I was intrigued to learn from your column that each parent can give their child €3,000 free of gift tax each year. But when I approached the two biggest banks (BoI and AIB), neither could offer a deposit or savings account in a child's own sole name under the age of seven.
Do you know, does one have to set up an account in their own name or would a joint account be acceptable to revenue? Is there a legal reason why under-sevens can't have their own accounts?
I would be interested to find out how I can practically gift the €3,000.
Mr AG, email I have not been able to ascertain whether there is a specific legal impediment to a child under the age of seven opening an account in their own name, although seven seems to be a threshold for children in all manner of legal issues under Irish and other international law. In any case, it is certainly the case that the financial institutions I looked at impose such a limit.
And it is not just an Irish thing, the same restriction seems to apply in the United Kingdom.
However, none of that should put any practical impediment in the way of you availing of the small gift exemption for your child.
A number of banks and An Post will allow you to open an account in the name of both you and the child. Once the child advances beyond the age of seven, the institution will normally contact you to see if you want to move the account into the child’s name only.
The crucial thing from the Revenue’s point of view is that the gift is clearly intended for the child and not simply moved as a matter of convenience. Obviously, there would be no tax advantage to yourself in putting money on which you have already been taxed into a joint account with your child for your own use, so I cannot see why Revenue would have any issue with it.
Where they do tend to be more aggressive is where money is gifted under the exemption to a series of people who, in turn, channel that money to one or more people who have already benefitted from the exemption. The concern here is that someone might use a circuitous route to try to gift more than the €3,000 limit to any given person.
None of this applies to you. You can set up the account in the child’s name alongside your own for the purposes of facilitating the small gift exemption.
Rolling back public service pension levy?
Is the pension levy decrease for the public sector or just the private?
Mr PV, email
I assume you’re referring to the changes in the pension levy announced in the budget. They effectively confirmed the ending of the levy in the private sector at the end of next year, as previously promised by the Government, and its reduction to 0.15 per cent in 2015 in the run-up to its abolition.
Those measures apply only to the private sector and relate to the levy introduced by Minister for Finance when the Government came to office as a means of paying for the jobs initiative as well as the lower 9 per cent VAT rate of tourism- related businesses.
However, there has been talk in the past week or so of action on the public service pension levy as part of any upcoming public service pay talks. The levy, which averages 7.5 per cent, was introduced in 2009 as part of the then Government’s moves to cut back the pay and pensions bill for 300,000 people in the public sector.
While the first €15,000 of earnings is exempt from the levy, it kicks in thereafter at a rate of 5 per cent on anything between €15,000 and €20,000. The rate jumps to 10 per cent on earnings above €20,000 up to €60,000 and to 10.5 per cent thereafter. The idea is that it might be easier for the Government to sell the concept of an ending or cut in the levy rather than sanction a pay increase. For the public sector workers, the impact will be the same as any cut in the levy will automatically increase take-home pay.
However, I wouldn’t hold your breath. The understanding is that talks will not begin at all until the end of the public service trade unions’ “conference season”, which brings you to the early part of May.
There was some suggestion that talks might conclude by the end of July but, if recent experience is anything to go by, it is more likely that they will continue after the summer.
How permanent is public service pension reduction?
I am retired from the public service. A levy of PSPR is deducted at the rate of €120.09 from my pension on a monthly basis. This is in addition to USC and the normal tax I pay monthly. Is this PSPR levy a permanent deduction or a temporary one from my pension?
Ms MW, email
While the previous inquiry related to a pension levy imposed on those still working in the public service, yours relates to retired public servants in receipt of a pension.
The Public Service Pension Reduction came into force in 2011 and applies to all public service pensions in excess of €12,000. Again, a sliding scale applies, with a 6 per cent cut on any pension between €12,000 and €24,000, rising to 9 per cent on pension income between €24,000 and €60,000, and to 12 per cent on income between €60,000 and €100,000.
On any public service pension income above €100,000 a year, the reduction is 20 per cent.
For those with pensions above €32,500, higher rates were introduced last year.
The first measure was brought in under the Financial Emergency Measures in the Public Interest Act 2010.
That would seem to imply that, once the emergency is past, the measures shall lapse.
That certainly seems to be the case with the public service deduction referred to by the correspondent above, with the Minister for Public Expenditure and Reform Brendan Howlin noting earlier this year in relation to public service pay and pensions: “A day will arrive when the emergency no longer exists.”
Quite when that day arrives for public servants in receipt of a pension, like you, remains to be seen, though a looming election might be expected to sharpen the focus of ministers.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.
