Hadn’t even thought of trying this, thanksHave you tried to negotiate with your current broker to get the lower rate?
You can't. The amc is fixed under each contract and cannot be changed. The issue is the tax liability that will be incurred. He would have to cash in the existing plan and transfer the funds to the new plan. You have to work out the tax liability and how long it will take for the savings in amc to pay for that.Have you tried to negotiate with your current broker to get the lower rate?
You could get an even lower amc on the lump sum payment.
That is a net payment of €29,160.In addition to the potential tax implications that Steven mentioned ( assume OP paid in €25K - exit tax liability €2,050. Reinvest €27,950 and value grows to €30,000 - another €840.50 liability.
That is true.If value of the €27,950 dropped on the new plan then the exit tax paid on the old plan won't be added back).
That would make euro money market funds look very attractive.A further complication is that I expect that the 41% emergency exit tax will be reduced this year possibly all the way down to the DIRT rate of 33%
I would be amazed (and delighted) if that happened. With absolutely no idea of what will happen, my guess is that it will go back to DIRT plus 2% but it will move down to 35% on a gradual basis, like DIRT did when it went from 39% to 33%.That is a net payment of €29,160.
If you stay invested then your fund will grow to 30k x 30/27.95 = €32,200 and after tax you will receive €29,248 so that the tax cost of encashing early would be €88.
That is true.
A further complication is that I expect that the 41% emergency exit tax will be reduced this year possibly all the way down to the DIRT rate of 33%
Have to think about that. The way DIRT works is that if there is any guaranteed return at all it is subject to annual DIRT on the bit that is guaranteed. So following this approach the product linked to a cash fund would have to have no guarantees other than possibly that its price won't fall. So you would be tied to a ex post variable return. Not sure that would be a big winner.That would make euro money market funds look very attractive.
I suppose the smart money would be on DIRT + 2%, consistent with the very original formula before deemed disposal which was Standard Rate + 3%.I would be amazed (and delighted) if that happened. With absolutely no idea of what will happen, my guess is that it will go back to DIRT plus 2% but it will move down to 35% on a gradual basis, like DIRT did when it went from 39% to 33%.
That’s news to me.The way DIRT works is that if there is any guaranteed return at all it is subject to annual DIRT on the bit that is guaranteed.
In addition to the potential tax implications that Steven mentioned ( assume OP paid in €25K - exit tax liability €2,050. Reinvest €27,950 and value grows to €30,000 - another €840.50 liability. If value of the €27,950 dropped on the new plan then the exit tax paid on the old plan won't be added back). Granted, these may be only short-term downsides but they're there if OP couldn't go the full term to wash out the cost by the 0.5% pa saving.
Also, if OP was receiving 101% allocation on original plan it's very likely that the €27,950 would not receive that on a new plan, from the same provider. The 1% isn't a provider cost, but a Government one, and the providers cover it on some plans. That reduces margin so it would be unreasonable to expect that they would pay it again on a value that they've already added it to. There's a note about this on the product profile that intermediaries would have access to but a customer would not see that.
Gerard
www.prsa.ie
1% insurance levy?This is very helpful thanks. I am in a similar situation but currently have 100% allocation and 1% AMC and wanted to change to a better deal with another broker (same product) for 101% allocation and 1% AMC. As I haven't already benefitted from the 1% bonus, would I get it on the new contract with the same provider?
1% insurance levy?
I was more thinking of bank structured products, say 5 years. To give them parity with insurance companies they only had to pay DIRT annually on the extent of the 5 year guarantee.That’s news to me.
Are you saying no DIRT is deducted from interest paid on a demand deposit, where the rate can obviously vary from time to time (much like a MMF)?
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