Q&A: Do you have any idea what class of PRSI contribution will be due on unearned income and what entitlements it might bring.
I had to retire early on ill-health grounds and am 14 paid contributions short of the 520 needed for a contributory pension. I have applied to make voluntary contributions but might the contributions on unearned income make up the shortfall?
Mr T.McM, email
It has not yet been expressly stated what level of PRSI will apply to unearned income when the new regime kicks off in 2014. However, it seems likely that the rate will be 4 per cent.
This will put it in line with Class S contributions, under which self-employed people already pay PRSI on unearned income.
Class S entitles a person to: the contributory State pension; the contributory widow (er)’s pension; maternity benefit; adoptive benefit; bereavement grant; and contributory guardian’s payment.
The other important thing yet to be determined by the Minister is who precisely will be subject to PRSI on unearned income.
The Budget gave to understand that it would apply to all unearned income. However, as it stands, people over the age of 66 do not pay PRSI.
I am aware the Minister did announce plans to target wealthier people over the age of 70 – those earning more than €60,000 – by increasing their exposure to the universal social charge. But there is still no mention of people over the age of 66 paying PRSI.
The details will eventually be published in the Finance Bill but the importance, as you have guessed, is on the entitlement side of the equation.
There is no certainty that the State will use Class S for PRSI on unearned income for those other than the self-employed but, if it did, it would certainly appear to have implications for assessing eligibility for the contributory state pension in cases such as yourself.
It may well be that the new regime will apply only to people under the age of 66.
Where can I find advisers?
Last week you recommended contacting an independent financial broker/adviser regarding pension/investment advice. Where would I get a list of these?
Mr LW, email
The Central Bank keeps a register of financial advisers, with a breakdown of those who are supposed to be able to give independent advice and those that are tied to particular agencies. You can find the list at iti.ms/TWiyfq.
Basically, an authorised adviser is someone who is obliged to give the best advice to customers, regardless of whether that means suggesting products for companies with which s/he has a connection.
A multi-agency adviser can advise only on the products sold by the companies with which s/he has an agency.
The other thing to beware is the cost of advice – in this case, beware free advice. Nothing in financial services is free; if you’re not paying upfront, the broker is going to receive payment by way of commission . . . and that could prove considerably more expensive.
If possible, agree an hourly fee with your broker.
Owner must pay the property tax
Are people living in council houses and paying rent liable for property tax?
Ms CB, Longford
No. When he was announcing the measure in the Budget, the Minister for Finance pointed to background documents on the new charge. These state explicitly that local authority housing is not exempt from the charge unless it is provided to people with special housing needs, such as the elderly or people with disabilities.
However, liability rests with the owner of the property, in this case the local authority or social housing organisation, not with the people living in the property. Of course, there is nothing to prevent owners raising rents to cover the cost to offset this over time.
Will I only have to pay tax once?
As I rent out my house, up to now I have been liable for NPPR (even though I only own one house). Last year I had to pay NPPR as well as the household charge. I think in 2013, I will be paying NPPR and six months worth of property tax . . . but from 2014 on, will I only have to pay tax once on this house?
Ms SD, Dublin
Yes, from 2014, you will pay only the local property tax. As you say, the household charge has been phased out at the end of this year (although unpaid amounts will be added to your bill for the new property tax).
The tax itself is not coming into force until July 1st, so you will only pay half the annual amount in the coming year.
And, yes, you will still be liable for the non-principal private residence charge (NPPR) on the property for the whole of 2013. Thereafter, it will no longer be in force.
Is free travel and TV licence hit?
Will the free travel and free TV licence schemes be affected by the changes to the household benefits package for the over 70s or do the changes only apply to the telephone and electricity/gas allowances?
Mr TB, Wicklow
The changes apply only to the phone and electricity gas allowances. The former drops from €22.60 a month to €9.50 from January. The electricity/gas allowance falls to €35 from €39.40.
This column is a reader service and is not intended to replace professional advice. Please send your questions to QA, c/o Dominic Coyle, The Irish Times, 24-28 Tara Street, Dublin 2, or to dcoyle@irishtimes.com. No personal correspondence will be entered into.
