A NUMBER of brokers who deal in second hand endowment policies have responded to recent comments we carried by Mr Aidan McLoughlin about the Capital Gains Tax (CGT) risk when purchasing such policies. He was responding to articles which had appeared in the Irish Broker magazine.
"The CGT position is not at all as severe as your correspondent points out," writes Mr Andy O'Loughlin of Endowment Exchanges Ltd of Co Donegal. He itemises them as such:
"All capital gains to the individual, benefit of course, from annual indexation using the retail price index - say 3 per cent per annum - before the liability is assessed.
"Assuming that the maturing policy is the only gain by a married couple in that particular year, the annual exemption of £2,000 also applies before liability for the CGT is calculated.
"The tax payable by assurance companies on their with profit fund is tiny, and certainly not 27 per cent as suggested by your correspondent. Policies are by government regulation for a minimum of 10 years and various exemptions/concessions are allowed.
"In any event the maturity values are net of tax and over the past number of years have come in at 9 to 13 per cent compound on premiums paid, depending on the company/term length.
"Finally, the Irish CGT regime is severely out of line with the EU generally and there is little doubt that we will be obliged to move more into line with Europe in this area to avoid losing mobile investments to more tax friendly areas."
