PERSONAL FINANCE:Your queries answered
Q
I have over 25 years’ service with a local authority. I still have a little over 10 years to go to reach retirement age. Obviously, I will have my local authority penson but will I also qualify for the State old age pension? What are the criteria for receiving both pensions?
- MR P E, KILDARE
A
If you have been with the local authority for the past 25 years, the likelihood is that you will not be entitled to the State contributory pension.
This is paid to pensioners who, during their working life, paid the full rate of PRSI. However, until fairly recently, local authority workers paid a lower rate of PRSI. In pension terms, anyone appointed to a position in a local authority before April 6th, 1995 is deemed to be uncoordinated. It would appear that you were appointed around 1985.
Under the Local Government (Superannuation Revision Consolidation) Scheme 1985, people who are uncoordinated pay a lower PRSI contribution and also a lower level of contribution to the occupational pension scheme.
As a result, they receive a lower level of benefit and are not eligibile for the contributory old age pension. A non-contributory old age pension also exists but this is means tested.
Do I have liabilities on BoI Rights Issue sale?
Q
Last June, I sold 14,373 of my Bank of Ireland Group Rights Issue. The proceeds of the sale were €1,729.27.
I have three questions re the capital gains on this item:
(1) Have I a capital gains tax liability on it?
(2) May I now create a capital loss by selling more Bank of Ireland stock to offset the gain I have made?
(3) Do I bring in the proceeds of sale of the rights issue to affect capital gains tax calculations on future sales from my holding of Bank of Ireland stock?
- Mr M.L., WATERFORD
A
Bank of Ireland did very well getting in ahead of their peers with that rights issue. However, it does raise tax issues for those who bet against the bank and sold their rights.
First up, on a matter of record, you will have a capital gains tax liability on the sale of rights. To calculate this you will have to take: (A) the money raised by you in selling your rights; (B) the value of the remaining shares you hold; (C) the original cost of the shares initially acquired. Divide A by the sum of A + B and multiple that answer by C. That gives you the “allowable base cost” for the shares, enabling you to calculate your capital gain.
The bank itself was distinctly unhelpful in its circular to shareholders, suggesting only that: “If you have any questions on the tax implications of taking up or dealing with your rights, you should contact a duly authorised independent financial/taxation adviser.”
Great. Issuers in the US and Europe are generally far more helpful in a similar situation.
On a practical level, your proceeds are €1,729.27. Your capital gains liability will not be far above the €1,270 annual exemption, if at all.
You can sell other stock at a loss to offset some or all of any capital gains tax liability owing. Any stock sales occurring this year are taken into account in assessing capital gains tax.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@irishtimes.com This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.
