Q&A

Can my wife claim a medical card?

Q

I fear that my income (occupational and State pensions, plus investments) is above the threshold for a medical card but my wife has turned 70 and has a much lower income.

Is she entitled to claim a medical card in her own right? If it is based on joint income surely the threshold should be doubled?

- Mr L.C., e-mail

A

As you are aware, the rules were changed last year, effectively ending the system where all people over the age of 70 were entitled to a free medical card. Since March last year, a single person must have gross income of less than €700 per week to qualify for a card. For a married couple, the gross income is €1,400 per week.

All forms of income – including pensions and investment income are taken into account. The important thing to note is that there is no allowance made for deductions, such as tax.

In relation to investments, the first €36,000 of investments for an individual – or €72,000 for a couple – are not considered when assessing the means test.

For the balance, it is the gross interest earned by the investments that is taken into account, not the lump sum itself.

You can use either the actual rate of interest applicable to the loans or a “notional” rate set quarterly by the Health Service Executive (HSE).

As is normal when it comes to means tests, couples are assessed jointly. The provision under income tax where people can choose to be assessed individually or as a couple does not apply.

How will DIRT impact on a Government bond?

Q

I am considering investing in the current government bonds paying 50 per cent at the end of 10 years. What is the DIRT tax situation for me when the bonds mature in 2020 as I will be over 70 years of age? Does it depend on my income at the time? My pension when I retire next year will be approximately €40,000.

- Mr R.K., e-mail

A

From your reference to bonds paying 50 per cent at the end of 10 years, I assume you are referring to the National Solidarity Bond rather than normal Irish government bonds. These bonds, designed to help the Government meet its borrowing requirements, went on sale at the start of May.

You need to remember that only a very small portion of the growth in the bond is attributable to interest – just 1 per cent per annum. The rest of your gain will come from tax free bonus payments which are made at various stages over the 10-year life of the bond.

If you leave the bond invested for at least five years, you will be entitled to a 10 per cent bonus – free of tax as I said previously.

For people who hold the bond for at least seven years, this bonus payment rises to 22 per cent. Of course, if you do keep the funds invested for the full 10-year term, the encashment bonus rises again to 40 per cent.

The interest element is subject to Deposit Interest retention Tax (DIRT), which is currently levied at 25 per cent. However, the terms and conditions of the bond states that normal Revenue protocols will apply in relation to exemptions.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com