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Switch funds into ETF

  • 01-07-2014 5:17pm
    #1
    mickmac76
    Registered Users, Registered Users 2 Posts: 400 ✭✭


    Hi

    Back in 2007 I started putting money into a quinn life index funds every month as a long term investment. So far I've put in about 31,500 euro and the funds I have are worth around 41,000 euro. I don't need access to the money any time soon as my investment is a long term saving. I intend to continue putting about 450 euro a month into long term investments.

    Would I be better off taking the money out of the funds and purchasing ETF's myself from a broker. The funds I currently have all have charges of between 1 and 1.5 percent. Also if I take the funds out I will have to pay tax of about 3,800 euro bringing my investment down to about 37,000 euro. I'd like to hear peoples opinions on what I should do.


    Mick.


Comments

  • #2
    Browney7
    Registered Users, Registered Users 2 Posts: 3,100 ✭✭✭Browney7


    mickmac76 wrote: »
    Hi

    Back in 2007 I started putting money into a quinn life index funds every month as a long term investment. So far I've put in about 31,500 euro and the funds I have are worth around 41,000 euro. I don't need access to the money any time soon as my investment is a long term saving. I intend to continue putting about 450 euro a month into long term investments.

    Would I be better off taking the money out of the funds and purchasing ETF's myself from a broker. The funds I currently have all have charges of between 1 and 1.5 percent. Also if I take the funds out I will have to pay tax of about 3,800 euro bringing my investment down to about 37,000 euro. I'd like to hear peoples opinions on what I should do.


    Mick.

    Assuming its a life insurance policy it's subject to deemed disposal rules whereby exit tax is deducted every 8 years from the policy and paid to revenue.

    If you were to buy an ETF I'm pretty sure you'd be subject to this regime also but if you crystallised your gain now you won't pay tax for another 8 years. I'm not certain of this though. Again its my understanding if you bought a FTSE etf and an S&P500 etf you wouldn't be able to offset gains and losses. Open to correction on this also though.

    1.5% p.a. is a little on the high side. What funds are you invested in and do they suit your needs/are they fit for purpose?


  • #3
    mickmac76
    Registered Users, Registered Users 2 Posts: 400 ✭✭mickmac76


    Hi Browney

    Thanks for the reply. The policy I have at the moment is a life insurance policy with a tax every 8 years as you said. Currently my funds are split between a Euro index fund, a UK index fund, a USA index fund, a technology fund and an emerging markets fund. The funds do suit me but I'm not sure if i'd want to buy six or seven different ETF's. Also the tax situation could be complicated with the 8 year rule. I don't want to save money on the fund fee's only to need an accountant to try figure out my tax liability every year. The most troubling part of ETF's is that no one seems sure of how the tax situation works.


    Mick.


  • #4
    valderrama1
    Closed Accounts Posts: 53 ✭✭valderrama1


    Not 100% sure of the tax on ETFs either but I think they are treated as shares. So if that's the case (?) you would pay capital gains at 33% when you eventually sell them on any profit over 1200 euros (basically). But watch out for dividends on them, they will be taxed at income tax rates and you'll have to do a tax return for them. Also the country where the ETF company is based will withhold a percentage so you might not be left with much but still it might be 1% or so which is something over time. You might have to look up how to calculate the income tax but once you know how to do it you shouldn't need an accountant and it would be more or less the same every year. (There are some ETFs where the dividend is not paid out and instead they reinvest it for you, they'd be much better if you can find them for the indexes you're interested in.)

    The advantage with the Quinn funds is that you can change what you have in each fund without any cost. If you had ETFs you'd have to sell and buy again to change. But even if you had 7 ETFs and didn't want to sell them anytime soon, you could just buy them. It would be a once off trade and it wouldn't be too bad. The "expense ratio" for the main indexes like you have is fairly low usually, maybe 0.25% so you would definitely gain on that. Over 40,000 the difference - say it was about 0.75% is actually about 300 quid a year so it's not to be sniffed at. That is how life insurance policies make their money of course..


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