Dominic Coyle answers your questions
Accounts for sterling payment
I wonder can you help me please. I have grandsons in England and I also have a modest sterling dividend income which I want to use for the benefit of the boys. I had thought I would have no trouble in setting up a sterling account here to make regular payments into savings accounts in England in their names. (I want to avoid, if possible, passing the money through the boys' parents in case nasty tax implications arise now or in the future.)
In fact it has turned out to be a nightmare. I have been hindered at every turn by a mixture of regulatory and anti-money laundering measures (eg a Republic of Ireland resident cannot hold an account in Northern Ireland) coupled with the reluctance of Irish banks to offer such a service without unreasonable conditions and fees (my bank NIB demands a balance of £10,000 and £100 per annum-plus in transaction fees - we have ways of showing you we don't want your business!)
We can't be the only grandparents in the country who wish to set up such an arrangement, so how can we do it? Any suggestions or sources of advice would be most appreciated. Thank you very much.
Mr B.B., Dublin
I have checked with several sources in banking and there appears to be no reason why you should not be able to establish a sterling account in the UK.
Where you might encounter practical obstacles is in setting up a sterling account within the Republic. As you have discovered, the charges involved in these accounts can be prohibitive for someone looking at the small-scale transactions you envisage. This is because these accounts are designed for use by business involved in cross-Border trade and not by individual retail customers. This is not unique to National Irish Bank.
As you say, you are simply trying to use your sterling dividends to benefit your grandchildren without having to go to the cost and hassle of converting your sterling into euro and back again.
If you are dealing with banks in the North, you might be better advised to approach one with a sister operation in the Republic - such as Northern Bank (NIB), First Trust (AIB), Ulster Bank or Bank of Ireland.
You might also consider opening - or have their parents open - accounts in Britain in the names of your grandsons. You could then arrange for the companies from which you receive sterling dividends to pay those amounts directly into this account.
Limits on SSIA pension bonus
My wife has received her SSIA and is interested in investing €1,000 in the government scheme where they will contribute €2,500.
My income is €70,000 and as my wife is working in the home she does not have an income of her own.
If she invests in the scheme, is there a tax liability when she withdraws the money in about five years time when she is 65.
I will also be 65 in five years with a pension equal to half my salary.
Mr R.K., Galway
The only two limits on people availing of the Government bonus on pension contributions from maturing SSIAs are:
a) a ceiling of €7,500 on the amount the Government will recognise in relation to its €1 bonus offer for every €3 invested;
b) an income threshold of €50,000 in the year before the SSIA matures.
As your wife is working in the home and has no independent income, she should easily fall within these parameters in terms of eligibility for investment in a Personal Retirement Savings Account (PRSA).
In terms of ultimate tax liability, income from a pension is treated the same as income from other sources in terms of taxation. Thus, if your wife's income when she draws down her pension in retirement exceeds the income tax exemption threshold, she will be liable for income tax; otherwise, not.
It is worth bearing in mind that when it comes to drawing on your PRSA, there are certain rules in place. Upon retirement - any time between 60 and 75 - a PRSA holder can take 25 per cent of the fund as a lump sum free of tax.
The rest, as I said, is taxed as income depending on your liability. However, unless you already have guaranteed annual pension income of €12,700, including any social welfare entitlements, you will not be able to further reduce your PRSA balance if it is below €63,500 until the age of 75.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2 or e-mail 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. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
