Dominic Coyleanswers your questions.
Reinvesting those SSIAs
With regard to your reply to D.McA. (April 6th) re tax incentive for reinvesting a portion of an SSIA into a PRSA, how and when (including timeframe) could my mother (aged 73 and in receipt of old age non-contributory pension) draw down income from it and will it affect her non-contributory OAP? Also, what options are available if any, for my father (aged 80 and also receiving non-contributory OAP) to benefit from above incentive if he cannot open a PRSA?
Mr S.McK., email
Working back from the end of your question, your father cannot benefit from the incentive at all because it is only open to people who transfer money from the SSIA to a pension scheme and anyone over the age of 75 cannot open such a scheme.
In relation to your mother, she is entitled to make such a transfer, notwithstanding the fact that she is already in receipt of a pension. The easiest way for her to do so is by opening a personal retirement savings account (PRSA).
When it comes to drawing down this sum, there are certain parameters - at least until your mother turns 75. At that point, she is entitled to draw down the entire sum as long as it has been invested in the PRSA for a minimum of 12 months.
Until she turns 75, she would be allowed to draw down 25 per cent of the PRSA after a year had passed free of tax, but could not withdraw the rest unless she had a guaranteed income of €12,700 a year for life.
Where that is not the case, any PRSA fund of €63,500 or less must be used to buy an annuity or be left in what is called an approved minimum retirement fund.
In the case of your mother, as she is on a non-contributory state pension, her guaranteed income is likely to be around €10,400. This means she would not be able to get access to all her PRSA until she turned 75 but then that is less than two years away and probably worth the wait in view of the €2,500 on offer from the Government should she transfer €7,500 of her SSIA to a PRSA.
As to the effect on her pension, non-contributory schemes are means-tested.
Any investments, bank savings or cash in hand held by your parents up to a threshold of €20,000 has no effect on their pensions. Above that level, the next €10,000 is presumed to be providing means of €1 per €1,000. Assets of between €30,000 and €40,000 are presumed to yield income of €2 per €1,000 and anything above that is considered to be produced €4 per €1,000.
In terms of affecting the pension, it doesn't matter whether these thresholds are breached by the SSIA itself maturing or from any subsequent PRSA opened under the incentive scheme.
Tax on SSIAs
As the exit tax on the SSIA represents Dirt tax on the bank interest, I cannot understand why the Revenue Commissioners refuse to refund it to a person who was living solely on the State pension of €10,500 per annum. Dirt tax has been refunded on an ordinary savings account. Perhaps you can shed some light on this anomaly?
S.H., Dublin
The anomaly to which you refer is explained by the fact that the exit tax the Government levies on Special Savings Incentive Accounts (SSIAs) is not deposit interest retention tax (Dirt). It may look like it and the impact on your SSIA may be akin to what it would be under Dirt, but this is a totally different tax.
The best way to explain it is to look at the nature of SSIA accounts. For those who opted for deposit account SSIAs, it is easy to forget that there was also an equity-based option. Dirt historically is levied on bank deposit accounts; it was never relevant to equity investments.
Indeed, the exit tax levied on such equity investments is non-refundable regardless of age or means, unlike Dirt. The Government effectively sees the SSIA scheme as an investment scheme rather than a bank deposit scheme, which explains the nature and extent of the tax levied on the interest or investment gain accruing over the five-year period - 23 per cent.
It is worth noting the Government's €1 for €4 bonus is not taxed, so SSIA holders are still doing remarkably well on the scheme.
Fyffes break-up
In the break up of Fyffes, I received shares in Total Produce. Should I also now have shares in Blackrock Land and, if not, why?
Mr W.L., Mayo
First up, yes, you certainly should have shares in Blackrock International Land - as long as you bought your original Fyffes shares before Blackrock International Land was spun off in May 2006.
Under the terms of the break-up of Fyffes into three constituent parts - Blackrock, Fyffes and Total Produce - those people who were existing shareholders of the original Fyffes before the process began receive one share in each of the three companies for each Fyffes share they originally held.
Assuming you bought your Fyffes shares before the Blackrock demerger, it would seem strange that you did receive your shares in the later demerger of Total Produce but not in the original spin-off of Blackrock.
In general, the main reason people do not receive their shares in these situations is that the people who maintain the share register have an out-of- date address.
Clearly, however, if they were able to contact you in relation to Total Produce, they do have the correct details and you should have received the Blackrock information and shares.
I suggest you contact the companies' share registrar - Computershare - which manages the share register for Fyffes and its offspring. The company is contactable at: Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18.
It is also contactable by telephone at (01)216 3100 and, in my experience, is very helpful.
While we are on the subject of Fyffes, Blackrock and Total Produce, it is worth noting that the Revenue has updated its advice on the "base cost" of the Total Produce shares.
At the time of a recent query on this area, only the Blackrock base cost had been determined.
For those who bought Fyffes shares before the break-up began and who still hold those shares, the price they originally paid for the stock should be apportioned as follows:
• Fyffes 42.4 per cent
• Blackrock 23 per cent
Total Produce 34.6 per cent
If you bought your Fyffes shares since Blackrock was demerged in May 2006, the base cost would be apportioned between Fyffes and Total Produce as follows:
• Fyffes55 per cent
• Total Produce 45 per cent.
These figures relate to Irish shareholders of Fyffes. The allocation between the companies is slightly different for UK-based shareholders.
• 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.
