SSIA related Pension Incentive Tax Credit Scheme

K

Killoscully

Guest
See e-brief from Revenue as regards the SSIA related Pension Incentive Tax Credit Scheme. It is not necessary to be on 20% tax rate but earnings for year previous to SSIA maturity must be under 50,000.

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Anybody know if these changes mean that where a married couple are on joint/aggregated married taxation but one would otherwise qualify on their own that spouse can now avail of the incentive?
 
It appears that qualification will be on the basis of an individuals earnings in the qualifying year - P60 or suchlike. Therefore a taxpayer earning under 50K should qualify notwithstanding the earnings of the spouse.
 
Thanks for the prompt reply. Might be a runner for her indoors so. We had dismissed it as a possibility based on the initial proposed rules but must check it out again so.
 
My understanding of the Act is that if you invest €7,500 from an SSIA and then seek to claim the €2,500 from the Govt, that you cannot also claim tax relief on the €7,500.
If this is the case then for top rate tax payers it makes no sense, since you are giving up 42% PAYE +6% PRSI relief. So the total value of €10,000 has cost you €7,500 net, as opposed to investing €10,000 personally and claiming the 48% tax relief (a net cost of €5,200)
Even for standard rate tax payers, the benefit of the SSIA pension incentive seems illusory. The €10,000 value still costs €7,500, whereas if the tax relief system was applied the net cost would be €7,400 (assuming 20% PAYE + 6% PRSI).

Am I mis-reading the Act (possible since it is so turgid).
 
They seem to have made this whole incentive scheme so complicated (even after the latest supposed simplifications) that there's a danger that people will not avail of it because they don't understand the ins and outs. I certainly don't at this stage... Maybe the obfuscation is a deliberate ploy? :(
 
My understanding is that it will make perfect sense for homemaker to avail of the opportunity.

Also agree that it is suitable for the non tax payer and it may be an unbelievable deal for a non tax payer that is over the age of 60 and has no other pension benefit.

Invest your €7,500 and avail of the €2,500 bonus. 'Retire' a few weeks/months later and take the lot tax free as it will be under the limit of (€20K?) before tax free cash, whereby you commute the lot as a lump sum.

Someone else might clarify this but unless the Revenue put in some other 'complication', I think that it will be possible and will also be an administrative nightmare for the product providers (but who will care, not I)
 
A tax credit is on offer - not free cash. The claimant will need to have taxable earnings to qualify.

As outlined by Conan there is really no benifit to anyone (except the pension companies) unless the incentive is an "add-on" to the normal tax relief available on pension contributions.
 
Killoscully said:
A tax credit is on offer - not free cash. The claimant will need to have taxable earnings to qualify.
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Wrong - several tax credits already benefit those who don't pay tax. This is just another one. For example, SSIA top-up, private health insurance premiums tax relief at source, owner occupier mortgage interest relief at source etc.
 
F Kruger,
Not sure this is correct.
If you invest €10,000 into a PRSA (say), having claimed the Tax Credit and then retire, you options are as follows (assuming no other pension benefits):
  • Take 25% tax free
  • Invest 75% into an Approved Retirement Fund/Approved Minimum Retirement Fund
I cannot see how you get all the fund back tax-free (what is your reference to €20k?)
 
I took out a government approved PRSA pension policy a few years back. Does anyone know if it is now possible to transfer my savings to the new SSIA related Pension Incentive Tax Credit Scheme? I appear to qualify under the criteria.

I attach an article in relation to the new scheme.

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This incentive scheme is designed to encourage qualifying SSIA savers to shift some or all of their SSIA funds into a PRSA. I don't see how shifting an existing PRSA into another one, as you seem to be suggesting, is relevant or of benefit.
 
To avail of the tax credit of €1 for every €3 contributed? Although I must examine the return I'm getting on the existing PRSA...
 
You can only get that by transferring SSIA funds to a PRSA. You seem to be suggesting transferring an existing PRSA to another one above. This will not qualify. Maybe I have misunderstood you or something?
 
Apologies for not making myself clear. Can existing SSIA funds + existing PRSA funds be combined & transferred to new SSIA Tax Credit Scheme to avail of €1 for every €3 offer. Or, as you said, maybe there is no benefit to this.
 
Conan

There is regulation that governs 'trivial pensions' which, from my understanding, entitles the individual to a once off payment( subject to PAYE) if the remaining fund after the deduction of the tax-free lump sum (from all pension sources other than State Benefits) is €15K or less.

Is it not then technically possible for an individual/couple to have no tax liability on what would remain ( €7,500) after the tax free lump sum, assuming various tax credits, age, other income etc. being taken into account?

This is just something that I thought might be worth exploring ?
 
Decieboy said:
Apologies for not making myself clear. Can existing SSIA funds + existing PRSA funds be combined & transferred to new SSIA Tax Credit Scheme to avail of €1 for every €3 offer. Or, as you said, maybe there is no benefit to this.
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Only transferred SSIA funds will qualify for the incentive. If you are availaing of this then there is no need to move your PRSA or open a new one. But you will not get any top-up for non SSIA funds.
 
F Kruger,
The Trivial Pension rules state that if the "total of all funds...following payment of the lump sum benefit is less than €15,000" then this can be paid as a "once-off pension". BUT this will be subject to tax.
Also this provision will only apply to PRSAs after the AMRF requirements have been met.
I like the way you are thinking, but the Revenue are ahead of you.
 
Hi all
Conan, That is my reading of the situation i.e no benefit for 20pc payers and a bad move for any 42pc payers to take up the €3 for €1 pension offer. I'm surprised to date nobody on financial/your money pages has written this up. HAve discussed with colleague Charlie Weston,in the Indo/Your Money, raising the 'anomaly' when he wrote the €50k angle yesterday.
We decided not to confuse the situation further, but on more mature reflection, I guess we will have a go at it soon - as the Dept of Finance is either confused, inept, obtuse, or just downright careless about misleading the public with wrong info.
K
 
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