Jill Kerby

I need the best route out of my freeway SSIA fund

NH writes from Dublin: I contributed €254 per month into an SSIA (Special Saving Investment Account) which I did not cash when the scheme ended. In fact, I put more into the fund, the Quinn-Life Euro Freeway fund, which is now well down from its heights. The value is now less than the amount I’ve put in.

 In light of ongoing problems with the Quinn Group, albeit not, they say, with Quinn-Life – they say this fund is “ring-fenced” and completely safe - do you think it would be better to cut my losses and cash-in?

 I am, thankfully, not in pressing need of cash right now and would be happy to leave things as they are in the hope that they may come good eventually: the niggling fear is that I may lose all if Quinn-Life collapsed.

Quinn-Life is still owned by the Quinn Group and is neither for sale, nor in any danger of ‘collapse’, said a spokesman for the company. However, there is no compensation scheme for life assurance investment holders (unless you are a customer of Standard Life, which comes under the UK investment compensation scheme.)  If Quinn-Life were to collapse you could lose all or some of your investment.

As to whether you should encash your fund or not, this is something you should decide upon only after weighing up the actual loss: Quinn-Life’s website shows that the Euro-Freeway fund has lost -36.8% over the past five years, the period in which you have increasing your contribution to the fund. However, during the previous five years of the SSIA scheme, 25% of all your contributions were a gift from the state, and the fund produced a positive return. Also, if you do encash right now there won’t be an exit tax to pay if there is a loss, but because it is a life assurance investment and not say, an equivalent exchange traded fund (ETF) that trades directly on the stock market, you won’t be able to carry forward your losses to mitigate other capital gains tax liabilities.

Instead of crystalising your losses – you admit you don’t need the money and “things might come good some day” – you could consider a free switch to a different Quinn-Life fund.

Past performance is just that, but over the same five year period to 13 January, 2012, since you started adding more money to the Euro-Freeway fund, to 13 January this year, the Biotech Freeway fund produced a cumulative gross return of +58.3%, the Latin American Freeway Fund, +39.9% and the Technology Freeway fund, +25.2%. Only the Celtic Freeway fund, at -64.4% produced even worse returns than the Euro-Freeway.

MG writes from Dublin: Is it possible for a parent to loan his son money to clear his mortgage without the son incurring a tax liability?

There is a lifetime tax-free gift threshold between a parent and child that is currently €250,000 before any capital acquisition tax of 30% must be paid.  So long as your son’s mortgage is below this amount, and he has not received a previous gift that would be liable to CAT, he will have no tax liability to pay.

PM writes from Dublin: My brother-in-law, 65, is an citizen and resident of Ireland and has been advised by the UK state pension fund of his British pension entitlement as he worked for a few years in the UK. They also advised him that he could practically double his pension by making a payment to cover some missing years of contributions. If he does this, the pension his wife receives will also be increased though she never worked in the UK. He has a small pension fund currently invested with Acorn Life Galway which he intends to continue as he will need to carry on working for the foreseeable future.  He would like to use part of his Acorn pension fund to finance the amount required to enhance his UK pension. To avoid any tax complications Acorn will need to make payment direct to the UK State Pension Fund.  This appears to be covered under the Revenue rules, however Acorn are dragging their feet. Perhaps this is the first time they have come across this opportunity. Is it possible for you to confirm whether it is acceptable to make such a transfer as envisaged above?

According to pension consultant Clive Slattery of Friends First, a former senior Revenue pension official, there is no Irish Revenue rule that allows a private pension fund holder to part-encash their fund or for their pension provider to do so in order to transfer the money to the UK state pension fund in order to purchase an enhanced state pension payment (the latter of which is possible in the UK.)

The financial advisor and pensioner trustee Eddie Hobbs of FDM Ltd added, “Perhaps your reader is confusing this idea with the 25% of his pension fund that he can take tax-free, that he might then be able to pay to the UK state pension authorities to enhance his and his wife’s pension benefit.”

Your brother-in-law needs to speak to his Acorn Life representative again or write to the company for clarification on this matter.  Given his confusion over what is possible, he should also consider engaging an independent pension advisor when dealing with Acorn, who could also help him decide what to do with the remainder of his pension fund if he does use the tax free portion to buy additional UK state pension benefits.