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37

LIFE

February/March 2012 www.esb.ie/em

GETTING TO THE BOTTOM OF A TAXING SITUATION!

Clearing up the confusion

BARRY MCCAL

PERSONAL FINANCE

MANY OLDER PEOPLE received quite a shock at the end of last year when they opened a letter from the Revenue Commissioners informing them that they may have underpaid tax if they hadn’t declared that they were in receipt of both a state pension and an occupational pension. The fact that the vast majority of those who received the letters were fully tax compliant and had absolutely nothing to worry about did little to dispel the fear and near panic that gripped a very vulnerable group.

The difficulty and resulting confusion lie in the long-held but mistaken belief that state pensions are exempt from tax and in the different ways in which state and occupational pensions are treated for the Universal Social Charge (USC).

With very few exceptions all, income is subject to tax. The State Contributory Pension is €230.30 a week at present with an additional €206.30 available for a qualifying adult. This would bring the pension to €436.60 for most married couples or civil partners. This is €22,703.20 per annum – well within the €36,000 tax exemption limit available to couples. Hence the widespread belief that the state pension is tax-exempt.

However, if one of the partners in that couple also had an occupational pension of €30,000 they would find themselves liable to tax. In this instance, tax would be payable at the 20% rate for the €16,703.20 income which is over and above the threshold. This would be €3,340.64 per annum and would normally be deducted under the PAYE system by the occupational pension provider.

However, if the pension provider has not been informed by Revenue of the necessity to deduct this tax they will not do so. This can occur if the Revenue had not been informed of the couple’s state pension income.

The issue gets a little more complex after that due to the introduction of the USC. While the state pension is exempt from the USC and both state and occupational pensions are exempt from both PRSI, occupational pensions are actually liable to the USC. Once you have an income of more than €10,036 a year you are liable to pay it on the whole of your income – state pension excluded of course.

Thus, in our earlier example the USC would be payable on the full €30,000 occupational pension at the rate of 2% for the first €10,036, 4% for the amount between €10,036 and €16,016, and 7% for everything above €16,016. However, the 7% rate is abolished for people over the age of 70 and medical card holders and they pay the 4% rate for all income above €10,036.

In the case of our example where our notional couple are both under 70 and do not qualify for a medical card, the total USC liability would be €1,418.80 (€200.72 + €239.20 + €978.88). This would give a total liability between income tax and USC of €4,759.44 or €91.52 per week.

This is a considerable amount of money and can quickly build up over time if it is not paid for any reason. The good news is that a huge majority of pensioners are paying their full tax and USC liabilities on time and in full so have nothing to worry about.

Anyone who is still concerned about their tax situation should contact their occupational pension provider or the Revenue Commissioners (www.revenue.ie) for advice and assistance.

Renault Wind Gordini - 1.2 TCE 100bhp.

DAVE WALSHE

MOTORING

GORDINI. A NAME to conjure up images of cars tearing all around Europe and winning Rallies. It’s as synonymous with motoring as Chanel is to perfume. Of late, Renault has started reusing the name again on their cars, this time the Wind. A two seater of particularly distinctive looks, it screams “look at me”. I on the other hand had to drive it.

This car really lives up to its name. Wind noise with the roof up or down. “Yes Baldrick”, it’s a two seater convertible with a very clever, flip-folding, opening roof. It flips up and over without bending in the same style as the Ferrari 575M Superamerica - very good company. The Ferrari stills beats it in flipping time taking 10s v 12s for the Wind, that’s Ferrari for you, so competitive. Renault will be pleased to be compared to Ferrari and on that score the Wind’s alloy wheels are as appealing as anything on a Ferrari.

The market for this car is undeniably young and trendy, that’s not ageist or, fashionist just factist. In traditional Gordini Blue with the two trademark white strips and white mirrors, it can only be driven by those who can carry it off. It is a cool car alright but I’m afraid the delights are visual for the observers whereas the driver gets to know its flaws all too soon.

The driving dynamics of this car are not in keeping with the Gordini tradition. Sporting it ain’t and the car never really feels entirely composed being driven hard or just tipping along. I can easily get boy/girl racer wheelspin just when I don’t want it. On twisty roads its ride is only adequate.

Roof down the car loses it’s rigidity a bit too much and I tended to ease off, which in any convertible is usually my style of driving. Nice and slow and enjoy the trip. That trip won’t be too long as the tank only takes 40 litres. With the roof folded the boot space is still surprisingly large so shopping trips are not threatened at all.

What Renault has tapped into here is a car that has looks for the style conscious buyer. Someone who likes to express themselves individualistically and is comfortable with that. It is an ideal accessory for those fashion minded individuals who need a form of transport full stop and not car aficionados who are style conscious second.

I think Renault has designed a car around a roof idea, for a niche customer. As a target market exercise Renault have hit the bullseye.

However, like a bullseye, the target market is small, as will be the number of buyers of the Wind.

Want to save €1,000s on your personal debt?

SIMON DUNNE

ST. PATRICK’S CREDIT UNION (ESB STAFF) LTD.

Are you paying 11% p.a. on a personal loan with your bank? Are you paying 18% p.a. on your credit card bill?

If the answer is yes to any of the above questions, then clear these expensive personal debts with a loan from St. Patrick’s Credit Union at just 6.5% p.a. and save yourself €1,000s in the process.

Personal loans

The table below shows the repayments on a €20,000 loan over five years with Bank of Ireland, compared with the same loan from St. Patrick’s Credit Union.

As you can see there is a saving of €2,523 to be made by choosing St. Patrick’s Credit Union.

Credit card debt

If you owe €10,000 on your credit card and are only making the minimum repayment every month, it will take you 20 years to clear the balance and cost €9,000 in interest.

If you take out a loan to clear the balance from St. Patrick’s Credit Union over three years at €306.49 per month, it would cost €1,033 in interest – a saving of €7,967 to be made.

Please also note the following:

• Fees and charges
Banks sometimes levy fees and charges for the ‘privilege’ of taking out a loan with them, such as a Documentation Fee and Completion Fee which are typically around €70 each – St Patrick’s Credit Union does not.

• Loan protection insurance
Banks do not offer FREE loan protection insurance for personal loans i.e. insurance which will clear the loan in the event of death - St Patrick’s Credit Union does.

If you want to save €1,000s, then please see our website www.stpatrickscu.ie for further details on how to apply for a loan or contact a member of staff on 01-6325100.

*source- www.bankofireland.com

St Patrick’s Credit Union Competition

Win an iPod nano!!

To be in with a chance of winning please answer the following question and text your answer to 087 9858238 in the following format:

“CUCOMP followed by your answer (i.e. a, b or c) and your name”

How much cheaper is a €20,000 loan from St. Patrick’s Credit Union than from Bank of Ireland?

a) €1,000 b) €2,000 c) €2,523

Important Only one entry per person, no mail entries acceptable, and the closing date is the 30th March 2012.

Last issue’s winner was Bernie Lennon, working in Athlone. Congratulations Bernie and your iPod nano is on the way out to you.