Q & A

Old age pension claim

I am 59 years of age and have taken early retirement. My only income is a small company pension. I was born in England and worked with commercial companies between 1961 and 1975 in England with gaps of only two and six weeks between jobs. In 1975, I came to work in Ireland, based in Dublin for a commercial company. I retired in May, 1998.

What I want to know is:

a) When can I claim a British pension?;

b) b) To whom do I submit any such claim?;

c) How much am I likely to receive?;

d) When can I claim an Irish pension?;

e) How much am I likely to receive?;

f) Which is more beneficial to me financially - a British pension, Irish and British pensions or an Irish pension only?;

g) What are the tax implications?

Mr J.C., Sligo

Because of the number of years which you have worked in Ireland, your situation is relatively uncomplicated. Assuming you have paid your PRSI contributions continuously during your Irish employment, you have enough of them to receive a full Irish contributory old age pension. Such a pension currently pays £83 a week for those under 80 years of age, £88 a week to those over that threshold. Following changes announced by the Minister for Finance, Mr McCreevy in the Budget, these figures will rise to £89 and £94. However, you will have to wait until June of next year for these increases to take effect. You do have to submit a claim for such a pension. This should be made to the Department of Social, Community and Family Affairs. It will then send you the forms necessary to complete any application for such a pension. The department warns that applications should be made at least three months in advance of the applicant turning 66 years of age. This is to allow time for the necessary application and checking procedures. People who do not apply run the risk of losing certain pension benefits because there is a deadline on retrospective payments. This is particularly applicable to those people who are continuing to work beyond their 66th birthday but who are eligible for an old age contributory pension.

In cases such as that of Mr J.C. who started work in Ireland late, the Department takes what it calls a short average in determining eligibility for the contributory old age pension. This means it goes back 20 years and determines the number of weekly PRSI contributions made over that time. In the case of Mr J.C., he would have a full complement of contributions in that period and so should be eligible for the maximum level on pension. Given that this is the case, there is no question of the British pension being relevant. You cannot claim two full state pensions even in separate jurisdictions. Had Mr J.C. fallen short in his contributions for the requirement of the Irish pension, his stamps in Britain would have come into play. As it is, in this case, there is no need for them to do so.

On the question of tax, Mr J.C., who is resident in the Republic and will be claiming a contributory pension in the State, will be liable for income tax here on all his earnings - the contributory pension and his existing company pension - assuming the two exceed the relevant thresholds.

Return on sterling savings

I have a query regarding sterling and the EMU. Should I convert sterling savings accounts in banks and the post office in Scotland before January 1st, 1999, or is it worthwhile holding fire as Britain will be outside the EMU?

Mr B.M., email

This is the second time in as many months this topic has been raised, understandably perhaps in the light of the imminent change to the euro.

There are several issues which anyone with money in sterling savings or planning to put money into such vehicles needs to consider. These are: [SBX]

currency fluctuations; [SBX]

interest rates; [SBX]

commission costs.

Looking at the first issue, the Irish currency is likely to be less exposed to fluctuations than in the past as it will be bolstered by being party to a club which includes the French and Germans. Indeed, the euro aims to become a major player alongside the US dollar in the currency stakes, although there is no way of knowing how rocky the early days of the new currency might be. On the British side, sterling appreciated considerably against the pound and other European currencies in the run-up to EMU, partly on the back of higher interest rates in that country. It may continue to be seen as a safe haven as the euro cuts its teeth on the markets, which would preserve the balance in favour of deposits in Britain. However, it is quite possible that sterling will fall back again, effectively depreciating in value against the members of the eurozone. This is particularly true if, as expected in many quarters, Britain makes a concerted effort to join the EMU at a later stage.

The question of currency risk is tied into that of interest rates. If rates remain as low as they are currently within the euro zone countries, including the Republic, the rates on offer for British deposits look attractive. If, on the other hand, sterling falls in value against the euro for whatever reason, that would have to be offset against any interest gain. Alternatively, if British rates continue to fall - and they have more room to do so than their euro counterparts, especially if sterling intends joining the euro club - the benefit of investing in Britain would be diminished.

In addition to the above factors, you will face commission costs on any transfer between currencies inside and outside the euro zone, although such charges will disappear for currency movements wholly within the zone.

As you can see, gauging whether to invest at the ridiculously low rates on offer here or take the risk and avail of the undeniably more attractive rates in Britain is a lottery. As you weigh up your options and decide how to gamble, one final point to remember is that interest not taxed at source - i.e. DIRT free - will be treated as income for Irish residents and currency gains can, in addition, be liable to capital gains tax.

Send your queries to: Q&A, Business This Week, The Irish Times, 10-15 D'Olier Street, Dublin 2, or email to dcoyle@irish-times.ie.