET is €12.5m . (Table 1 / Page 1)
Repealing the 1% Government Levy would have been circa €40m.
He could easily have progressed the abolition of the 1% Levy separately to anything else that's happening with EFTs but he chose not to. There is no consideration at all for the bringing down costs/charges, to consumers, of Life Assurance Savings/Investments products.
If you want to be a consumer advocate and do something about the 1% Government Levy, to help reduce costs for consumers, then write to your TD about it.
Gerard
www.bond.ie
P.S. If you can avoid it, don't do any encashments until after 01/01/2026.
Immediate tax rebates will not apply, the tax rebate would apply only when the policy is encashed or at the next 8 year deemed tax deduction.
We now know that DoF/Revenue went to the bother of finding out how much tax was self-assessed/collected via EFTs.
For 2024 - LAET €169m and circa €86m from EFTs.
Based on 2024 figures, the cost of the 3% reduction in LAET is €12.5m . (Table 1 / Page 1)
Repealing the 1% Government Levy would have been circa €40m.
He could easily have progressed the abolition of the 1% Levy separately to anything else that's happening with EFTs but he chose not to. There is no consideration at all for the bringing down costs/charges, to consumers, of Life Assurance Savings/Investments products.
If you want to be a consumer advocate and do something about the 1% Government Levy, to help reduce costs for consumers, then write to your TD about it.
Gerard
www.bond.ie
P.S. If you can avoid it, don't do any encashments until after 01/01/2026.
Immediate tax rebates will not apply, the tax rebate would apply only when the policy is encashed or at the next 8 year deemed tax deduction.
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Djimi Traore
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I get why they have to quote it as a "cost" of 12.5m but in reality the asset values that the 2024 figures were based on will have grown so they will likely end up taking in a higher amount in 2026 despite the reduction in tax rate. I think the accountants are being given too much say here as there is no vision or leadership.
