Monday, 23 May 2011

No PRSI on Employer PRSA

I know - snappy title. The Department of Social Protection have confirmed that contributions by an employer to a PRSA do not generate a PRSI liability for the employee. Such contributions do, however, generate a USC liability.

In clarifying this, the powers that be have gone less than half-way to rectifying a known anomaly between PRSAs and Occupational Pension Schemes. Employer contributions to Occupational Pension Schemes are not a Benefit in Kind and therefore do not generate a liability for the employee in respect of tax, PRSI or the USC. Employer contributions to a PRSA are a Benefit in Kind and, while tax relief offsets the tax and now the PRSI liability has been removed, the liability to the USC remains.

When PRSAs were launched, less than eight years ago, they were designed to be low-cost, transparent, portable pension savings vehicles that would encourage more people to save for their retirement. Why the Government is now discriminating against them in favour of the older type Occupational Pension Schemes is beyond me.

Image: graur codrin /

Saturday, 21 May 2011

Surprise - Mortgage Lending is Down

This week, the Irish Bankers Federation published their Mortgage Market Profile. Unsuprisingly, the Irish mortgage market continues to contract. In my opinion there are two main reasons for this - (1) people are still deferring property-buying decisions due to fear / uncertainty / possibility of further price drops and (2) lending criteria has tightened so much that it's a lot harder to get approved for a mortgage than it was previously.

Here's an extract from the Press Release...

• 3,259 new mortgages issued in Q1 2011 to a value of €577 million
• Home purchasers continue to dominate the market

The IBF/PwC Mortgage Market Profile published today shows that 3,259 new mortgages to the value of €577 million were issued during the first quarter of 2011.

The volume of new lending is down 42% compared to the previous quarter and is down 53.1% on the previous year. While the seasonal pattern of mortgage lending typically results in a lower level of lending in the first three months of the year compared to other quarters, this more pronounced reduction in activity reflects the broader macroeconomic environment.

However, the key home purchaser segments of the market, First Time Buyers and Mover Purchasers, continue to dominate this smaller market. Together they now account for over 77% of the market by value and 67% by volume. In effect, more than three-quarters of all mortgage credit issued now goes to the home purchasing segments of the market.

Lenders generally continue to report subdued underlying demand for new mortgage finance. This has been influenced by uncertainty around macroeconomic developments, property price trends and future interest rate movements. At the same time, lenders continue to point to the need for prudent lending with the all-important focus on the borrower’s employment situation and capacity to repay.