What level of PRSI will apply to unearned income?
Q&A: Do you have any idea what class of PRSI contribution will be due on unearned income and what entitlements it might bring.
I had to retire early on ill-health grounds and am 14 paid contributions short of the 520 needed for a contributory pension. I have applied to make voluntary contributions but might the contributions on unearned income make up the shortfall?
Mr T.McM, email
It has not yet been expressly stated what level of PRSI will apply to unearned income when the new regime kicks off in 2014. However, it seems likely that the rate will be 4 per cent.
This will put it in line with Class S contributions, under which self-employed people already pay PRSI on unearned income.
Class S entitles a person to: the contributory State pension; the contributory widow (er)’s pension; maternity benefit; adoptive benefit; bereavement grant; and contributory guardian’s payment.
The other important thing yet to be determined by the Minister is who precisely will be subject to PRSI on unearned income.
The Budget gave to understand that it would apply to all unearned income. However, as it stands, people over the age of 66 do not pay PRSI.
I am aware the Minister did announce plans to target wealthier people over the age of 70 – those earning more than €60,000 – by increasing their exposure to the universal social charge. But there is still no mention of people over the age of 66 paying PRSI.
The details will eventually be published in the Finance Bill but the importance, as you have guessed, is on the entitlement side of the equation.
There is no certainty that the State will use Class S for PRSI on unearned income for those other than the self-employed but, if it did, it would certainly appear to have implications for assessing eligibility for the contributory state pension in cases such as yourself.
It may well be that the new regime will apply only to people under the age of 66.
Where can I find advisers?
Last week you recommended contacting an independent financial broker/adviser regarding pension/investment advice. Where would I get a list of these?
Mr LW, email
The Central Bank keeps a register of financial advisers, with a breakdown of those who are supposed to be able to give independent advice and those that are tied to particular agencies. You can find the list at iti.ms/TWiyfq.
Basically, an authorised adviser is someone who is obliged to give the best advice to customers, regardless of whether that means suggesting products for companies with which s/he has a connection.
A multi-agency adviser can advise only on the products sold by the companies with which s/he has an agency.
The other thing to beware is the cost of advice – in this case, beware free advice. Nothing in financial services is free; if you’re not paying upfront, the broker is going to receive payment by way of commission . . . and that could prove considerably more expensive.