Jill Kerby

NW writes from Dublin:  I read your column regularly and have noticed that for some time you have recommended that savers make sure their bank is safe as well as getting the best interest rate.  I am wondering if you have any views about Investec (I have never seen you mention them before.)  My husband and I took the last of our savings – about €40,000 out of Irish Nationwide (we were hoping to get the windfall) and saw that Investec is now offering between 3.75% and 4% for six and 12 month fixed rate accounts. They only pay 3.1% on their three month fixed account in the UK.  How safe is this bank?  

The banking side of Investec is regulated by the UK Financial Services Authority and all deposits up to stg£50,000 come under the UK deposit compensation scheme in the event of insolvency.  The Irish fixed rate accounts all require a minimum €20,000 deposit and allow one or two withdrawals only (depending on the term) without incurring an interest rate penalty. As with Irish depositors who are depending on the Irish government’s bank deposit promise, your money is safe as long as the UK Treasury can afford to guarantee every depositor with €50,000 but according to Investec’s own website (see www.investec.com/en_ie/#home/investor_relations/financials___forcasts/credit_rating.html+uk), Investec Bank UK has an individual rating of C from the ratings agency Fitch, and a C minus Financial strength rating, a Baa1 (negative outlook) Long term deposit rating and a Prime-2 Short term deposit rating from Moody’s.  By comparison, RaboDirect is rated AAA by both Moody’s and Standard and Poors and is the highest rated bank in Ireland but its deposit rates are quite a bit lower because it does not have to pay a risk premium to depositors. 

Ends

EB writes from Dublin:  On the advice of a broker, which I accepted at that time, and agreed with them that they were giving me the best advice available, I signed up for a policy from Friends First called Special Savings Account. This was in April 1999 for a nine year policy which matured this year when I was a few months over 70 years and would be needed as a supplement to my state pension. I paid into this policy over €12k. Then due to a lack of funds and on the advice of an actuary friend I stop paying.    In April 2007 the account was worth €17k. The policy has now matured and Friends First has told me it is now worth approximately €8,000. At no stage was I aware that I could cash in this Savings Account. The broker has checked this out with Friends First and assures me this is the correct amount. I am at a loss of €4,000 and can do nothing about it, maybe this letter would be of assistance to other readers.   If you take out a Friends First Special Savings Account or similar, be careful, it may turn out to be a Special Savings LOST Account.

The timing of the maturity of this policy was very unfortunate – stock markets everywhere fell by 30%-40% in the year to March ‘09 and here in Ireland, by over 60%. This situation has been repeated across every investment company, so your experience with Friends First is not unique. What is unfortunate is that your broker didn’t do more to advise his customers whose policies were closer to maturity to consider a free switch within the selection of funds at Friends First as the markets started to slide in early 2008. My personal view is that in the case of actual Retirement Annuity Contracts and other personal pensions, it should be mandatory that clients be offered a review as they get closer to retirement age so that they can move their funds out of risky assets like stocks and shares and into ones that protect their capital, like cash funds and ideally, indexed-linked bonds.  Your story does make a good lesson for others: first, always know exactly what you are buying before you sign an investment contracts and then make sure you review your policies every few years, especially as it gets closer to its maturity date or your retirement. 

Ends

JM writes from Dublin: I left my employer a few years ago and have an AVC in addition to my occupational pension. The AVC has lost nearly a third of its value since this time last year. I would like to access the tax free part of the pension and AVC (for pressing financial reasons – I am nearly 60) – and have read that transferring my pension and AVC to a PRSA would allow me to do this. But I have been advised not to do so because the transfer costs would be too high.  I thought you could transfer a pension with less than 15 years worth of contributions to a PRSA for no charge? Despite meeting with the company’s pension manager I still don’t fully understand how the charges are determined. 

The calculation of transfer values from defined benefit pensions (the kind you have) to other employer’s schemes, into buy-out bonds or PRSAs has been a bone of contention with fund holders for many years.  The calculation is done by actuaries who must take into account not just the value of your portion of the pooled pension, but its projected value up to retirement, how much it would cost to buy similar benefits on the open market and a consideration of the various fees and charges that are also involved in your portion of the pooled pension. Independent financial advisors I know say they frequently challenge the calculation and have succeeded in having transfer values improved. You are entitled to move your AVC to an AVC PRSA right now, but you cannot access the money in an AVC/PRSA separately to your DB occupational pension before your retirement age.  If this had been a private pension plan – the kind self-employed people own, or those whose companies never operated an occupational scheme - you could have transferred it to a PRSA at no charge (except the cost of the actuarial certificate) and access the funds prior to your retirement age (so long as you were over age 50).  The transfer process, whether it involves your entire pension and AVC or just the AVC, requires an actuarial certificate. If you still want to consider such a move, you should engage a private pension advisor/actuary who can act on your behalf with the company actuary at your former company. In the end, he may very well agree that shifting your DB scheme would be against your financial interests.  As for the AVC he may be able identify a better asset fund within your existing provider’s stable of AVC funds so that it too can remain in place but produce a better or safer return. If there is no suitable fund, then he can also help you shift the AVC alson into a PRSA AVC.  But remember you cannot access the money until you reach your official retirement age. 

MG writes from Cork:  I met you briefly at the recent Over 50s Show in Cork and mentioned I was retiring from the HSE and that I had an AVC with Cornmarket. I am meeting them to discuss what to do with the AVC and was wondering if you have any particular questions you think I should ask.

Most advisors suggest that you take the maximum tax free amount from your pension/AVC in order to clear your remaining debts and to provide a cash fund to keep on hand especially for incidental expenses or emergencies. If Cornmarket had been earning their high commissions and fees, they would have recommended over the past decade that you shift a predominantly equity based AVC into safer, fixed interest and bond assets in order to safeguard your savings the closer you got to retirement age. You don’t say if you are aware of the current value of your AVC but chances are it has experienced a significant fall in value if it was mainly invested in equities. Once you take your lump sum, you can cash in the balance of the AVC (subject to your highest rate of income tax), use it to purchase a pension annuity or transfer it to an ARF (approved retirement fund) that allows your money to remain under investment and from which you can then draw down an annual return.  This option might suit you if you don’t need access to the entire fund right now.  Before you do anything, make sure you get Cornmarket’s recommendations in writing and then seek a second opinion, ideally from a fee-based financial advisor. Do not be pressured into making a quick decision. 

ends

MH writes from Dublin: My query is as a small private Waterford Wedgewood shareholder. I am completely in the dark ... what is my position with the company as it stands?  In fact where does it stand right now?  Or, do I simply write them off as a loss?

I’m afraid that you have little option but to write off your Waterford Wedgwood shares as a loss.  Technically, the shares are still listed on the Irish Stock Exchange but have been suspended from trading since the group was placed into administration on January 5th. Since then the assets of the group have been sold to the venture capital group KPS. Depending on the price you paid for the shares and the consequent capital loss, you might be able to offset the loss against a capital gain. Regarding your being completely in the dark, I’m surprised that the administrators, Deloitte, haven’t communicated over the past six months to tell you what has been going on, but that’s a matter you’ll have to take up with them directly.  

ends

WW writes from Co Louth:  In March my mother’s only brother died. There were only two beneficiaries, me (his godchild) to whom he left cash and savings certificates and his best friend, to whom he left his small house which is on three quarters of an acre. (I am also the executor.) Unfortunately, the cottage is in poor repair and was valued, with the land, at less than €100,000. My uncle’s friend is in dire need of cash but is facing an inheritance tax bill that he cannot afford unless the house is sold, which doesn’t look very likely. If he cannot pay the inheritance tax, which I think is about €16,000, what happens to the property?  Is it automatically put up for sale?  What if it can’t be sold?  Dothe Revenue charge interest on the tax they are owed?  I might consider buying it from him, but not for anything like €100,000.  What are the tax implications if I buy it at a lower price?

First, the capital acquisition tax rate payable on inheritances is the one that applies when the benefactor dies, or in this case, at 22%. The Finance Act 2009 increased the rate of CAT to 25%, but this new rate only applies to inheritances where the benefactor dies on or after April 8th, 2009. According to the Revenue, your uncle’s friend “is deemed to have acquired the house and land for its market value on the date the deceased died”, that is, in March 2009.  For CGT purposes ‘market value’ generally means “the price which an asset might reasonably be expected to fetch on a sale in the open market. If the friend sells the property, the chargeable gain/allowance loss will be computed on the difference between the sale price (net of any legal and auctioneer's fees) and the market value at the date of death.”  In other words, if the house is sold for less than its original market value back in March, his CGT may very well be reduced. However, states the Revenue, “if…the sale is not at ‘arms length’, then the actual sale price is replaced by the market value of the property [the original March market value] at the time of sale.”   If you were to buy the property at less than the market value, “this would be treated as a gift …and the value of the gift would be the difference between the market value of the property and the amount actually paid". The tax-free threshold between strangers since April is just €21,700 so you may have a CAT liability but since the property is worth less than €127,000 you would not have any Stamp Duty liability.  Finally, if your uncle’s friend cannot raise the CAT he owes, he could end up with a tax charge on the property at a daily rate of 0.0219% from July 1st.  Deborah Kearney of Lehman Solicitors in Dublin says he could apply to his Tax Inspector for a moratorium on the interest accrual, perhaps even until the property is sold,or he could try and raise an equity release mortgage to pay the €16,000 tax.  This money would only have to be paid by his estate after his death.  Finally, your uncle’s friend “who should take legal advice” says Kearney, could renounce his inheritance in favourof someone else (who would be liable for the CAT) or revert it back to the estate.  In that case, as his remaining heir, you would inherit the property.  

KM writes from Donegal: I recently made a request to Ulster Bank for a two month summer holiday break from paying our mortgage and they turned us down, saying that my husband’s salary is enough to cover our modest mortgage. They went on to say they are only sorting the very needy out at the moment. However, our contract allows for a two month holiday. I am self employed and my cash flow is good from September to May, however apart from a few summer camps for the children, it will be tight enough for us this summer. I am not sure if the Government (that is, we, the tax payers) have bailed them out, but if we have does that mean that they can really turn us down? 

I suggest that you remind your lender, this time in writing if you haven’t already done so, of the terms of your contract. Note exactly which months you intend to defer and request that they acknowledge and facilitate your decision by return post.  You may have to speak to a more senior manager or write a formal letter of complaint to the bank if your letter doesn’t generate a positive response.  If that doesn’t work I suggest you take this breach of contract to the Financial Ombudsman at 1890 882090 or www.financialombudsman.ie 

Ends  

MG writes from Dublin: In a recent column about PRSA’s, you stated that the Commission on Taxation will likely recommend that a tax of 17.5% be applied to the pension lump sum for employees in occupational schemes. I am one such person and am due to retire from the public service in August 2010. However, the example that you give of a person with a one million pension fund will pay €43,750. This represents 4.375% and not 17.5%. Can you advise me on two matters: my own lump sum will come to approx €120,000. Will I be liable for a 17.5% or 4.375% tax? And in view of the above, I am considering taking early retirement before the end of December 2009. Do you think the Minister would be entitled to backdate any tax to a date before the new tax year kicks in?

First, the 17.5% tax on the pension tax free lump sum is just speculation; hopefully, this matter will be cleared up when the Commission on Taxation reports next month.  The €43,750 tax liability I quoted (on a pension fund worth €1 million) is based on a 17.5% tax on the 25% of the fund that is tax-free – ie €250,000, not €1 million.  If a quarter of your €100,000 defined contribution pension ends up subject to a tax of 17.5% (or €4,350) the balance amount you will get that is tax free will be €20,650.  Finally, every taxpayer should accept that the Minister for Finance can – and in the April emergency budget, did, back date a tax measure. The 1% income tax levy was introduced in the December 2008 budget but was overtaken by the 2% and 4% income levies introduced in the mini budget in April. Yet anyone who received a lump sum bonus or commission payment in addition to their usual PAYE income between January 1st and May 1st (when the higher levies came into effect) was now liable to the higher levies on those payments.  In effect, we are all on notice that the Minister can tax your income, however he likes, whenever he likes. 

Ends

NOR writes from Dublin:  I bought an apartment three years ago and am now in negative equity, my mortgage is €211,000 and the value of the property is about €170,000. I am coming to the end of a two year fixed mortgage and I have been offered an LTV variable rate at 3.15% or a tracker at 3.25%. The fixed rate offers are 5.25% or 5.75% for two and five years respectively. I have tried to change mortgage lenders but they of course are not interested in taking on a negative equity loan. Should I take the tracker mortgage, at a 2% difference from the fixed rate? And if I do, should I overpay my mortgage? I can afford to pay an extra €200 a month.

The LTV you’ve been offered is not as attractive as the tracker rate on the simple grounds that it does not offer the assurance that your rate will next exceed the ECB plus 2.25%. If the ECB rates were to rise to 4% again, you would know that your mortgage rate is 6.25%.  If you chose the variable rate loan, it might be 6.15% (4% ECB plus the current margin of 2.15%), or it could be 7.15% or even higher. There is certainty. The fixed rates you’ve been offered are 2%-2.5% higher than the best rates on the market. However, an increasing number of economists and financial commentators believe that these low central bank rates cannot last; unfortunately no one can pin an exact date on when rates will go up again, by how much, or for how long. If, as you say, you can afford a higher repayment right now, then fixing your loan for three or five years will at least give you the peace of mind of knowing exactly what your repayment will be each month.  But how confident are you that you can maintain a higher repayment? The tracker will be cheaper right now, but all it would take is for the ECB rate to rise from 1% to 3.55% for your mortgage rate to exceed the 5.75% five year fixed rate you have been offered. 

My wife and I are both veterinary surgeons and intend to set up a clinic in Ireland. Our accountant has advised that we would be better forming a company for tax reasons instead of sole trader. However, our professional body, the veterinary council of Ireland states that as vets we cannot run the clinic as a company. I believe other professions operate the same. Yet, when I looked at the companies web page there are numerous vet practices listed as companies. Have they found some way around the veterinary council rules? Are they operating the company from the UK?

I asked Lyn Lawlor, a partner at the Dublin accountants DLS Partners about your situation and she said that the listed companies you noticed may have been set up separate to the actual veterinary practices specifically to operate a pension scheme for the partners or for other investment purposes.  Pension investing is a way to reduce tax liability, at least for now, and you should consult your accountant again about how to best structure the business to be as tax efficient as possible within professional restrictions. 

Ends

BK writes from Linconshire: I was employed in the Republic for more than 25 years and retired at 65 in July 2006. I receive the State Pension and an occupational pension that amount to more than €25,000. In August 2006 I moved permanently to Lincoln, England. I informed the Revenue Commissioners and submitted an IC1 form stamped by HMRC. However, the Health Levy has been deducted from my occupational pension.  I have tried unsuccessfully to reclaim this tax despite being in communication with various government departments, including the Department of Family and Social Affairs (DFSA). Apparently, their regulations do not indicate how a UK resident should proceed. There have been suggestions that since I earn more than €20,000, I am not entitled to reclaim this money. If this is correct, am I entitled to Irish dental and optical benefits?

According to the DFSA, if you satisfied the PRSI conditions for the Treatment Benefit scheme when you reached age 66, you remain qualified for the scheme and benefits for life even if you move to another EU member state. The Department also told me that if your annual earnings “during 2009 fluctuates above and below €500, but is not more than €26,000, you are entitled to claim a refund of the Health Levy 2% or 4% deduction. Where a person’s weekly earnings/income fluctuates above and below €1,925, from 1 January 2009 to 30 April 2009 and/or above and below €1,443, from 1 May 2009 to 31 December 2009, the person may claim a refund of the 0.5% or 1% Health Contribution deduction, if the amount paid in 2009 is in excess of that due.You should claim your refund from the Department PRSI Refunds office, Oisín House, Pearse St., Dublin 2. Telephone: (01) 673 2586. An application form, PRSIREF1, is available on www.welfare.ie .

Ends

NS writes from Dublin: We bought our house two years ago at the peak of the market. At the time, we were lucky enough to get a tracker mortgage that is 1.1% above the ECB rate. Now, however, we fear that interest rates are just going to start going up and up from next year. We are thinking of fixing but worry that if we fix for two years, rates will be much higher when we get to the end of the term and the tracker will no longer be available. What would you advise?

Tracker rates are very attractive products that have mainly worked in the borrower’s favour in recent years – which is why the banks are very keen to convince their mortgage customers to voluntarily give them up. Most of lenders have five year fixed rates below 4% APR, but this a huge jump from the 2.1% you are paying now. The question is, how long can these low fixed rates last especially if inflation becomes a serious problem again, (as I suspect it may). Will you be able to switch to one in time?  Also, can you afford the higher fixed repayment right now in the hope that it will pay off during an inflationary period? Before you make any decision, compare the cost of the best fixed rates you can find against your existing tracker if it were to rise by another few percentage points. Then get a written breakdown from your lender of exactly how much it would cost you to break a fixed rate contract were interest rates to fall again and you felt compelled to return to a variable or tracker rate. 

Ends

PC writes from Sligo: I believe that CRH is going to benefit from President Barack Obama's building programme in America and I would like to buy shares in the US operation. I have been told that I can buy CRH on the ISEQ but I don't want to. Can I buy shares in CRH as listed on the New York Stock Exchange through fexco.com or sharewatch.com? 

You can, but buying CRH shares on the New York stock exchange, using euro that is exchanged into dollars, exposes you to a foreign exchange risk that is unnecessary given that these shares are listed here in Dublin. If you already had a reserve of US dollars in a US bank account then it would make sense to buy CRH shares through a US broker if you so wished, but no matter on what exchange your CRH shares are listed, if the company’s turnover and profits improve because of the US government stimulus package, (or any other country’s) this will be reflected in the overall CRH share price.  

SR writes from Co Louth:  In his will my late husband left me his entire estate – made up of a modest number of acres of farmland (that we leased out for a number of years), our family home and cash savings.  The total value is less than a million euro.  I will be retiring (I am a nurse) next year and will also have a pension income.  My query is regarding the excessive legal bill I have received for the probate – over €17,000.  I have requested a full breakdown of all the fees, costs and charges involved, but the solicitor is being very uncooperative and has offered to reduce the bill by €2,500.  How can I get information re costs of probate and all to do with registration. 

Two years ago, as her executor, my husband processed his late mother’s will with the help of officials in the ‘Personal Representatives’  section of the Probate Office here in Dublin.  It was a bit time consuming – there were copies of the will and death certificate and a tax clearance certificate from the Revenue Commissioners to gather and then he had to notify her bank and the State Pensions office of her death, but in the end the cost was negligible as she left her entire estate – a Dublin property and some savings equally to her three sons.  It was so straightforward, that our own solicitor recommended that he do the probate himself.  Even if my husband had opted to use our solicitor he certainly would not have charged anywhere near the fee you have incurred.  Meanwhile, the Law Society’s consumer booklet on solicitor’s charges states: “When you instruct a solicitor to carry out some work for you, your solicitor is obliged by law to give you information in writing about the legal charges you will incur.”  Did your solicitor provide you with this written fee schedule, which may only be an estimate of the charge? They are also obliged to give you a breakdown of all their fees, expenses and other charges, plus VAT in the actual bill.  Since you did not receive such a breakdown, and your solicitor is not cooperating you should make a written complaint to the Complaints and Client Relations Section of the Law Society, telephone (01) 672 4800. Alternatively, the Law Society suggests that you have your bill taxed by a court official called a Taxing Master. “This means they will look at your bill to assess and decide what charges you should 

pay.” A leaflet is available from the Taxing Master at (01) 888 6321.”   Good luck. 

ends

TM writes from Dublin:  I was the subject of a tax investigation by Revenue in 2002 in relation to a bogus non-resident account during the period 1980 - 1987. At the time I contended I had returned details of the bank accounts in question to Revenue, but in the absence of documentary proof, I was advised by my agent that I was obliged to pay taxes, interest and penalties totalling in excess of €65,000, which I made. At the time the Revenue official noted on his file the argument made by me that I had returned the relevant details in my tax returns. In 2006 I accidently found documentary proof to substantiate the claim I had made in 2002. Revenue repeatedly refused to reopen my file on the basis that it was outside the four year statutory period to submit a claim. However, after enormous effort on my part they conceded (mainly on the grounds that my claim was noted by the original Revenue official) and they have agreed to refund the €65,000.  Am I entitled to interest from Revenue on the monies refunded?  My second question is, is deposit interest subject to the health levies when computing all income liabilities for tax purposes?

You certainly are entitled to interest if you have been incorrectly assessed for income tax, penalties or surcharges; actually collecting this money, say tax advisors, could take some time and effort on your part, however. You will need to make an official appeal “and then doggedly pursue it as it wends its way – inevitably – through different officials and sections in the Revenue” one advisor told me.  I suggest you hire a good tax advisor to assist you.  Meanwhile all weekly income over €500 gross (except for pensioners, medical card holders and other social welfare recipients), including income from deposit accounts, is subject to the health levy which is now 4% on earnings up to €75,036 and 5% on earnings over €75,036.

Ends

GP writes from Greystones: You recently gave good advice to MB from Co Laois who had €5,000 to dabble in shares. (Although, I would respectfully suggest that '"dabbling" in shares - is not to be recommended to anyone - ask Sean Quinn!!!) I am interested in investing further afield, especially, though not only, in the USA. I am interested in ETF's but also in options trading. I have done a little research but my most pressing decision is who to deal with at an economic cost. I have no intention of becoming a day-trader (I am a buy and hold investor at heart) but Charles Schwab has an account that pretty much sums up my position - it's a 'Core & Explore' account. I have my 'Core' investments and now I want to do a little (well-protected and limited) 'Exploring'. What I would like is an on-line, discount broker who doesn't look for too big a deposit, is secure and who doesn't charge the earth. Do you have any suggestions?

US and UK based execution only, on-line brokerage houses can offer what appear to be very low set up fees and competitive charges compared to Irish ones like www.sharewatch.com or www.fexcostockbroking.com but if you use a foreign, non-euro denominated brokerage like Charles Schwab, you are taking a currency risk both on the commission you pay as well as on the value of the non-euro denominated shares.  The strong euro at the moment means that the trading cost favours you, but it works against you on the share value side if you currently hold US or UK shares denominated in dollars and pounds. You need to decide if the cheaper transaction charges justify this currency exchange risk. ETFs are a good low cost play, but before you opt for foreign currency denominated ones, check out the ETFs on the ISEQ, (www.ise.ie) and on www.iShares.com.

The Sunday Times 

MoneyQs – May 31

By Jill Kerby 

KS writes from Dublin: I had a Quinn Life SSIA and when this finished I continued to put money into a new product to keep up the saving habit. I took some money out and at present have around €15,000 in the fund. My question is, how safe is my money? Is it protected by the banking scheme?

There is no equivalent to the bank deposit guarantee scheme for life insurance companies regulated by the Irish Financial Services Authority. Only two life insurers that operate here, Standard Life and Caledonian Life, would pay out compensation to their investment or protection policy holders if their companies became insolvent. This is because they operate here under the regulation of the UK Financial Services Authority (FSA) and participate in the UK Financial Services Compensation Scheme.  The scheme provides consumers of UK regulated life policies 100% of the first €2,000 and 90% of the remainder of the claim.  As for whether Quinn Life – which is licensed and regulated by the Financial Regulator is ‘safe’, the company replied last September to the same question from a customer who then posted the reply on the popular financial website, askaboutmoney.com on October 2, 2008. The company stated: “QUINN-life must adhere to certain rules on solvency as defined by EU Life Directive's and Irish legislation. The company must report statistical and financial information to the Regulator on a quarterly basis and is subject to random supervisory visits by the Regulator… Quinn Life has a very simple balance sheet in that the company is carrying no debt, no derivative type assets and the company has no guaranteed type products that depend on derivative transactions with other companies. In addition, Quinn Life is a ring fenced regulated company, meaning that the company's assets or retained profits cannot be drawn down or transferred to any other Quinn Group company without prior Regulator approval.”  However just three weeks later it was revealed that the owner of Quinn Life, Sean Quinn, was personally fined €200,000 and Quinn Insurance, the non-life company within his group was fined €3.5 million for not informing the Regulator of a loan of €288 million from Quinn Insurance to the Quinn Group that was used by the Quinn family to cover falling stock market investments and finance share-buying in Anglo Irish Bank. Mr Quinn accepted full responsibility for the breach of the regulation.   

ends 

NO’C writes from Wicklow: Seven years ago I paid off the mortgage on my house that I had with Bank of Ireland. They sent me a statement showing a €0 balance which was accompanied by a congratulatory card! However, the bank has held on to the house deeds and as I would now like to have them in my possession, I wonder what steps I need to take and will there be a charge? Incidentally I am one of their "highly valued" Golden Years account holders and a pensioner.

You shouldn’t have any difficulty getting your deed back from your lender, I am told, hopefully without any cost though this could depend on the institution.  It is your property after all.  But you do want to keep it safe and that’s where you might hit a snag:  the Irish banks no longer offer safe deposit facilities, but your solicitor may.  (My solicitor has our house deed, for example.)  There may be a small annual fee to pay.  Home safes are becoming more popular; check out a good hardware, locksmith or security company for an appropriate model.  I know someone who had a below floor one installed in their house where they keep all their deeds, financial policies, passports and birth certificates and a few pieces of valuable jewellery.  After a spate of break-ins in his neighbourhood in which only car keys were being stolen from the hall table he now drops the keys to his Merc in the safe every night as well. 

ends

MD writes from Dublin:  I heard you speak last year at the Over 50s Show and came away relieved that my finances were okay. Recently, several of my savings certificates, building society fixed term accounts, etc have matured and I am at a loss about how to proceed. I am 75 years old, own my own house and while my savings is not a fortune – about €100,000 and a few more saving certs to mature in the next couple of years - I want to secure what I have.  I would like to be able to help my family afford a few luxuries like holidays and help with the cost of the education of my two grandchildren as well. 

Your desire to help your family is laudable, but I hope you are doing so only after you secure your own finances for both the short and long term, say in the event that you need either in-home or institutional care.  With interest rates so low, market volatility and falling house prices you need to err on the side of caution.  and there being so much volatility in both the banking and investment markets you need to be extra cautious; I expect your family will appreciate this too. I suggest that you speak to a good, fee based advisor to help you both secure your cash fund and generate a safe annual return which you can use both to boost you regular income and help your family.  A capital guaranteed bond, perhaps inflation linked, might be worth considering in addition to a selection of safe deposit accounts. Perhaps your family can help you find such a trusted advisor with the help of the Financial Regulator (Locall 1890 777777) who keeps a register of those that they regulate. 

CO’C writes from Dublin: We bought our current residence three years ago, and have a variable rate mortgage.  It is our understanding that since the recent budget changes, we will only be able to claim tax relief at source for the next four years. As a consequence, we would like to increase our monthly mortgage payments either by submitting extra money every month or by renegotiating a shorter mortgage term. Our question is: if we increase our payments, can we claim tax relief on the new larger monthly mortgage payments, or will the tax relief only apply to the current amount that we pay?

The amount of interest you pay on a variable rate mortgage in the early years of the loan is proportionately much higher than the principal or capital you pay off:  for example, if your loan was for €100,000 over 30 years and the interest rate (for argument sake) was 5%, your repayment would be about €536 a month of which €416 would be interest and €120 capital, and the capital would increase by tiny increments with each payment.  By the final years of the term, the bulk of the payment would be capital and only a small amount, interest. “I don’t think your reader entirely understands the value of accelerating the payments,” says financial advisor Liam Ferguson of Ferguson & Co in Dublin. “The whole point of accelerating your mortgage payments is to pay off more capital sooner, and therefore avoid future interest payments on that money. The interest payable, should your reader increase the repayment by say, €100 a month to €636, would still be in the region of €416; the extra payment of €100 is being used directly to pay off capital, not interest.”  Very simply, you will still receive the same tax relief on the original amount of interest you contracted to pay, but overall, you will pay far less interest on your total loan. 

ends

Mr JW writes from Limerick: I qualified for a partial UK old age pension having worked there for 10 years. Would you know if I could also claim medical expenses and if so where would I apply.

If you are a resident here in Ireland and are in receipt of a UK pension, then you are obliged to pay tax on your UK pension; if it is already taxed, then you can claim a tax credit for that payment against whatever tax you may have to pay here.  As an Irish resident and taxpayer (if there is a tax payment) you would then make any claim for qualifying tax relief for your medical expenses with the Irish Revenue authorities, not the British ones.  The Revenue website, www.revenue.ie explains how to claim your medical expenses (for up to four years of in arrears) using a Form MED 1. 

Ends

JMcC writes from Dublin: I have a small bank account in France with Credit Agricole. I keep a modest few euro in it for emergencies whilst on holidays for car breakdowns etc. Notwithstanding the Government guarantee I was thinking of transferring some of my savings from an Irish bank to Credit Agricole to spread my risk just in case Armageddon comes over the hill. I am wondering if you are aware of how the deposit interest rates in general compare between Ireland and France and more importantly does the French Government provide a guarantee for savings and, if so, does it include savers resident outside France and up to what amount. 

The French deposit guarantee scheme, also known as the ‘cash guarantee’ is worth a maximum of €70,000 and it includes all savings accounts in France or held in deposit accounts held in French owned banks outside France. The guarantee applies whether you are a French resident or not. If you do shift your funds from Ireland to France the money will be subject to the same EU anti-money-laundering rules as apply here: You may have to provide the French bank with some proof that you are the beneficial owner of the funds. 

ends

EM writes from Foxrock: A friend of mine whose husband died last year went to her local solicitor to make her will. The house in which she lives was in the name of herself and her husband. However the solicitor is urging her to have the house put into her sole name. Is this necessary?

According to solicitor Deborah Kearney of Leman Solicitors in Dublin, “transferring the property into your reader’s sole name very much depends on whether it was held under a joint tenancy or as tenants-in-common.  As they were husband and wife it is likely that it was a joint tenancyand in that case nothing will have to be done to the deed.  If however, it is a tenancy in common your reader will have to extract a grant of probate before she can transfer the property into her sole name. If this is the case the solicitor will charge a fee for his or her services.  It appears to me that your reader’s solicitor is being prudent to ensure the title  is tidy in case of any future dealings with the property.”

KD writes from Co Meath: We hold An Post savings bonds and certificates, a ‘backs against the wall’ safety position which we took last September - justifiably paranoid I think, but probably naive. But is the government guarantee of An Post bonds and certificates any better (or indeed any worse) than its guarantee of savings in banks? Is it time to crawl out of the bunker and avail of the better savings rates in the banks? If the IMF or ECB comes calling next year should we be fearful for our savings? Is it time to swap cash for something tangible that may (or may not) lose value, but won't actually evaporate?

You certainly aren’t alone in asking these questions but it seems to me from the way you’ve posed your questions that you are already working out your own course of action.  As you suggest, our economy is in serious trouble and there is no certainty that the government’s tax and borrow plan for recovery will work. In the end, the delivery of the government’s 100% guarantee of everyone’s savings in the Irish banks hangs on the plan’s success; if you are worried, you should not leave all your funds in a single Irish institution. Instead, spread your money around, even on the basis that some are better capitalised and carrying less debt than others. An Post and its sister bank, Postbank for example, have no Irish exposure to any lending, whereas the main Irish banks keep updating the size of their debts.  Of the foreign banks operating here, the markets believe that Dutch bank, Rabodirect, and the UK deposit-takers Leeds and Nationwide are considered to be the most solvent. The deposit guarantee in the case of Rabodirect is €100,000 and €54,175 for UK institutions.  Finally, whatever about the prospects of losing our economic sovereignty to IMF or ECB bean-counters, my personal view is that inflation of the money supply – which could cause a rise in retail prices - is probably a greater medium term risk to the value of your cash holdings.  You could buy some gold or other precious metals as a possible hedge against the devaluation of your cash, though the price of gold, like most assets these days can be volatile.  

ends

YM writes from Dublin: I am 55 years old and have only belonged by my company DB pension plan for the past six years though I joined the firm in 1992.  I lived for many years in the UK and bought a property there with an endowment mortgage in 1986. I moved back here in 1997, sold the UK property but kept the endowment policy that costs £54.21 (€58.81)a month. It matures in October 2011.  It’s target value was put at £37,000 (€40,137), but I recently received a surrender value quote from AXA, the insurer, for £24,752.99 (€26,852.04), which is £1,000 (1084.80)less than a quotation I got in February.  I would like your opinion on whether I should surrender it now or wait and will I be taxed in Ireland on the encashment value if I put it towards my Irish mortgage (of €40,000 which will be paid off in 2017) or if I use it to support a family member with long term illness? I can afford to continue the endowment payments until the maturity date, but am very worried that the value will drop so much by then, that I will have lost all my savings. 

The £24, 752.99 surrender value is a combination of the basic sum assured – the premiums you will have made over 25 years - and the rolled up returns and locked in annual bonuses that your investment has accumulatedsince 1986.  The higher, €37,000 figure is the projected value, plus final bonuses that may or may not be paid upon maturity, depending on how well financially AXA is in 2011. With just two years to go, you need to decide whether you think this fund will perform well, or badly and how urgent your own need is for this money. I’m told that there isn’t much of a market for nearly matured with-profits policies, but you should still check with the likes of the Endowment Policy Purchasing Company (part of IFG) for a quotation. (See www.ifgteppco.com). Finally, the fact that you would spend your maturity value towards paying off your Irish mortgage or to help support a relative would have no mitigating effect on any tax you may have to pay on the proceeds of your policy.

Ends

PMcLwrites from Cork:  I will be retiring in a few months and it has been recommended that I consider buying an annuity with my pension fund.  I was told that an indexed linked one is better over the long term but aside from my concern about the lower initial amount that I will receive I’m also worried about the indexing element. If inflation keeps falling – it’s already under 2% does that mean that my pension could actually be reduced?

According to Vincent Digby, of the Dublin financial advisors, Impartial, “both Irish Life and New Ireland, two of the biggest pension annuity providers, confirm that escalating annuities that are linked to inflation only reflect positive numbers. Deflation is ignored and in times of deflation there is a floor on the payment, which will not decrease.”  You are quite right to ask questions about buying an indexed pension:  the cost will be higher initially than a conventional flat rate annuity and it can take many years before you achieve the non-indexed pension value.  But on the plus side, the longer you live in retirement the higher your annual income.

The Sunday Times 

MoneyQs  May 3

By Jill Kerby

CD writes from Dublin: We have some land in Canada which we hope to sell in 2010 at a profit and understand that the capital gain will be taxed at 25%, payable directly to the Canadian tax

authorities. We also have some Bank of Ireland shares, which if we sell at present, will incur a capital loss. This loss will probably equate to a figure very close to the capital gain from the sale of the Canadian land. Can this loss be offset against any capital gain from the Canadian land?  Second, can I utilise my Irish CGT allowance to offset any of the Canadian gains? Third, how long can a capital loss be offset against a future gain?

The double taxation agreement between Ireland and Canada means that while you do have a 25% CGT liability here as well as in Canada, you will be credited with the Canadian payment and have little or no CGT payment to make on the sale of this land when you fill out your preliminary tax return at the end of October 2010. If there happens to be a small gain on the Canadian land sale your annual Irish CGT allowance of €1,270 can be used to offset this liability.  As for carrying forward capital losses, “your reader can do so indefinitely, or at least until the disposal of an asset produces a gain,” says Dublin tax advisor Sandra Gannon of TAB Taxation Services.

Ends

SM writes from Dublin:  I started putting away my children's allowance in Quinn Life Celtic Freeway, Euro Freeway and Emerging Markets funds from mid 2006. Today, I have lost around €4,500. It’s a shock. Would you say I need to change my investment strategy? I am not in immediate need of funds, bit I was hoping to have a good amount for the future education of my kids now aged 10, 7, 5.

From the tone of your letter, it sounds as if you know already that you need a new strategy – if only to allow you to rest more easily.  Investment losses have been severe over the past year, especially from Irish shares and the Quinn Life Celtic Freeway fund, which represents the top 20 companies in the ISEQ index has fallen by over 58% in the past year and nearly 67% over the past three years.  It would require a huge turnaround in the Irish stock market and economy for you to recover your initial investment, let alone record a profit from this fund. Meanwhile, the Euro Freeway fund is down about 36% over the past year and three years while the Emerging Markets fund is down nearly 34% over the past year.  Your children are still very young, so you have more time than a pensioner, for example, would to recover losses, but I appreciate that isn’t much consolation. Cashing out now, however, follows an unfortunate pattern than many people make – the sell low after buying high, thus crystallising their losses. However, continuing to add to a losing position – the Celtic Freeway Fund in this case - is another classic mistake, say successful investors. There has been a relatively modest share rally in Irish (and other) shares in the past few weeks, but there are doubts about how sustainable it is given the precarious state of our finances and the wider global situation. Before you keep adding any more money to the Celtic Freeway funds you need to decide how confident you are that the fund – and Ireland Inc – will recover by the time you need the money for your children’s education. (Many commentators are not very hopeful for the short to medium term.) Quinn Life allows you to switch funds at no extra charge so I suggest you look carefully at all the Quinn funds and their underlying companies. Just three of the 13 are producing positive returns over a full year – the biotech, cash and bond funds.  And while eight funds are back in the black over the last six months, you need to figure out for yourself if this is a genuine ‘bull’ rally or a short-term ‘bear rally’ that will result in further market falls. This is a hard decision, but if you don’t think you can cope with the heightened volatility of the markets, you can always opt for the greater security of cash and bond funds. 

Ends

CD writes from Dublin: I have accelerated my mortgage repayments on my original mortgage and this mortgage will shortly be paid off.   I originally took out a mortgage protection policy with Norwich Union and I think it is now with Ark Life. I am under the impression that the mortgage protection policy holder will want me to keep paying the premium for the original term of the mortgage which I have shortened.  I hope this is not the case. 

Mortgage protection policies must be taken out to protect the interests of the bank, not the mortgagee.  Once your loan is fully paid off you can cancel the mortgage protection policy without any penalty. You say you want to cancel it sooner than later, but keep in mind that life cover gets more expensive as you get older.  If you can possibly afford it, and you have dependents to support, it might be worth keeping the policy until the actual mortgage maturity date. 

JD writes from Dublin: In relation to the government guarantee on savings in banks, building societies and credit unions, will this guarantee stand if the country is bankrupt?  If the guarantee would not stand, do you think it would be sensible to move savings into property now?  

GT writes from Dublin: I really enjoy your column, I was hoping that you might at some stage do a practical feature (figures!) on how to calculate one's net income from gross income dealing with calculating tax deductions, insurance relief, income levies, health levies, tax credits, PRSI contributions. I find calculating one's PRSI contributions a mine field, the income levy and pension levy are fairly straight forward whatever about the pension/superannuation rates one has to make. If not do you have any book published or any book you would recommend that sets out in figures how to determine one's net income. It would be nice to be able to understand one's payslip. Hope you can help.

JM writes from Kildare: I am interested in trying my hand at direct share investments and want to learn about the tax issues relating to the sale of shares as I am a PAYE worker and therefore never had to submit tax returns before. Do most investors use tax advisors/accountants for dealing with CGT/dividends etc and do they give advice? I have looked at the CGT booklet from revenue and the CGT return forms but cannot really understand them. Would the accountant usually charge a percentage or a set feeand would this wipe out your profit? I understand the first €1,270 is exempt of tax but the form is quite complex in terms of inflation/indexation relief & also if shares are bought via a rights/bonus issue etc, further rules apply. CGT appears to become even more complex when you buy more shares of the same stock, but at different times and in different amounts. Assuming I only sold a certain amount of those shares, at different times, how are all these factors considered in the calculation of CGT? Finally, assuming dividends are paid out every so often, how is the income tax handled in this regard? Do I just record total dividends once each year and submit all together or submit returns each time? How do I make tax returns for dividends?

JD writes from Dublin: In relation to the government guarantee on savings in banks, building societies and credit unions, will this guarantee stand if the country is bankrupt?  If the guarantee would not stand, do you think it would be sensible to move savings into property now?  

TO writes from Dublin:  My husband is well over 80 and qualifies for the medical card on income grounds. As I am now over 70 he was told that I also qualify.  The form I must fill in requires not only details of our savings, but evidence and there is no way my husband will write down the numbers of our An Post savings certificates or our post office book. Surely asking for details and evidence of our savings is breaching the bounds of decency? 

Last October’s budget changed the rules by which the medical card is now issued, but the fact that your husband is still receiving the card, and was not required to produce any further statement of income, suggests that the HSE is satisfied that he continued to qualify for the free medical card after the October changes. (In fact the majority of over 70s continued to receive the card.)  The request for income details from you, not that you are over 70, sounds to me like a formality, unless, of course you have separate income to your husband that would push you both over the qualifying income limit of €1,400 per week for a married couple. The HSE has said it will take a sympathetic view of pensioners with existing cards and question marks over their continuing qualification.  Why don’t you contact your local Citizen’s Information Centre and discuss your concerns with them?  They should be able to allay your fears about having to fill out this form.