Retirees left out of pocket for a year as State pension is only payable at 66

Could you help me with a query in relation to pensions and the deduction of the old age pension allowance?

A person retiring at 65 this year will not be eligible for OAP until 2015. However, on receipt of a company pension this year, the calculation includes a deduction of twice the OAP allowance. Is there not an anomaly here?

Mr A.C., Tipperary

There certainly is but, possibly more importantly, it shows once again the casual disregard this and previous governments have had for private pension provision. Government after government exhort people to join a private pension and point to generous tax relief available – indeed, the current Minister for Social Protection is on record affirming her view that mandatory pensions should be introduced to force people into private schemes, though not yet.

The caveat is that we need to await economic recovery. However, as the economy is now so recovered that this Government is looking to abandon austerity, one would assume such a time has come. But there is, as yet, no whisper of intent by the Minister or the Government to introduce what they see as essential reform, leading one to believe that, while she favours it in principle, the Tánaiste would rather some other government got to implement it.

What this Government has done is raid private pension pots in an unprecedented exercise in retrospective taxation. This year, the combined pension levy on private pensions will bring in more money to the exchequer than the hotly contested water charges are expected to deliver next year.

All of which is by way of explaining why it is no surprise that the Government should abolish the transition pension payable to people at 65 without making any effort to address the difficult economic position in which this puts thousands of private sector workers who retire this year. They will not now be eligible for the State pension until they turn 66.

The problem for people in your position is “integration”. This means the State pension is integrated into your private pension. Effectively, in order to reduce the cost to the company of funding your pension, it takes account of the fact that you will be receiving the State pension at the same time. The combined amount comes to the total you would expect to receive from your employer.

The answer to your question is ultimately to be found in the trust deeds and rules of your particular scheme. If, for instance, the wording of the rules states that the multiple of the contributory State pension payable at 65 "is offset from salary to arrive at your pensionable salary" to quote the Pensions Authority, then you could argue that the problem is the company's. As no State pension is payable at 65, there is nothing to offset and therefore the company must pay the full amount.

However, in my experience, the wording of scheme rules tends to be sufficiently vague in such areas that trustees and sponsors of already struggling private sector schemes will be able to ensure they do not have to fill the gap.

There is also mention in advice from the Pensions Authority – the regulator for the private pension sector – of the possibility of trustees amending scheme rules in certain circumstances, which might allow them an out.

The fact that integrated occupational schemes benefited from the significant rise in State pension rates during the boom years seems unlikely to lead to them taking any short-term loss on board.

The bottom line is that, if the occupational scheme will not meet the shortfall, then you are stuck with it.

The same applies to those on “bridging pensions” who retired early.

The options open to you are to work on with your current employer until you are 66, if the company rules permit it, or to work elsewhere for the intervening year to make up the shortfall.

Otherwise, you could see what welfare payments you might be eligible for.

Ironically, this could include jobseeker’s allowance, assuming your means do not exclude you.

Making gifts individually to our children

Is it possible for husband and wife to gift individually to children?

Ms P.M., email

It is certainly possible to do so. Each of you can gift up to €3,000 each year to each of your children and still stay firmly within the terms of the small gift exemption.

The only two restrictions of which I am aware are:

a) the figure: the maximum amount in any tax year is €3,000 from any donor to any recipient;

b) the gift must be genuine. If Revenue thinks, for instance, that you have gifted each of two children €3,000 but that you intend one child to pass that on to the other to fund, for example, a house deposit, it will rule that the ultimate recipient has received both gifts and is therefore well beyond the threshold.

Any limit on years I can give small gifts? Is it allowed to give a gift of €6,000 per year, without incurring future gift tax – ie €3,000 each – every year – to a son and daughter-in-law?

Mr J.H., email

There is nothing stopping you gifting €3,000 each year to your son and a separate €3,000 to your daughter- in-law, or anyone else. Technically, you could give the €3,000 to a random neighbour without it impacting your future gift tax threshold and liability. And you can do it for as many years as your continue to live.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice