Dan White: Be wary of the tax trap if you're hoping to cash in your top-up pension pot

I AM a retired public servant on an annual pension of €40,000. My wife has no income. Prior to retirement, I invested €16,000 in an Advance Voluntary Contributions (AVC) pension scheme, on which I received a tax refund. As the return on the investment does not cover the management fee, I am thinking of cancelling this policy. Could you tell me what are the tax implications if I go down this road?

Ronan

Ronan should think carefully before cashing in his advance voluntary contributions.

If pension contributions, including AVCs, are cashed in, then the money -- including any increase in the value of the AVCs -- becomes liable for tax at the standard 20pc rate.

Any refund would also be subject to the universal social charge. While the standard USC rate is 7pc, people aged 70 or over pay "only" 4pc.

What this means is that, if he is aged under 70, Ronan could end up paying as much as 27pc tax, income tax and USC, on any refunds of AVCs.

Postpone

That would translate into a deduction of up to €4,320 if the refund was for the original €16,000 invested.

If the AVCs had increased in value, he would also pay 27pc tax on any increase.

There is however, one step that Ronan could take to postpone paying tax if he cashes in his AVCs.

He could use the money to top up his pension by purchasing an annuity.

This would pay him a fixed annual amount for the rest of his life, supplementing his existing pension.

The downside is that any payments received from the annuity would be taxable.

In practice, given that the amount he would receive each year from his annuity would be so small, Ronan might be better off just cashing in his AVCs and paying the tax.

However, before he does anything irrevocable he should first take professional advice on his options.

Having recently booked a flight on Ryanair, an unexpected problem arose and I needed to contact them urgently. Imagine my surprise when I found that, while customers book virtually all of their Ryanair flights online, I could only contact the airline in writing or by telephone. Can this possibly be true?

Liam

Yes. Incredible as it may seem, customers wishing to contact Ryanair cannot do so by email.

Instead, they have to use either good old-fashioned snail mail or the telephone. And Ryanair wouldn't be Ryanair if it hadn't figured out a way of screwing customers wishing to contact it by telephone.

While you can take your chances with Ryanair's main customer service number, which is charged at national rates, there is also a premium rate "priority assistance" number which will set you back a whopping 95 cent a minute.

However, Ryanair customers looking for an e-mail address to contact Ryanair will look in vain.

This is despite Ryanair fining customers who have the temerity not to check-in on-line €40.

Quite clearly when it comes to Ryanair, what's sauce for the goose isn't sauce for the gander.

The good news is that Ryanair may be forced to mend its ways.

The EU Commission recently ruled that Ryanair's uncommunicative communications strategy was in breach of the European e-commerce directive.

This stipulates that companies doing business on-line must supply customers with an e-mail address.

Force

The Commission has passed the matter on to the National Consumer Agency in this country to deal with.

If the matter isn't resolved to its satisfaction, the Commission can take legal action against the Irish government to force it to implement the terms of the directive.