TAXATION OF CREDIT UNION SAVINGS
VHI / QUINN DISCOUNT
Why is saving with a credit union better?
Whether youre saving for something in the future or just for a rainy day, regular saving is a good idea. Regular saving with your credit union is an even better idea. At your credit union, youre not just a customer, youre a member of a successful financial co-operative. Each share you hold in your credit union is equal to 1. To be a member there will be an entrance fee of not more than 1 and you will need to hold a minimum savings of ten shares. Members enjoy equal rights to vote (one member, one vote) and participate in decisions affecting the credit union.
- Savings are insured at no direct cost to the eligible member.
- No hidden fees or transaction charges. When your credit union declares a dividend at the end of its financial year, each share you hold for that year is eligible for a dividend.
- The more shares you have, the greater the dividend you will receive.
- And you have the added bonus of knowing that your savings are being used to make loans to other members. Members just like you.
When a member who is over 16 years of age opens a credit union account, he/she is entitled to nominate a person (or persons) to receive his/her property in the credit union on his/her death. Property includes shares, loans and insurance proceeds. This is of benefit if the member dies without leaving a will as the property left in the credit union will not have to pass through the sometimes timely intestacy process.
Are my savings secure?
Credit Unions in the Republic of Ireland are covered by the Deposit Protection Scheme which is administered by the Financial Regulator. This is a scheme that canprovide compensation to depositors if a credit institution is forced to go out of business. It covers deposits held with banks; building societies; and credit unions. The maximum amount a credit union member can receive under this scheme is €100,000.
The Deposit Protection Scheme covers:
- current accounts;
- demand deposit accounts;
- term deposit accounts;
- share accounts and deposit accounts with building societies; and
- share accounts and deposit accounts with credit unions.
In addition to this, the Savings Protection Scheme (SPS) owned and operated by the Irish League of Credit Unions is also available to proactively intervene to protect members' savings by making available financial assistance to help any credit union which may experience difficulties.
The Savings Protection Scheme (SPS) fund currently stands at €118 million.
What return will I get on my credit union savings?
Every share you hold with your credit union for the year is eligible for a dividend when declared. A dividend is the return on your shares and it is paid by your credit union out of surplus.*
*Past performance is not a reliable guide to future performance.
The amount of your dividend will depend on:
The amount of shares you have saved (one share is equal to 1).
The surplus income available for distribution by your credit union to members.
Only members of your credit union receive a dividend from your credit union. The amount paid to members varies from one credit union to another.
Can I have easy access to my savings?
You can withdraw your savings provided they are not pledged as security on a loan. However, you are encouraged to keep your savings intact, so that:
- They continue to earn a dividend.
- They continue to benefit from the Life Savings Insurance protection.
Your credit union will be happy to talk to you about suitable alternatives to withdrawing your savings.
- A nomination must be in writing.
- The statutory maximum amount that can pass under a nomination is currently 23,000. Any amount in excess of this balance will form part of your estate.
- If you elect not to complete a nomination, the proceeds of your account will form part of your estate on your death and will be dealt with under the terms of your will, under the rules of intestacy if you make no will, or under the small payments provision*.
- You may revoke or vary your nomination at any time by completing a new nomination form.
- A nomination is not revocable or variable by the terms of your will or by a codicil to your will.
- A nomination is automatically revoked when your nominee dies before you. In this case, you should consider completing a new nomination. If you do not, your property in the credit union will form part of your estate.
- A nomination is automatically revoked by your subsequent marriage.
- Where your personal circumstances change (e.g. marriage, divorce or separation) you should review your nomination at that time.
- The nominated property does not form part of a deceased persons estate.
- A person under 16 years of age cannot make a valid nomination.
TAXATION OF CREDIT UNION SAVINGS
You may be aware that on 1st January 2002, new regulations were introduced that changed the system of taxation of credit union dividends. You now have two basic share account options. The following is a brief explanation of the two options.
REGULAR SHARE ACCOUNT
Members may stay with the current system whereby he/she is liable to pay tax on any dividend earned, at the marginal rate of 0%, 20% or 41%. It is the responsibility of the account holder to inform the Revenue Commissioners of any dividend posted to the account in his/her annual Income Tax return.
SPECIAL SHARE ACCOUNT
Dividend is posted net to the account every year after deduction of Retention Tax from the gross dividend earned. Credit Unions are not required to submit details of individual members from whom they have deducted DIRT. The Credit Union will deduct the tax and will pay it over to the Revenue Commissioners on behalf of the account holder. The rate of retention tax will be the prevailing rate announced in the Finance Act each year. It is currently 27% (tax year 2011). This deduction of tax will fully discharge the Income Tax liability of the account holder in respect of the dividend paid to his/her Special Share Account. The account holder is not required to disclose the amount of dividend earned in his/her annual Income Tax return. Members must request in writing that his/her account be changed to a Special Share Account.
MEMBERS WHO ARE NOT LIABLE FOR TAX SHOULD STAY WITH A REGULAR SHARE ACCOUNT.
What is so different about a credit union Loan?
Before taking out a loan of any kind, it's worth taking the time to understand how lending works. That way you can compare the benefits and be aware of the risks. Here are some of things that make a credit union loan different:
- There are no hidden fees or transaction charges.
- Credit union interest rates are fair and reasonable and capped by law.
- Repayments are calculated on your reducing balance, so you pay less interest with each repayment.
- Once you are eligible for a credit union loan, repayment terms can be designed around your needs.
- Your credit union loan is insured - subject to terms and conditions - at no direct cost to you.
- You can pay off your loan early, make additional lump sum repayments or increase your regular repayments, without a penalty. Other lenders may charge you extra for paying them back faster! Other lenders may charge you extra for paying them back faster!
What about repayments?
The two most important things about a loan are, being able to borrow the money and being able to repay it. Your credit union is flexible. You can choose a payment plan that suits you today and if your situation changes, you can talk to your credit union about possibly changing your repayment plan. Remember you can pay back you loan early, make additional lump sum repayments or increase your regular repayments, without a penalty. Other lenders may charge you extra for paying them back faster!
How do I apply for a loan?
For members, it's as simple as visiting your credit union and discussing your needs. They will give you an application form to fill out or you may download a form from this website. If youre not already a member, call into your local credit union for more details on how to apply for membership. Your credit union encourages you to manage your money carefully by structuring loans around your needs and your ability to repay. So, whatever youre borrowing for – a car, home improvements, a special occasion, holiday, school or college fees – your place will give you a fair deal.
Loan Protection Insurance is payable on the death of the eligible member, subject to policy terms and conditions.
- The insurance benefit payable is the amount of the members outstanding loan balance.
- Cover ceases on the members 85th birthday.
Life Savings Insurance is payable on the death of the eligible member, subject to policy terms and conditions.
- The insurance benefit payable will be in proportion to the amount of savings that a member has made during the term of membership.
- The benefit is also dependent on the members age at the date lodgements are made to the account.
- Amounts saved after the 70th birthday is not insured. However, cover built up before the 70th birthday remains in force after the 70th birthday.
- Withdrawals of savings can affect Life Savings cover and any withdrawals are considered as from last in deposits.
- Ennistymon & District Credit Union extends cover to include the "Accidental, Death and Dismemberment" Rider. Under this extension the amount of the Life Savings claim is doubled if the member dies as the result of an accident. Also if the member looses a limb or sight as the result of an accident then a benefit may be paid to member. The amount of the benefit is based on the savings that the member makes during the term of membership and the age that lodgements are made.
- Ennistymon & District Credit Union offers a full foreign exchange facility and any currency can be ordered with next day delivery.
- No commission for members.
- Euro Drafts available
- Cost per draft is €2.75
VHI / QUINN
- We have a long standing group scheme with VHI and offer 10% reduction on any of their health plans just ask for the application form and our friendly staff will assist you in completing it.
- Further details: Call VHI on 1850 44 44 44 or visit their website on www.vhihealthcare.com
LE CHEILE INSURANCE
MABS (Money Advice and Budgeting Service)
- Budget sheet available from any of our offices