Madam, - The recent Finance Act has introduced provisions which provide an "incentive" for Special Savings Investment Account holders whose annual income does not exceed €50,000 to reinvest up to €7,500 of their maturing SSIA funds in pension products.
The "incentive" is that the Revenue will invest a further €2,500, to provide a total investment into the individual's pension fund of €10,000.
The pension premium paid under these provisions is not tax deductible.
For those paying tax at the 42 per cent rate, the reinvestment of SSIA funds in such a fashion is decidedly unattractive.
A person who is taxable at the 42 per cent rate will have increased their pension fund by €10,000, at a net cost to them of €7,500.
On the other hand, if such a person were to make a direct pension contribution, which is tax deductible, they would increase their pension fund by almost €13,000 for the same net cost.
In certain circumstances, the operation of PRSI and levies will make the direct pension contribution route even more attractive.
It is important that the Revenue clarify this matter as soon as possible before large numbers of taxpayers find that they have entered into commitments which are not to their benefit. - Yours, etc,
JOHN CONRAN, Bluett Conran & Company, Chartered Accountants, James Place East, Dublin 2.