Cash covered by underlying guarantee

Q&A:Q I read your answer to a query in Personal Finance recently which prompts me to enquire when this two-year guarantee on deposits in the seven Irish banks and building societies expires?

I opened a deposit account at Irish Nationwide with a five-figure sum on April 16th, 2009 for a 15-month fixed term and am anxious as to its future with this institution.

Ms P.K., e-mail

A The two-year guarantee on deposits at seven named Irish financial institutions runs from September 29th, 2008 to September 29th, 2010.

Your 15-month deposit with Irish Nationwide will mature in July 2010, well before the guarantee expires.

In any case, someone in your position would be covered under the underlying bank deposit guarantee scheme that will come back into force when the absolute guarantee period expires. It provides – at least following amendment last summer – to fully guarantee deposits by any customers in a particular institution up to a maximum of €100,000. Given that you are talking about a “five-figure sum”, it should be covered by this protection even after September 2010, should you choose to roll over your investment at Irish Nationwide . . . assuming Irish Nationwide is still in existence as a standalone group.

If, as a result of the State rescue programme, it winds up being merged with other groups, your money will still be covered.

It’s wait and see on Irish Nationwide

Q Last week, you said that members of Irish Nationwide are unlikely to get a windfall if the society merges with another [building] society. Can you tell us if members will then retain their shares, albeit with their value diluted?

Mr D.B., Dublin

A The parameters of any merged institution have not yet even been sketched out, never mind properly signed off.

If Irish Nationwide was to merge with another building society, there is no technical reason why existing members of each institution could not hold membership rights in an enlarged mutual. However, if any merger was to involve a non-mutual, that might be more difficult.

A second issue is whether the State nationalises Irish Nationwide or any other of the guaranteed institutions ahead of such a merger. If it did, the membership rights of existing shareholders – ie yourselves – would disappear in the same way as those of shareholders in Anglo Irish Bank have already been excised. I know it’s not much help but we will have to wait and see.

Income levy paid on minimum wage

Q I am single, PAYE employed on a minimum wage and work flexi-time between 20/30 hours a week. I am paid weekly.

My annual income is no more than €12,000, including holiday pay. I am now paying an income levy of 2 per cent on all my weekly income. As I am well under the income threshold of €15,028 per annum, why is this the case?

Mr P.C., e-mail

A The income levy is charged on gross income at rates varying from 2 per cent to 6 per cent since the start of May, following increases announced in the emergency budget.

However, there are a number of exemptions, and top of the list is an income threshold of €15,028 per annum. If you earn less than that, you should not be facing a charge under the income levy.

The only reason why this might be happening is that your employers are required to assess the income levy on a weekly basis. You say you work flexi-time and it might be possible that in certain weeks you will earn more than the weekly threshold of €289. In that event, your employer has to deduct the levy for any week in which you exceed that amount.

If, at the end of the year, your annual income is below the €15,028 threshold and you have been with the one employer all year, Revenue says that employer should make an adjustment at week 52 and refund all income levy deducted from you.

If you have moved employers in the period, you will need to apply to Revenue for the refund.

If, despite the flexi-time, you do not earn more than €289 in any given week, you should not be paying the 2 per cent and should inform your employer of this.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2 or by e-mail to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.