1% Levy on Life Assurance & Pension Products

The 1st of August is almost upon us and the introduction of the new 1% Levy on payments to Life Insurance & Pension products is still in a bit of disarray. What is certain, is that from that date the 1% (of each new premium) will apply to individual life insurance 'protection' policies (Mortgage Protection, Term Insurance, PHI etc.). However, the 1% Levy on all new contributions to Pension/PRSA and Investment/Savings products remains a bit of a mystery.

On Friday I received confirmation from Irish Life that they are proposing to 'absorb' the cost of the 1%, to consumers, on Pension/PRSA & Investment/Savings contributions until further notice. It would appear that they, and other members of the Insurance Industry Federation, are in negotiations with the Department of Finance to try and come up with a better solution to this additional 'tax' on savings.

It is my understanding that all Life Offices acknowledge that the Government needs to raise additional revenue; but the levy on savings type products, in its current form, is not workable.

I would hope that the rest of the Life Offices operating in Ireland will adopt a similar approach to Irish Life, as I do not see the Levy as being a major revenue spinner for the Government in the immediate future. Indeed, judging by the levels of contributions to these type policies year to date, I doubt that it would be a hefty burden to bear by any well managed Life Office, from now until December.

A more practical, and probably easier to administer, approach would be to take a nominal tax on the funds under management of each Life Office. Whether this 'tax' would be passed on to the consumer, in the form of an increase in Annual Management Charges, remains to be seen.

As an industry practitioner, I don't go along with these additional taxes on savings. Without savings; there is no future. The Government should be abundantly aware of this predicament.

Update 17/02/2010

The 1% Levy is being collected by all Life Offices for Protection Policies(Mortgage Protection, Term Insurance, PHI etc.)

The 1% Levy will not apply to Pension Policies.

Some Life Offices are collecting the 1% Levy on Savings & Investment Policies and others are planning to do so shortly.

If you are currently planning to Invest a Lump Sum in a Unit-Linked Investment Bond you should check with the product provider as to whether the levy will apply to you.

As of today, the 1% Levy on the products available through www.InvestAndSave.ie and www.Bond.ie is being absorbed by the Life Offices and we will not make any retrospective charge to you for such payments.