# Free €2500 SSIA/Pension Incentive makes no sense



## cronley (23 Oct 2006)

I dont see any sense putting €7500 of my SSIA  & the governments €2500 into a PRSA. They take the 2500 back from you by taxing the drawings from the pension fund when you retire. Am I missing anything here.


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## Guest126 (23 Oct 2006)

Yes - you may be able to receive it all tax-free when you retire, or at least 25% of it.


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## ClubMan (23 Oct 2006)

cronley said:


> Am I missing anything here.


Yes - in addition to the above tax issues are important but should not necessarily deflect one from planning to find one's retirement years. A high rate taxpayer gets 42% tax and 6% _PRSI_/health levy relief on pension contributions. The pension fund will grow tax free in the meantime. At retirement one could feasibly take a 25% lump sum tax free and pay no tax (if below the income tax exemption thresholds) or standard rate tax (20% now but could be different in the future) on pension income. In such a situation there is still a tax advantage even though one may be paying *some *tax. It's shortsighted to dismiss pensions just because there may be some tax due in the future. Of course what's appropriate really depends on your specific individual circumstances and goals.


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## cronley (23 Oct 2006)

CapitalCCC
Please explain how you can receive it all tax free. I understand that 25% of the PRSA can be taken tax free, but the other 75% is taxable when drawn.


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## extopia (23 Oct 2006)

It will depend on how much you draw down each year.


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## Guest126 (23 Oct 2006)

HOW CAN IT ALL BE TAX-FREE:

Here is just one way...

If it goes in to an occupational pension from which your tax-free lump sum at retirement turns out to be 150% of final salary (for example more than 20 years of service with related company) then it may well be that your entire pension fund is a tax-free lum-sum (including this part).


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## ClubMan (23 Oct 2006)

Or ... you take 25% lump sum tax free and buy an annuity with the rest but the income accruing is below the income tax exemption threshold.


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## cronley (23 Oct 2006)

Thanks folks. I need to do some more sums on my own circumstances, to work this one out.


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## sunshine? (25 Oct 2006)

If you are paying tax at the high rate, this incentive would not be of benefit to you.


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## Guest126 (25 Oct 2006)

Unless you had already maximised your pension contributions for a tax year!


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## ClubMan (25 Oct 2006)

CapitalCCC said:


> Unless you had already maximised your pension contributions for a tax year!


*That's *an interesting point that I'm not sure was ever mentioned before. Hmm.... I'm on 42% and have maximised my pension tax/_PRSI _relief for 2005 and 2006 so far so maybe this _SSIA _to _PRSA _transfer incentive would be useful to me? Or can you maximise your normal annual pension tax/_PRSI _relief and avail of this incentive?


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## Guest126 (25 Oct 2006)

Yes Club you can do both.

I have mentioned this before (I think!).

Remember the fact remains that you have to be on a salary of less than €50k in year before SSIA matures?


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## ClubMan (25 Oct 2006)

Ah - I knew that there was a catch! What a rip-off!


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## GreatDane (26 Oct 2006)

Hi

Without wanting to go too much off topic, I've heard some suggestions that people who are already retired (with only a state pension, lets say), can put their SSIA into a new privately established pension fund, get the Government subsidy & subsequently withdraw it.

Can anyone explain how this works (if it's true) please ?

Thanks

G>


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## MHSpurs (26 Oct 2006)

ClubMan said:


> Ah - I knew that there was a catch! What a rip-off!


Do they hide the fact that there are conditions?

Then by your own definition how can it be a rip off?


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## ClubMan (26 Oct 2006)

The smiley was a clue that I was actually being facetious. Sorry for causing you any confusion. I'll try to be clearer next time.


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## boaber (26 Oct 2006)

Garrettod said:


> Hi
> 
> Without wanting to go too much off topic, I've heard some suggestions that people who are already retired (with only a state pension, lets say), can put their SSIA into a new privately established pension fund, get the Government subsidy & subsequently withdraw it.
> 
> ...


 
This is exactly the reason why Brian Cowen brought in the fact that if you withdraw from your pension within 1 year you lose the govt bonus


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## Fanny (26 Oct 2006)

That's an interesting one I was not aware of, Clubman!

Just to give an example, what is the income tax exemption threshold these days? I know the laws could be changed later...
Do I understand correctly, if I was a low earner and underneath a certain threshold as a pensioner, I would not be asked to pay tax on my PRSA annuity returns?

Fanny



ClubMan said:


> Or ... you take 25% lump sum tax free and buy an annuity with the rest but the income accruing is below the income tax exemption threshold.


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## ClubMan (26 Oct 2006)

Fanny said:


> Just to give an example, what is the income tax exemption threshold these days?


[broken link removed]

For example somebody over 65 can earn €17K p.a. without paying any tax - €34K if they're married.


> Do I understand correctly, if I was a low earner and underneath a certain threshold as a pensioner, I would not be asked to pay tax on my PRSA annuity returns?


 Yes.


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## GreatDane (27 Oct 2006)

boaber said:


> This is exactly the reason why Brian Cowen brought in the fact that if you withdraw from your pension within 1 year you lose the govt bonus


 
So it's a year and a day then or something similar and the retired person is "home free" ?

- actually, Im quite interested in this for a close relative who is retired and could benifit.

Thanks

G>


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## Guest126 (27 Oct 2006)

Yes but tax payable on what is drawn down from the pension (may be applicable depending on circumstance)?


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## GreatDane (27 Oct 2006)

Thanks

The individual in question would not have much in terms of cash or assets (other than private residence and weekly state pension), so I suspect it could almost all be availed of tax free.   

Sadly, the individual in question is one of those who worked for years, was always honest but got "done over" by a dodgy person a number of years back and never really recovered financially.

Thanks for the help.

G>


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## Guest126 (27 Oct 2006)

Sounds good, good luck with it!


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