Thanks to everyone who joined our ‘Moving money from deposit’ webinar – we had great engagement from Financial Brokers both during and after the call. Today I want to touch on a few of the points that we raised during the session, and also answer some of the questions that we received.
As a starter, I think we are all very aware of the opportunity for customers to earn better returns by investing their money in multi-asset type funds over leaving money on deposit. A number of Financial Brokers brought up the 41% rate of exit tax (compared to the 33% rate of DIRT). This is a very valid query – exit tax is out of sync with other forms of taxation. But I would argue that given the potential for much higher returns on an Investment Bond over money on deposit, it is an argument worth making to a customer.
If we look at a real life example of someone who invested €35,000 over 8 years ago then I think it makes a compelling story:
|1st September 2015
Invested €34,653 (after levy, product allocations, etc).
100% in Active Asset Allocation (AAA) Fund.
|31st August 2023
Policy value before tax: €54,218
Gain made: €19,565
Exit Tax (8th year deemed withdrawal): €8,021
Current value today: €46,697
Given than the equivalent deposit rates had been close to 0% over that same time period, it really make a good story for the customer. We are seeing interest rates rising – with local banks offering headline rates of >2% (before DIRT of 33%) so I’m sure some customers will be swayed by those – but the long-term argument for investing is compelling. And maybe 41% tax is taking the glass half empty view, 59% of any return is tax-free! None of us love tax but you’re only paying tax when you’re making money and paying some tax on some returns is better than paying no tax on no returns.
- One simple online application form
- No further admin, annual tax returns or tax payments
- Award winning investment management with >30yr track record
- Asset allocation and ongoing active management
- Range of investment options across different risk levels
- Tax deferred
- Clear and cost effective pricing
- Ability to withdraw funds at any time
- Online portal giving current value of investment both before and after tax
- Experience and financial stability of a global insurer