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 / FreeDigitalPhotos.net

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.

Personal Fund Thresholds - Revenue deadline looming...

In accordance with Section 787P(2), Taxes Consolidation Act 1997, anyone with pension benefits with a capital value of over €2.3 million at 7/12/2010 has until 7/6/2011 to apply for a Personal Fund Threshold (PFT) Certificate. Anyone who misses this deadline faces substantial additional taxation when they retire. Bearing in mind that an application for a PFT Certificate involves gathering details of all pension arrangements, often from a variety of sources, anyone who needs a PFT Certificate should be taking action now.

Worryingly, in this Irish Times piece, Dominic Coyle tells us that by April 8th, only 144 enquiries had been received by Revenue on this topic, out of an estimated 6,000 affected people.

Who does this affect?

While the figure of €2.3 million might seem enormous, don't forget that this is the capital value of a pension fund. So you don't have to be a multi-millionaire to fall into this category. Here's a few examples: -

• Anyone in a Defined Benefit pension scheme with an expectation of a pension of €115,000 per year or more, before lump sum entitlements.

• Any Public Servants with an expectation of a pension of €100,000 per year or more.

• Anyone in either of the above categories with a lower pension entitlement but with additional pension funds from other sources, e.g. AVCs, RACs, pensions from previous employments etc.

• Anyone with Defined Contribution pension funds totalling more than €2.3 million at 7/12/2010.

What happens if the June deadline is missed?

After 7/6/2011, anyone who retires with pension benefits with a capital value of greater than €2.3 million, who does not have a PFT Certificate, will be taxed on the excess over €2.3 million at 41%. This is an additional tax, over and above the normal taxes that will apply to drawdown of pension funds. So an individual who retires with a pension fund of €3 million and no PFT Certificate will pay €287,000 in tax before drawing their pension benefits in the normal way.

How can we help?

We can gather the required information from the various pension schemes, calculate the capital value of pension benefits in Defined Benefit and Public Sector schemes, calculate the Personal Fund Threshold and prepare the application for submission.

The world will end when men & women pay the same for insurance

I wrote recently about how insurance premiums of all sorts will have to be harmonised for gender from 21st December 2012 following a European Court of Justice ruling. So from then on it will be illegal to charge different premiums for men and women for insurance.

But it will never happen!

As it turns out, 21st December 2012 is the day that the world ends. This is the day that the Mayan calendar ends and according to many highly respected sources, it will be the date that the world will come to an end. Google "End of World 2012" if you don't believe me. The internet never lies.

Oh those cunning Europeans.

Testing Posterous

Nothing to see here folks. Just testing!

TRS online only...and Revenue on YouTube

I see that Revenue are no longer accepting paper applications for Tax Relief at Source (TRS) on new mortgages - TRS must be applied for online. That might prove troublesome for people who aren't that comfortable with the web, don't have unrestricted access to the web etc.

However, Revenue have produced a few snazzy new videos and published them on YouTube to help people through the process.

You can get more details of TRS in general by clicking here and watch their videos by clicking here.

Unisex premiums for insurance deferred

I blogged last week about today's European Court of Justice hearing in relation to whether or not men and women could be charged different premiums for various types of insurance. This includes life assurance, income protection cover, car insurance - any type of insurance where gender is a factor in the price.

Well the Court today decided that gender-based pricing is not in keeping with EU law. BUT they have permitted an extension such that the current pricing methods can continue to apply until 21st December 2012.

No doubt our insurance companies will be poring over the full text of the judgement in the coming days to see what needs to be done. But it's business as usual for now...

You can read the press release here.