Q&A

Dominic Coyle answers readers personal finance queries

Best short-term return on SSIA

I am a lone parent of two kids in their mid-teens. I want to save €10,000 of my SSIA for three years for their education. Where should I look for the best returns?

Ms G., Monaghan

In all honesty, the term that you are considering considerably restricts your savings options.

Financial advisers will not advise stock market investment for funds if the investment period is less than five to seven years.

That really just leaves you choosing the most competitive deposit option available.

Obviously, given the amount of money that you intend to save and the fact that you can lock it away in a note account will help.

In addition, rates are currently rising - if not necessarily at the same rate as the European Central Bank rate rises.

As far as I can ascertain, your best bet is Northern Rock's 3.65 per cent offering for its online product.

If you are looking for an option where you can physically deposit your cash, Anglo Irish's 3.4 per cent annual rate on its 30-day notice account is as good as you are likely to obtain at present.

Health levy on deposit savings

I have noted from your replies that deposit interest, which is subject to DIRT, may also be subject to the health levy where applicable.

The interest on An Post savings certificates and savings bonds is exempt from tax, but is it also exempt from the health levy?

Also, are the interest and Government 25 per cent contribution on an An Post deposit account SSIAs exempt from the health levy?

Mr J.McA., Dublin

Like yourself, I was somewhat surprised that the health levy could be applicable to people on deposit savings that were subject to DIRT.

In fact, I am willing to bet that the vast majority of people receiving minuscule interest at today's almost derisory rates on most accounts are not declaring the amount in their annual return - even if they are filing an annual return - for the simple reason that it would never cross their mind to do so, especially as DIRT deducted at source covers one's full liability to income tax.

In that light, you are quite right to check whether this system would equally apply to other forms of saving.

As far as savings certificates and savings bonds from An Post go, these products are free of tax and that includes the health levy.

In relation to your special savings incentive account (SSIA), there is a particular tax treatment.

For those with eligible accounts, 23 per cent tax will be levied on any interest or equity market gain on the SSIA account upon maturity - assuming that you file the appropriate closure form.

If you are no longer an eligible SSIA holder, of course, that 23 per cent will be levied on everything in the account.

In either case, no health levy applies.

Tax benefits on inheritance

I am a widow with three adult children. Two of these have lived with me for a number of years. When I pass on, I would like my estate to be divided equally among the three as stated in my present will.

However, a few years back, Mr McCreevy's welcome concession exempted the house value for children with the residential qualification for inheritance tax purposes.

Do I have to specifically state in my will that the house goes to the two resident children for them to benefit or does the concession apply automatically?

Ms J.W., Dublin

I am even less a lawyer than I am a financial adviser, but my general advice with inheritances is to be as specific as possible in any will you make.

Vague and general wording in any legal document is open to a range of interpretations at the decision of a court, and you would not want your children to have to battle the Revenue - or each other - to secure what you intended for them.

Specifically, I do not think that a will stating simply that your estate be divided equally would assume that the two children meeting the residential qualifications were intended by you to receive the house between them to the exclusion of the third child, no matter how advantageous to them and the estate overall in terms of capital acquisitions tax would be.

My strong advice would be to get your lawyer to set down specifically what you want.

They do not have to say "give the house to the two children" as circumstances may change between now and the time you pass on.

It should be sufficient to state that the house goes to those offspring who have lived with you for at least the residential qualifying period.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 10-16 D'Olier Street, Dublin 2 or by e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice.

Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.