Monday, February 22, 2010

1% Levy on Unit-Linked Savings and Investments

I'm a bit piqued by the 'not for turning' attitude on the Government on this Levy; as introduced in the Finance Bill.

Let's call a spade a spade; this Levy will have a negative affect my business but it also affects me as a consumer as I have a preference for saving/investing through these products. I don't fancy handing over 1% of every payment I make, to save for my family's future, to subsidise a Government that can't think beyond tomorrow.

In 1985 the Government introduced a 'temporary' insurance levy of 2% on General Insurance (house, motor etc.) premiums to assist with the bailing out of the Insurance Corporation of Ireland. 25 years later, it's still there and it was increased by 50% in 2009.

Now, the Governments attention is focused on Life Insurance Protection type policies (mortgage protection, term insurance etc.) as well as Unit-Linked Savings and Investments. They had initially planned to apply the 1% Levy to private Pension policies but did a u-turn on the wisdom of that between the publication of the Budget and Finance Bill. The 'great minds' that had the temerity to even think about slapping a levy on these pension policies should be the ones that are emigrating.

Anyway, back to the title of this post. I understand that Government need to raise revenue to bail out the reckless spending and lending that has landed us in the mess we are in, but I don't understand the train of thought that goes along with some of the areas they are hitting.

Here is a summary of why I think that the 1% Levy on Unit-Linked Savings and Investments is a bad fecking idea :

# It's Anti-Competitive - It does not apply to all similar type products in this sector.
# It's a deterrent to save/invest - Folk should be encouraged to save so that they have something to fall back on when their Country goes bust, just to keep the show on the road.
# I would have serious doubts about the anticipated revenue it will raise - Do they (DoF) even know?
# The Government take tax at 41% of the growth on these funds already.
# Consumer groups have been campaigning for a long time to reduce the costs of these products - not increase them.
# There seems to have been no thought given to the costs of administering the collection of the levy.
# It punishes those that are being prudent with their money by saving for the long-term - Unlike you-know-who.
# It will drive savers/investors to the doors of the Banks and Post Office - Think about that one!
# There is no 'plan' as to how long this levy will apply - "Shur they'll get used to it like the Insurance Levy".
# It comes at a time when the Government are introducing their own medium to long-term savings scheme via the National Solidarity Bond - No levy on that then. Ahem!!!

Folks, would there be any appetite out there to get the Government to reverse this levy on Unit-Linked Savings and Investments? They haven't listened to the Industry heads. Do you think that they might listen to the consumers?

UPDATED 30/12/2011

The 1% Levy on the Savings & Investment product available at will not apply for the term of the contract.


Liam D. Ferguson said...

Hi Gerard,

I agree with everything you say above.

The Government will be announcing their latest pensions initiatives tomorrow afternoon. No doubt they will be stressing how important it is that everyone plans for their pension. They might even announce some form of compulsory pension contribution scheme.

But evidently they're happy to discourage people from saving for medium-term needs, like their kids' education.

Perhaps the Government would prefer to see people borrowing from the banks for such needs?

Gerard said...

Indeed. The savings market is being completely distorted by taking a short-term view of a long-term issue.

I suppose that the Government will eventually have to make up their mind about which days of which weeks they want us to save for the future, and what days/weeks they want us to spend.