Dominic Coyleanswers your questions.
Spelling out SSIA conditions
My SSIA is due at the end of this month from a building society. I am 71. I enquired from them as to how I could place €7,500 into a pension scheme and take advantage of the extra €2,500 from the Government.
They felt that this was not possible. I know you have dealt with this matter in the past (I actually cut out your reply, but now that I need it, I cannot find it). Could you please spell out the conditions concerning this scheme, particularly as I am already drawing a pension.
Mr D McA, e-mail
The level of ignorance and misinformation confronting customers at financial institutions defies comprehension. Businesses are savvy enough to salt away hundreds of millions in profits but cannot properly train frontline staff is an indictment of their attitude to customers who generate massive profits.
The rules on the Cowen initiative, or the Pension Incentive Tax Credit, are straightforward. Provided:
a) you are transferring money from a maturing SSIA to an approved pension policy within three months of the SSIA maturing;
b) that your income last year did not exceed €50,000 and;
c) you are prepared to leave your investment in that pension policy for a minimum of one year.
You are entitled to receive €1 for every €3 transferred - up to a maximum bonus of €2,500.
To maximise your benefit you need to transfer €7,500 to the pension policy. In addition, you will not pay exit tax on the sum transferred to a pension - a saving of 23 per cent on the interest or investment gain accrued in your SSIA.
The other point to bear in mind - under general pension rules - is that you cannot open a Personal Retirement Savings Account (PRSA), the most appropriate vehicle for your pension contributions in this case, once you have turned 75. PRSAs are the vehicle which would generally be opened by someone availing of this scheme.
That aside, there is nothing to stop someone who is already a pensioner availing of this initiative. Indeed, the people most likely to gain are precisely those paying little or no tax - a situation more likely to apply to pensioners. High earners - those paying tax at the 41 per cent rate - would be better off availing of normal tax relief on pension contributions than on the Cowen initiative.
Some life companies have been positively obstructive in facilitating pensioners looking to open PRSAs, cowering behind what was an intimidatory letter from the Revenue that it subsequently had to back away from. Correspondence to this column suggests Eagle Star has been more helpful than some of its peers to people in your position.
Irish Nationwide
Having read your response to Mr T O'B (March 23rd), you state that €20,000 or over will qualify for a forthcoming windfall. My reading is that no amount qualifies for windfall at this stage, no matter how large. I believe this has been the case for some considerable time. Perhaps you could ascertain this?
Mr B Q, Wexford
The reply to Mr T O'B was in connection with his long-standing investment in the society - the account he held is no longer open to new entrants. The only threshold that matters for existing members is the threshold that existed at the time they joined the society.
Within Irish Nationwide, the threshold for eligibility on more recently opened share accounts - those activated since March 1st, 2003 - is €20,000.
More generally, under the Building Societies Acts, you must have been a society member for a full two years on the date the demutualisation is announced to benefit from the process.
It is true that it is now likely to be too late for people to avail of windfalls at the Irish Nationwide by opening an account but there is no guarantee.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara 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. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
