With the 1% levy on life assurance products about to kick in, now is the time to secure the best price on a policy, writes FIONA REDDAN
AS INSURANCE firms get ready to impose the new levy on life assurance products, investors have a small window of opportunity to get the best deals.
While the 1 per cent levy was introduced last August, most insurers did not impose the charge straight away, instead choosing to carry the cost themselves while at the same time lobbying the Government for its removal.
Now, however, given the formalisation of the levy in last week’s Finance Bill, insurers are set to apply the charge, although it should be noted that it no longer applies to pension products.
Customers of Irish Life, for example, will see the charge being applied from March 1st, while Bank of Ireland Life will also start collecting the levy in March for its regular premium savings business, and this will be collected retrospectively to August 1st.
The bank says it is “currently reviewing our position” on its lump sum investment business.
Standard Life says it is still absorbing the levy, but this is “under review”, while Aviva is preparing its systems to enable it to apply the levy, but it adds that it is continuing consultations with the Department of Finance about the application of the levy.
From April, Canada Life will apply the levy on all investment and savings policies that were taken out on or after August 1st, but there will be no backdating of the levy to last August.
The firm has already been applying the charge to policies taken out before August 1st.
So this gives investors a chance to boost their allocation, at least with some insurers, because when the levy is imposed, investment allocation will be reduced by 1 per cent – ie, for every €100 invested, only €99 will make it into the fund, with €1 going to the Government in the form of the levy.
For customers who invest in the product through a fee-based broker, Irish Life is offering a keen management charge on investments in its Signature 2 Bond.
According to the life assurer, retail clients can avail of a “100 per cent investment/no exit fee/0.75 per cent a year fund charge” on this product – with a minimum investment of €20,000 – if they invest before February 26th.
The incentive is only through fee-based brokers, as the commission they’d normally receive is reinvested for the client.
Investors in Bank of Ireland’s new Secure Plus 8 lump sum product, which was launched earlier in the week, will get an extra 0.25 per cent allocation if they invest before February 19th. On an investment of €100,000, an extra €250 would be allocated to the fund.
Canada Life, meanwhile, is offering a 0.5 per cent reduction up until September 29th in the annual management charge for investors in its Canada Life/Setanta Cash Fund.
Minimum investment ranges from €75 for monthly premiums to €6,500 on lump sums.
While the levy applies only to insurance companies – which means that funds offered by stockbrokers, banks and overseas investment providers are not liable – some exempt service providers are nonetheless making their offerings even more competitive by cutting charges.
Rabodirect, for example, is waiving the 0.75 per cent entry fee on its regular investor plans until the end of March.
This means investors will be able to access more than 51 internationally managed funds in sectors such as water, Latin American equities and mining, from €100 a month.
Annual management charges vary on the funds, but range from 0.7 per cent to 2 per cent per annum, while there is also an additional 0.75 per cent exit charge.
However, if you are thinking of investing, you should consider that the levy may yet be extended to all investment service providers, and not just life assurers.
The insurance industry is continuing to lobby the Government for a wider application of the levy, and hopes that the change will be imposed before the Finance Bill is enacted in early April.
