If the allocation rate is quoted gross of the levy then they don't interact with each other.
1000 - (1000 * 1%) + (1000 * 1%) = 1000
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Life Assurance Exit Tax (LAET) - Changes?
- Thread starter GSheehy
- Start date
1000 - (1000 * 1%) + (1000 * 1%) = 1000
Steven Barrett
Registered User
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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
Registered User
- Messages
- 5,506
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?
55 year old with 300K lump sum to invest.
This is getting a bit ridiculous. Edit: Rest of post deleted
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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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