Dominic Coyle answers your financial questions

PRSI relief for self-employed

In reply to my query last month, you said the self-employed are entitled to refunds of PRSI on contributions paid into private pension plans and to enclose a copy of my P60 to claim a refund from Revenue.

(1) As a self employed person (sole trader) I do not have a P60.

(2) I have been allowed a tax credit on my contributions.

(3) Are you mixing up a self-employed person with an emloyed person who pays into a pension from their own resorce.

(4) I have been advised that if I was an employee I would be entitled to PRSI refund but as a self-employed person am not.

Could you please clarify this, as if this is the case it would seem to be very inequitable in light of the Government's efforts to convince people to take out pensions.

Mr M.K., e-mail

There has been a host of correspondence on the issue of PRSI and pension contributions since the item referred to above appeared last month. The good news, from my point of view at least, is that the answer given to the query regarding PRSI relief on pension contributions was correct - apart from the obviously crass suggestion that self-employed people send P60 they would not have to the Revenue.

People are entitled to relief from PRSI on contributions to a pension scheme, whether it is an occupational scheme or a personal pension (Retirement Annuity Contract or Personal Retirement Savings Account).

Of course, if you are paid through the PAYE system, you automatically receive tax relief on pension contributions, including relief from PRSI. The same can apply to directors, who are on company payrolls.

For other self-employed people, the situation is slightly more complicated, though the principle is the same. You are entitled to the relief but you will have to claim it back from the Revenue.

The PRSI refund section is based at the Collector General's office in Francis Street, Limerick, and I am informed that claims can be made after you file your annual return.

Clearly, from the number of letters and e-mails I have received on this issue, there are a considerable number of people out there receiving incomplete advice regarding their tax entitlements.

Some of the confusion may be down to the fact that self-employed people have only been able to claim PRSI relief in this way quite recently - the Department of Social and Family Affairs informs me that the current system of PRSI refunds for self-employed individuals on pension contributions dates back to a statutory instrument that was signed by the minister in 2003.

PRSI for over-66s

Replying to a query about tax deduction on pension contributions, you mentioned in passing that PRSI was no longer payable by people over the age of 66. I have checked this out with various sources and no-one seems to know about it. Are you sure you are correct?

Mr A.S., e-mail

I have checked again and I am certain that my information is correct. It can be a little confusing because the slip you receive with your pension or other payment can include a figure under the heading of PRSI.

In fact, for people over 66 this relates to the 2 per cent health levy which people continue to pay until they are 70.

It is also worth noting, if you are a pensioner, that you pay the health levy on any occupational of private pension income but not of the social welfare pension - the old age contributory or non-contributory pension.

SSIA contributions

The question that arises for me in the recent correspondence on the timing of SSIA maturity dates is whether or not there will be 61 payments taken from the SSIA holder by the institution rather than 60. This is particularly the case for situations like the one mentioned last week where the SSIA was opened in July 2001 but will mature only at the end of July 2006.

Some financial institutions have been known to accept an extra instalment or two at the end of a mortgage or loan - naturally returned later after they have enjoyed the comfort of the money for a period. The possible extra contribution would be welcome if there was an extra 25 per cent monthly bonus but I would have grave doubts as to whether that accident would occur.

Mr L.F., Roscommon

The SSIA scheme rules state that the policy matures at the end of the month in which the fifth anniversary of the first payment occurred. However, the scheme is a five-year programme and no financial house has the authority to take any further contributions as the scheme will not be extended.

Will it happen? Quite possibly. Will you get the Government bonus on such payments? No chance.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 10-16 D'Olier Street, Dublin 2 or by e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering questions.