Essential Tax Benefits of a Savings Plan

In a rapidly changing economic landscape, where efficient tax planning plays a vital role in financial advice, savings plan products from a life company offer a range of attractive tax benefits. Understanding and leveraging these tax benefits will undoubtedly contribute to long-term financial success and wealth accumulation as we move forward in 2024.

Karen Deenihan, Senior Savings, Investments & Funds Marketing Manager with Aviva Life & Pensions Ireland DAC, explores three tax benefits of these products.

1. Section 73: Funding for a Future Gift Tax Liability

The lifetime transfer of an asset can give rise to a gift tax liability for the beneficiary of the gift. To fund for this gift tax liability, your client can endorse their Aviva Savings Plan policy under Section 73 of the Capital Acquisitions Tax Consolidation Act (CATCA) 2003 at outset. The benefit of using a Savings Plan policy to fund for a future gift tax liability is that if the qualifying conditions, as prescribed by the Irish Revenue Commissioners (“Revenue”), are met, the proceeds of the policy (to the extent used to pay the gift tax liability of the beneficiary) are exempt from Capital Acquisitions Tax (‘CAT’) and will not increase the gift tax liability of the beneficiary. What’s more, your client is not obliged to use the proceeds of the policy to pay a potential gift tax liability. This feature offers you and your clients flexibility with their financial plans.

2. Small Gift Exemption: Passing Wealth Across Generations

The Aviva Children’s Savings Investment Trust allows you and your customers to make use of the annual small gift exemption. The Small Gift Exemption allows your clients to gift up to €3,000 tax-free in any one year to their child, grandchild, or anyone else and this gift will not impact the recipient’s group threshold for Capital Acquisition Tax purposes.

The use of a Bare Trust allows money to be paid by a Settlor(s) to a trust fund managed by Trustees on behalf of the Beneficiary(ies) of the trust.

While the Children’s Savings Investment Trust uses a Bare Trust in conjunction with Aviva’s Savings Plan and is appropriate for beneficiaries under the age of 18, we also have a simple solution where the beneficiary is aged over 18 which allows parents, grandparents and anyone else to gift up to €3,000 per annum to their chosen beneficiary.

3. Favourable Exit Tax for Companies: Maximising the Benefits of Compounding

Companies in Ireland also stand to benefit from the tax advantages offered by savings plan products. Corporations are subject to an exit tax rather than ordinary income tax rates when encashing a unit linked savings plan. Profit elements of any withdrawals from savings plans are subject to exit tax of 25% for companies. As the investment growth is only taxed on any withdrawal, any surrender, maturity, assignment, every eight years or on death, the investment growth is not reduced each year by tax. This gives companies’ savings the potential to work hard and benefit from compounding.

With Aviva’s Savings Plan, your clients can:

• Invest as little as €100 per month. This product offers access to a range of strong performing investment funds at competitive charges.
• Set this product up as a Section 73 policy at the outset.
• Set this product up to fund gift tax for adults.
• Set this product up for Company Regular Savings
• Additionally, you can use our new Children’s Savings Investment Trust to fund for gift tax for minor beneficiaries.

Karen Deenihan
Senior Savings, Investments & Funds Marketing Manager
Aviva Life & Pensions Ireland

Learn more

To find out more about Corporate Savings & Investments with Aviva , please contact your Aviva Account Manager.

Warnings

Warning: If you invest in this product you may lose some or all of the money you invest.
Warning: Past performance is not a reliable guide to future performance.
Warning: The value of your investment may go down as well as up.
Warning: These funds may be affected by changes in currency exchange rates.