Why to use a “Wrapper” or Open Architecture insurance product
With more and more people becoming aware of the costs of investing and how this can impact on their net returns, it’s time to do some comparisons.
If one invests in investment funds, there is an entry cost of usually between 3% – 5%; without meaning to state the obvious, this means your investment is in negative position straight away, and could take some time to recover.
If one holds the fund for less than 6 months in Luxembourg and a gain is made, then there is of course Capital Gains Tax (CGT) to pay.
When putting your money in a “wrapper” with a large company, there is no up-front charge and only annual, quarterly and transaction fees. These fees are based on the initial premium and not on the value, so any gains made are of immediate benefit. This is a long-term solution with a minimum timescale of 5 years.
Larger companies have deals with most fund houses; with the larger fund houses these are NAV (Net Asset Value) deals, so no up-front fees – a considerable saving !
Another advantage with investing this way is that one may be able to access some investments that would not normally be available to an individual investor.
Whilst assets are within the wrapper and, even if one holds a fund or other asset for only a short period, there is no CGT payable as the assets are held by the life company and therefore the individual does not have an immediate gain. In Luxembourg there is no tax on withdrawals from such products.
The choice of investments within such a wrapper is huge and, with some, one can even hold individual stocks and shares and also some structured products.
The tax information above of course relates to residents of Luxembourg; however, should the individual return to the UK there are tax advantages – however there are restrictions on the choice of investments held within the wrapper.
- Article originally posted on Chronicle.lu
