# Government €2.5k top up where at least €7.5k of SSIA into pension



## Betsy Og (1 Feb 2006)

Details in todays Indo on unison.ie

Will such a pension contribution still be tax deductible or will the the 15%-30% bands will be increased by the above sum? 

If not then wouldnt seem to be any benefit to top rate taxpayers as they would get approximately 48% of their contribution back whereas if they availed of the scheme above and it ruled out tax relief then only get 33.3% "back" (i.e. the 1/3 top up into the fund).


----------



## Christy (1 Feb 2006)

*Putting SSIA into pension*

I am not sure if this is in the right place or not, I heard this morning that the Government are 'offering' to pay up to €2,500 on top of your SSIA if you put up to €7,500 of your SSIA into your pension.  Does anyone know if this would be on top of the tax relief you wouild get anyway?  E.g. if you put in €7,500 into your pension you will get tax relief of €3,150 (42%) and PRSI of €485, so for a payment of €3,865 you will get a pension contribution of €10,000. That seems like a great offer, or am I missing something?


Christy


----------



## Sherman (1 Feb 2006)

*Re: Putting SSIA into pension*

There was mention on the radio this morning that it was primarily aimed at lower paid workers.

Given Biffo and Bertie's recent conversion to socialism I'd say it is very unlikely they'd want to be seen 'giving' more money than absolutely necessary to the higher bracket taxpayers, so, without knowing the full details, I'd say its one or the other, i.e. the 'gift' or the tax relief, but not both.


----------



## Claragh (2 Feb 2006)

Check out www.revenue.ie where the details of the scheme are to be found.


----------



## argolis (2 Feb 2006)

According to the eligibility criteria, qualifying SSIA holders must earn less than €50,000 gross salary but NOT pay higher rate tax - how is this possible? I must be missing something here...


----------



## ClubMan (2 Feb 2006)

How can an individual or married couple earn less than €50K and pay only 20% tax? Easy - see [broken link removed].


----------



## argolis (2 Feb 2006)

Ah ok, I guess a married individual can have an SSIA earning 41,000@20% plus sundry tax reliefs so they've made it 50,000 max   I should have realised that!


----------



## Betsy Og (2 Feb 2006)

If you earned gross income of less than 50k in '05 (for an '06 maturing SSIA) but crept into top rate, it seems to me it might be worthwhile making an AVC for '05 to bring you back into the 20% band and become eligible for the scheme. Might be particularly the case if your '06 income was not going to give you much top rate tax relief on pension contributions.

Conditions that cant reduce your regular pension contributions - no substitution.
Also no tax deduction for the SSIA contribution (for the avoidance of doubt). 
If married you can see how you would have fared if you had been separately assessed.

Also, the tax credit refunding you the exit tax is proportional on the amount of the SSIA fund you invest in a pension fund. i.e. only pay in half to the pension fund then only get half of the 23% exit tax back.


----------



## cerberos (3 Feb 2006)

if couple  make the 20% tax condition, does that mean that they both can do 7,500 EACH into differenet pension scheme?


----------



## trekie (3 Feb 2006)

after reading how the banks  waded in and charged a wopping fee (1800 euro if max was saved) for equity based ssia's i dont know why anyone would take up an offer to transfare your ssia's to a pension so some financial institution can cream a wopping fee off the top. Of course people should have read the details and its their own fault but lets hope the outing of the ssia rip off will alert people to avoid this latest scheme that will only allow these institutions to make another killing...if you want to provide for a pension....stick with property....its not tax deductable but its managed by you and not some faceless fund manager that gets paid even if he loses your money





			
				Betsy Og said:
			
		

> Details in todays Indo on unison.ie
> 
> Will such a pension contribution still be tax deductible or will the the 15%-30% bands will be increased by the above sum?
> 
> If not then wouldnt seem to be any benefit to top rate taxpayers as they would get approximately 48% of their contribution back whereas if they availed of the scheme above and it ruled out tax relief then only get 33.3% "back" (i.e. the 1/3 top up into the fund).


----------



## ClubMan (3 Feb 2006)

trekie said:
			
		

> after reading how the banks  waded in and charged a wopping fee (1800 euro if max was saved) for equity based ssia's i dont know why anyone would take up an offer to transfare your ssia's to a pension so some financial institution can cream a wopping fee off the top. Of course people should have read the details and its their own fault but lets hope the outing of the ssia rip off will alert people to avoid this latest scheme that will only allow these institutions to make another killing...if you want to provide for a pension....stick with property....its not tax deductable but its managed by you and not some faceless fund manager that gets paid even if he loses your money


You have posted essentially the same thing three times now in three different threads. Please stop this or you will be banned.


----------



## Claragh (3 Feb 2006)

I pay into a Company AVC scheme and I'm in the %20 tax bracket. Am i much better off putting €7500 from my SSIA account into this AVC scheme rather than €7500 of my earnings into my AVC scheme ?


----------



## ClubMan (3 Feb 2006)

Contributions from income qualify for 20% tax relief, 4% _PRSI _relief and 2%. So each €1 contribution costs you €0.74. Transfers from your _SSIA _up to the €7.5K limit attract a €1 for €3 top-up so each €1 effectively costs you €0.67. So it would seem to make sense to avail of the _SSIA _to pension transfer if possible.


----------



## Claragh (4 Feb 2006)

Thanks Clubman.
From  www.revenue.ie 
*The incentive has two features.*
*Firstly:* for every €3 of SSIA proceeds reinvested by an eligible SSIA holder in a pension product, the Exchequer will contribute €1 by way of a tax credit. This tax credit cannot exceed €2,500.
_*Secondly:*_ the Exchequer will contribute an additional tax credit to the pension product. This additional tax credit will be a percentage of the tax deducted from the SSIA on maturity. If the SSIA holder reinvests all (100%) of hisher SSlA proceeds then the additional credit will be all (100%) of the tax so deducted. If he/she reinvests one half (50%) of the SSIA proceeds in a pension product then the additional tax credit will be one half (50%) of the tax so deducted - and so on.

Can you explain this second section in laymans terms ?


----------



## CCOVICH (4 Feb 2006)

> _*Secondly:*_ the Exchequer will contribute an additional tax credit to the pension product. This additional tax credit will be a percentage of the tax deducted from the SSIA on maturity. If the SSIA holder reinvests all (100%) of hisher SSlA proceeds then the additional credit will be all (100%) of the tax so deducted. If he/she reinvests one half (50%) of the SSIA proceeds in a pension product then the additional tax credit will be one half (50%) of the tax so deducted - and so on.



When your SSIA matures, you will pay exit tax of 23% (if an equity based SSIA) on any capital gain on the total contributions.

For example: You have contributed €100 per month. You have got a €25 bonus each month. The total contributions to the fund are 60x€125=€7,500.

On maturity, the value of the fund is €8,000, so the capital gain is €500, and tax payable is €115.

Presumably, if you invest the €8,000 in a pension, you receive a tax credit of €115 (therefore tax paid is nil), if you invest €4,000, the tax credit is €57.50 (therefore tax paid is €57.50) etc.


----------



## Claragh (5 Feb 2006)

Thanks CCOVICH

I also found this in todays Sunday Business Post

[broken link removed]


----------



## CCOVICH (5 Feb 2006)

Claragh said:
			
		

> Thanks CCOVICH
> 
> I also found this in todays Sunday Business Post
> 
> [broken link removed]



The SBP are stealing my piece!


----------



## RainyDay (5 Feb 2006)

This scheme is a good idea, but restricting it to SSIA holders is a terrible idea. For example, anyone who was strapped for funds 5 years ago and couldn't afford to take out an SSIA, but is just getting their head above water now should be really encouraged to participate in this scheme. But they will be barred from participating at present.


----------



## willows (9 Feb 2006)

If you put €10,000 of your own money into a pension fund you can get 26% tax & prsi relief costing you a net of €7,400. To get €10,000 into your pension fund through the government scheme it will cost you a net of €7,500. Am I missing some benefit from the governments incentive scheme here to actually call it a benefit ?


----------



## Betsy Og (10 Feb 2006)

willows said:
			
		

> If you put €10,000 of your own money into a pension fund you can get 26% tax & prsi relief costing you a net of €7,400. To get €10,000 into your pension fund through the government scheme it will cost you a net of €7,500. Am I missing some benefit from the governments incentive scheme here to actually call it a benefit ?


 
Well theres also the refund of the exit tax - though since this is only on the investment growth it may not be a huge figure.


----------



## CCOVICH (22 May 2006)

The rules have been changed slightly on who qualifies for this scheme-see  for details.


----------

