SSIA to PRSA - but now paying some tax at 42% rate

[laragh]

My wifes SSIA has just matured with AIB and she is considering rolling €7,500 of it into a PRSA since she has no pension in place at the moment.
She was earning less than €50,000 last year so would qualify for the Government bonus on her €7,500.
This year she will have a gross income of more than €50,000 and would be paying tax at the 42% rate.
Is this still an attractive scheme since she is now paying tax at the high rate?
Would she be better off just claiming the income tax relief at the high rate on a lump sum contribution?

Is AIB necessarily the best option for a PRSA?

 

[mula]

My wifes SSIA has just matured with AIB and she is considering rolling €7,500 of it into a PRSA since she has no pension in place at the moment.
She was earning less than €50,000 last year so would qualify for the Government bonus on her €7,500.
This year she will have a gross income of more than €50,000 and would be paying tax at the 42% rate.
Is this still an attractive scheme since she is now paying tax at the high rate?
Would she be better off just claiming the income tax relief at the high rate on a lump sum contribution?

Is AIB necessarily the best option for a PRSA?

if she can afford it she can do both

 

[imogen]

I made an enquiry to revenue recently about this on my own behalf. You can indeed do both but whether it is worth it depends on your circumstances/income etc. The SSIA scheme if claimed is credited first, then any 42% tax payable if there is pension payment in excess of the maximum SSIA amount and so on.

Bear in mind when calculating that in addition to the tax credit for income tax there is a reduction on the tax paid on any gains from the SSIA itself where you claim the SSIA rollover.

I am waiting to find out how much my SSIA comes out at, and to do some calculations once I know my total 2006 earnings. However I suspect it will work out better to NOT claim the SSIA rollover tax credit (at 20%) and instead to claim against 42% tax.

It is not such a mad thing to do if your wife, like me, thinks her income might also go down again after 2006 and she needs to get pension payments in place...

I would think it would be a good idea to get fee-based advice (independent) on what to do with the actual pension payment rather than just paying AIB. You will probably get some good advice on that here but not from me, I'm afraid!

Best wishes

Imogen

 

[murp]

If you are paying tax at the 20% rate then the SSIA / PRSA route is probably best as the effective rate of tax saving is higher (given the fact that no tax tax is paid in the gain on the SSIA element invested in the PRSA.)

Where you are paying tax at the 42% rate it is better to actually take the money from the SSIA and invest it in a pension and claim the tax relief personally.

 

[jem]

with regard to who to invest it with I would sugest that you go to a broker and not to a bank who can only offer one company- their own.