In Liechtenstein and Switzerland, no taxes are payable on the earnings or gains within a life insurance policy, so the compounding benefit of the investment is on pre-tax dollars.
It may also be the case in other countries that because the policy being purchased is a deferred annuity, the tax payable on the gains or income earned is deferred until they are actually taken out of the policy. That is, tax is deferred during the accumulation phase of the policy because the income/gains are not actually received by the policy owner but rather they are reinvested.
These income/gain taxes can potentially be deferred indefinitely because the policy does not need to commence making payments at a particular age – they can commence at 45 or 95.
The important thing to consider is the potential taxation implications when they do commence – such as pre or post retirement. There may also be potential taxation benefits if the policy is paid out as result of the life insured’s death. That is, there may be no taxes payable on any of the income or gains within the policy.
Due to the individual nature of the tax benefits, MyLifePlan consultants are happy to arrange for a joint meeting with your accountant to discuss your individual situation.