Tax-effective fund offering launched

30 May 2019

Generation Life and Redpoint Investment Management have partnered to launch a tax effective fund offering, which will offer investors a tax rate of nine to 11 per cent, making it lower than the 15 per cent offered by superannuation.

Generation Life hoped that the Tax Effective Australian Share fund would reduce the impact of tax paid by investors by delivering higher than expected returns through the compounding effect of lower annual tax payments, compared to what they could get from a domestic share-based managed fund.

The launch came in the wake of the Federal election, where the cost of tax on investors proved to be a focus for voters following the Labor Party’s franking dividend reform proposal.

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Generation Life’s joint chief executive and managing director, Lucy Foster, said that advisers needed to be more proactive in considering the impact of tax on clients’ returns, shifting their focus from before-tax performance.

“Our modelling shows that tax can be the single biggest drag on what an investor can receive from their investment,” she said. “The recent focus on lowering investment fees and the effect that has on performance has led to the rise of index-based investing. While focussing on fees has merit, the reality is that the biggest cost of any successful investment is tax.”

Generation Life predicted that the new fund could improve take-home returns by 56 per cent.

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