Home Economics: answering your property questions
Advice from our property expert on investing for an income when moving to France and on a possible catch when trying to access an old pension scheme.
Question: We are selling our home of 35 years to move to France, near our son. From the sale price (approx €600,000), we want to give our daughter €50,000 to build an extension to her house for our use to stay there when we return, which we hope to do regularly. We don't anticipate a problem with tax, however we will only need €280,000 to buy our home in France and plan to invest the rest for an income. Is it best to keep it in Ireland or France?
Sinead replies: That sounds like a lovely plan and you have two separate issues: on the gifting of money to your daughter, you're right - there's no tax issue up to €280,000. But the €50,000 lowers her tax-free threshold to €230,000 for future inheritances at current levels.
On the remaining €280,000 after you have bought your new home, you can keep it on deposit in either country, although I do have to warn you rates are risible either way! Get independent financial advice if opting for anything more risky, like equities. Tax on interest income in France is dependent on your income level and may be at a lower rate that the 41pc DIRT plus PRSI chargeable in Ireland. Barry Flanagan of Taxback adds that tax is based on France being your principal place of residence and you being considered a tax resident there. In most cases, funds accumulated prior to the move can be remitted to France without tax consequences. Under the Ireland/France Double Taxation Agreement, interest income arising would be taxable in France only, regardless of where the bank account is located. He adds: "You would submit a Form IC5 to reclaim any DIRT deducted at source by an Irish bank after the relocation. Alternatively, you could apply to the Irish bank to cease DIRT on the basis that you have become non-resident."
Question: I am 50 in July and I got a letter to advise me that I am now able to access an old pension scheme from a company I left years ago. I took the money and put it into a 'buy-out bond' when I resigned and I'm told I don't have to wait until pension age to get it. This is great, as I owe some money on an investment property and would like to pay it down; the amount is around €47,000. Are there any problems doing this and is it without a catch?
Sinead replies: Sadly, like most things, it is not. The 'buy-out bond', more properly called a Personal Retirement Bond is a transfer value from an occupational pension scheme and, yes, it can be accessed from age 50. The problem is that only a portion of it can be taken as a lump sum, which is tax free. This may be around 25pc, (€11,750) but you'll need to check that out with the insurer the bond is with.
The balance must be used to buy an annuity, or a pension for life, which commences immediately and, I'm sorry to say, annuity rates have never been lower. Actuaries calculate them based on your age (50 is very young), and how long you are expected to live and must eke out the money to last. It must also be invested by a pension company in very safe assets, which means returns will be lower. It is also taxable.
In a Revenue quirk, retirement bonds such as this cannot normally be used to create an approved retirement fund (ARF) which would allow you draw down funds at your discretion (within limits). You cannot make any decision without independent financial advice and that may turn out to be not accessing the bond yet. Do speak to a broker or the pension provider before progressing.
The Ryan Review
Listening to live feeds from the committee rooms of Leinster House can be trying at the best of times. But last week Nama popped up to answer members' questions on how it's going about its job of providing social housing.
For a largely secretive organisation that rarely gives much away, it was a telling exercise.
Nama comes in for much opprobrium from the public, but that's simply because it exists, rather than what it is doing (i.e. making an unexpected profit). But TDs were alarmed, not unreasonably, to be told that its Social Housing remit, which is to provide 20,000 homes by 2020, was not being met, while the available properties are being snapped up by the private sector.
The reason is that the local councils, who are offered houses by Nama, are turning them down. That includes apartments and homes in Dublin, the area of greatest need.
Indeed, an astonishing two thirds of units offered for social housing are declined by councils only to be bought by private investors.
On the face of it, the impassioned plea from Fine Gael's Fergus O Dowd - "how in the name of God can local authorities turn down a roof for families?" - is not unreasonable.
The problem lies with a Government rule that stipulates only 20pc of social housing may be provided in any one 'area'. It's an anti-ghetto measure, but the consequences are unintended. There are many areas in Dublin where this is breached in any event.
Simon Coveney just found himself one more job to do.