Q&A

PERSONAL FINANCE:Your queries answered

Falling foul of new, higher DIRT rate

Q

Is the new Dirt Tax rate of 27 per cent that came in on January 1st retrospective?

I had a 12-month fixed rate deposit account with Ulster Bank that commenced on January 19th, 2010 and matured on the 19th of January this year.

Although 99 per cent of the interest earned relates to the year ending December 31st, 2010, when the Dirt rate was 25 per cent, the bank deducted Dirt on the total interest earned at the new rate of 27 per cent. Is this correct?

- Mr HC, E-mail

A

It’s been very difficult to tell what has been happening with the provisions of the Budget and the more recent Finance Bill as they seem to be subject to U-turns almost as soon as they are announced. However, in this case, it does appear that the bank has been acting in strict accordance with the terms of the measure as announced in the Budget by the Minister for Finance Brian Lenihan.

It stated that the higher 27 per cent rate of Deposit Interest Retention Tax (Dirt) would apply to any interest accruing on or after January 1st, 2011. The summary of Budget measures, which is available on the website of the Department of Finance, states: “The increased rates will apply to payments, including deemed payments, made on or after January 1st, 2011.”

Unfortunately for you, it appears that all the interest on your 12-month savings product was added to the account at its maturity, ie, on January 19th this year. On that basis, it would appear to fall under the new, higher rate of Dirt.

Security and Quinn Life investments

Q

Would you have an opinion in relation to the security of investments in Quinn Life in reference to problems within the rest of the Quinn Group?

- Mr EB, Dublin

A

It is precisely because of concerns about the operation of the company’s insurance business that the Financial Regulator stepped in to Quinn Group in the first place.

However, it is important to note that Quinn Life is a separate business within the group.

When it became involved in Quinn last spring, the regulator stated specifically that Quinn Life was a separate business entity and unaffected by the measures being taken to prop up the general insurance arm of the group.

The company itself put out a statement noting that the company was subject to “separate regulatory supervision” than the general insurance business. “Policyholder funds are protected by regulation, in that the company must hold sufficient assets to cover these liabilities plus an additional solvency cover.”

It added that the assets were ring-fenced and could not be transferred to another group company without the prior approval of the regulator. That remains the case.

For what it’s worth, as an insurance company, Quinn Life does not come under the terms of the Investors Compensation Company, which is designed to bail out investors of investment firms which fail to some extent at least.

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, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com