Dominic Coyle answers your financial queries.
SSIA pension deal still holds
Does the Minister's decision to close the "loophole" in the SSIA pensions scheme mean that we can no longer avail of the special deal? We are both pensioners and our income would have met the criteria for the €2,500 bonus. Our SSIAs don't mature for a couple of months yet.
Mr A.J., Galway
The Minister has indeed moved to limit the scope of the loophole in his €2,500 incentive for transfers from maturing Special Savings Incentive Accounts (SSIAs) to a pension product, but he has not done away with the incentive altogether.
Effectively, the scheme announced by Minister for Finance Brian Cowen in the last Finance Act allowed people with income in the tax year before their SSIA matures of less than €50,000 to receive a bonus of €1 for every €3 they transfer from their SSIA upon maturing to a pension. The maximum bonus was €2,500, limiting the benefit to the first €7,500 transferred.
Exit tax on any amount transferred to a pension - even above that €7,500 level - is waived.
As anyone up to 75 can open a Personal Retirement Savings Account (PRSA), there was nothing to stop existing pensioners opening such an account. Equally, a pensioner can receive a tax-free lump sum amounting to a quarter of their pension fund, meaning pensioners could access at least some of their newly opened PRSA immediately.
This was highlighted in this newspaper before the Finance Act even passed through the Oireachtas, but no amendment was made. Instead the Revenue sent out a bug letter to pensions companies threatening to report them to the Pensions Board should they act contrary to "the spirit" of the scheme.
Following further intervention from The Irish Times, this Revenue advice was amended and toned down.
Now the Minister has announced plans to introduce amending legislation "at the earliest appropriate opportunity".
This legislation will ensure that from September 29th (last Thursday), any pensioners availing of the Cowen incentive will lose that €2,500 bonus if they access the funds within 12 months.
When you consider that, time and again, this Government and previous governments have said they cannot move speedily to close loopholes that have given huge financial benefit to powerful interests in the State, it seems strange, to say the least, that the Government feels able to move so swiftly on this occasion - when, for once, the loophole is benefiting the less well-off in our society.
Still, if you can leave your money in the pension for at least 12 months, the €2,500 is still available to you.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or 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 queries. No personal correspondence will be entered into.
