Overview
A Section 73 savings policy is a Revenue-approved savings policy for Irish individuals / couples that can reduce 33% Gift Tax during their lifetimes.
This policy should be primarily considered as part of a long-term investment strategy first and foremost, with the optional advantage of using for gift tax reduction after 8 years.
Unlike a Section 72 Whole of Life policy which is effectively life insurance that is payable on death, a Section 73 policy gives more control for those to pass assets, and save tax, in their lifetime.
Key Features
o A monthly premium investment policy is set up with an Insurance company, specifically endorsed as Section 73.
o An investment fund is chosen and each monthly contribution then is automatically invested in that fund. A wide range of investment options will be available.
o Market timing: By investing monthly, timing risk is reduced due to Euro Cost averaging as funds are ‘phased’ into the market.
o Single or Joint Life: The policy can be set up in Sole life only or on a Joint Life basis.
o Premiums: in order to qualify for the Section 73 tax saving, the premiums must be made consistently for at least 8 years and cannot deviate by more than 50% in any 12 month period.
Optional Tax advantage of Section 73 policies
Firstly note that the primary objective of this policy should be as an investment fund and to phase funds into the market over a number of years. The Section 73 tax advantage is an option, rather than an obligation
o From a tax point of view, the policy itself is treated like any other investment fund. Exit Tax (currently 38% and moving to 35% in 2027) on growth is deducted by the Life Company after 8 years. There is no annual tax filing requirement.
o After 8 years of regular contributions, the proceeds of the policy can be gifted to a third-party beneficiary and these proceeds are tax-free to the beneficiary as long as they are used to pay Gift Tax in the same 12 month period.
Example
Joe and Mary Bloggs have adult children and a significant estate. They want the flexibility to transfer wealth during their lifetime, rather than leaving all assets to pass on death. They initially intend to gift each child €420,000 during their lifetime, using the full Group A CAT threshold in the near term.
For illustration, consider one child, Molly. Once her Group A threshold has been used, any further taxable gift from Joe and Mary would generally be subject to CAT at 33%.
Joe and Mary set up a joint Section 73 savings policy in 2026 and contribute €3,000 per month.
After 8 years, they stop contributions and, for the purpose of this example, lets assume the policy has grown to a net value of €400,000.
In 2035, they decide to make a €300,000 gift for Molly’s benefit.
o Without Section 73: a €300,000 taxable gift would create CAT of €100,000 at 33%. Molly would retain €200,000 net after tax.
o With Section 73: the same €300,000 family transfer is structured as €225,000 cash plus €75,000 from the Section 73 policy. The €75,000 Section 73 proceeds are used to pay the CAT due on the €225,000 taxable gift. Molly retains €225,000 net.
o Benefit: Section 73 increases the amount Molly retains by €25,000, from €200,000 to €225,000. This is a 12.5% improvement in the net amount received compared with making the gift without a Section 73 policy.
Disclaimer: Compass Private Wealth does not provide tax or legal advice. No information above should be relied on as formal advice in relation to tax, legal or estate planning. It is for guidance purposes only.