Q I turned 50 recently and I’m now eligible to take a sum of money from my pension. My question is this: I have two pensions, one which is quite healthy and one which is much smaller as I am only working in my current job seven years. My partner thinks it’s a terrible idea to take money out at this early stage, but would it make any difference if I took some from the smaller pension, as it will continue to grow?
A You can take some of the money built up in your pension savings as cash at this stage, according to Ray McKenna, partner at Lockton Ireland, the Irish arm of global insurance brokerage Lockton. But he advises you to err on the side of extreme caution. Just because you can draw down some of your pension doesn’t mean you should, he said.
As a 50-year-old, you could easily live for another 40 years and while you have been saving into pensions for many years. He said he suspects that, like most people, your pension fund is still not yet big enough to enable you to live in the style you hope to when you retire.
Mr McKenna says he agrees with your partner’s opinion that while working you need to save as much as possible to make the money last through your golden years.
Once you have taken a cash payment from your pension, no matter how big or small, you cannot change your mind. Once it’s gone, it’s gone.
Mr McKenna said his advice would be to leave your pension alone.
Q I live in the UK and I am an Irish citizen. I recently got asked to pay tax in the UK as the tax authority there said I have an overseas asset, which is an apartment in Dublin I rent out. As I already pay tax in Ireland on my rental income, how is it that I am also requested to pay tax on the income in the UK? If I sell the property would I also need to pay tax in the UK as well as the capital gains tax in Ireland?
A Ireland has the primary rights to tax this income. This means you will be able to use a foreign tax credit relief for the tax paid in Ireland on your UK tax return, according to the tax manager of Taxback.com Marian Ryan.
This will eliminate the double taxation. However, additional tax may have to be paid in the UK, depending on your personal circumstances. This depends on the amount of personal allowances, other income, tax rate, reliefs etc.
You should also appoint a collection agent in Ireland who will be responsible for collecting the rent and will be accountable to Revenue for the tax liability, Ms Ryan advises.
In the absence of a collection agent, the tenant should deduct 20pc tax from the gross rent and remit the tax to Revenue. The tenant must issue a form R185 as evidence of the tax withheld and paid to Revenue.
Either of the above options are mandatory since January 1, 2022. In respect of your capital gains tax (CGT) obligations, again, Ireland has the primary rights to tax the gain, if there are any.
In the absence of a collection agent, the tenant should deduct 20pc tax from the gross rent and remit the tax to Revenue
The gain will be taxed at 33pc (sales proceeds less cost of acquisition). Of course, additional deductions/reliefs could apply which will depend on your personal circumstances.
Non-UK domiciled people can be exempt from paying CGT on foreign gains if gains are less than £2,000, and not remitted to the UK. If the gain you made is more than £2,000, your have to report this to HM Revenue and Customs and you will be able to claim a relief for the foreign tax paid.
Q Can you recommend a mid-market adult health policy for my 20-year-old son. As he is a college student, I will be paying this. I do not have private health insurance, but as he is planning on travelling to Canada for summer work. He needs his own policy which, he has been told, needs to include: medical care, hospitalisation and repatriation. He has been told that if he does not have sufficient coverage, he may be denied entry into Canada. Any recommendations would be greatly appreciated.
A It’s worth considering VHI Company Plan Plus Level 1.2 at €420 for a 20-year-old, according to Dermot Goode of TotalHealthCover.ie, part of the Lockton Group. He said this is an excellent semi-private corporate plan.
You can also buy the VHI multi-trip travel insurance policy to cover the trip to Canada. You will need to ensure that the full duration of the trip is covered by this policy.
However, the coverage can be extended for an additional premium cost.
The insurer will explain exactly what is covered by this travel policy and what exclusions or restrictions apply.