The Minister for Finance, Mr McCreevy, announced today he intends to change the tax treatment of personal portfolio life assurance policies.
Mr McCreevy said he had been made aware that the new "gross roll-up" tax arrangements for life companies, which came into effect in January of this year, were being used as so-called "wrappers" for direct personal investments.
"There is no element of a collective investment in these products; in essence the life policy is merely a contrived vehicle to secure gross roll-up tax advantages for selected personal assets," Mr McCreevy said in a statement today.
He said that historically the special tax treatment afforded to life insurance investment was based on the idea of collective funds and pooled investments using the professional management expertise of the life companies.
He said it was never intended that the same beneficial tax treatment would apply to purely personal direct investments using life policies as a "wrapper".
Mr McCreevy announced that, in respect of such personal portfolio policies, he will be providing in legislation for a 20 per cent surcharge to apply (on top of the normal exit tax of 23 per cent) when such policies are being cashed in, whether in whole or in part, on or after today.