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The Sunday Times - Money Questions 01/02/09

Posted by Jill Kerby on February 01 2009 @ 22:33

RO’S writes from Dublin: I have a windfall of €10,000 and as I do not presently need cash I would like your advice on how best to get a return.  I am 57 years of age and could leave this cash for 12-18 months if necessary.  What are the best options for a return on a notice account or are there other "safe" places. I have been told that government bonds might give a good return.

Government and/or corporate bonds are not usually considered to be short-term investments:  usually, the longer the maturity date of the bond, the better the annual yield. That said, there is a huge demand for bonds as investors seek security and short yields are quite low. (Corporate bonds are paying much higher yields but are considered riskier.) A stockbroker can assist you to buy into a government or corporate bond issue. If you are willing to leave your funds on deposit for 12-18 months our Best Buys page currently shows that the nationalised Anglo Irish Bank is offering 5.25% AER fixed for 12 months and 3.5% AER for two years on minimum deposits of €1,000 though it’s hard to understand why such a high rate is still on offer now that it is owned by the state. First Active’s 4.6% 12 month rate is unlikely to last now that it is being subsumed into Ulster Bank which leaves you with the Permanent TSB 12 month rate of PSTB 4.4% fixed rate.  With ECB rates likely to fall further, you might want to move quickly to lock in your money at these rates.

 

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PC writes from Athlone: I have €150,000 on deposit with Anglo, in a self-administered pension fund, the trustees are myself and ITC. It was funded by my company putting in €120,000 and €30,000 of my own savings. Unfortunately like so many others, I need cash to run the business and cover personal loans. The €150,000 is my only source to funds, however I am told by ITC that I cannot get access to it until I am 65, or if I retire from the business. I cannot retire as I am the business and by the time I get to 65, well, it will be all too late then. What a pity to leave funds sitting in an account getting 2.3% when, if I could get access to it I could keep the business going. I am a retailer in Athlone selling gifts and silver jewellery.

 

The information you were given is correct says John Mulholland, a director of the pension advisors, Custom House Capital in Dublin. If you were age 50 or over and ready to retire, you could have transferred your existing fund into a PRSA (this also assumes that the fund was set up no earlier than 15 years ago) from which you could immediately access 25% of it tax-free and then either encash the balance (with an income tax liability) or transfer it to an approved retirement fund (ARF) from which you could draw down a taxable income, but keep the capital invested. This is also an option for pension fund holders over age 50 who are made redundant. In your case, Mulholland says you must wait until you are ready to retire – and hope your business stays afloat in the meantime. (See MoneyComment.)

 

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PT writes from Dublin: All the different literature I have read about how to qualify for a medical card if you are over 70 doesn’t seem to provide an answer for the following: is gross income, i.e company pension, state pension, investment income such as dividends and deposit interest based on based the current or previous year.  If it is based on the current year, you may not have all the information to hand regarding your income. Can you clear this up?

 

My understanding is that the new means tested terms for the qualification of a medical card applies on gross “pensions, earnings, interest from capital and all other sources of income” up €700 per week for an individual or €1,400 for a married couple that is earned from March 1, 2009. Income from the first €36,000 capital (for an individual) and €72,000 for a married couple is not taken into account. There is also some discretion that can be exercised regarding applicants who may have high medical expenses but whose qualifying incomes exceed these limits.  You don’t say whether you are over 70 and have had the card already, only people whose known incomes are higher than €700 per week have been contacted by the HSE. If you are worried that last year’s income disqualifies you from keeping your card, but that you believe your income is likely to drop in 2009 (perhaps as a result of loss of share dividends) and that you would then qualify for a card, I suggest you ask for a meeting with an official in your local health office or call the HSE information line at Callsave 1850 24 1850 to explain your situation.  

 

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CM writes from Cork: Our son is likely to be studying at university in the UK from this September onwards and my wife and I will be responsible for paying his fees and expenses. The sterling rate is quite favourable at the present time and we wondered if we were to change money at the present time is there any way in which we could open a Sterling bank account, either here or in the UK, to make advance provision for his expenses.

You can speak to your bank about opening a sterling account here into which you can make sterling deposits at rates that you believe are favourable against euro.  Make sure to ask about the cost of running the account, and any deposit or currency exchange charges that may apply, especially if you are transferring euro into it, and an exchange charge applies.  Once your son is in the UK, he can open his own account and you can transfer the accumulated sterling into it, or feed it every month, but again, be sure to ask about the fees and charges which will vary from bank to bank.

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GD writes from Navan: Could you please advise on how to go about buying gold, who to approach what banks, what quantities etc. I would really appreciate your assistance.

 

Gold pays no dividends or annual yield, but nor does it disappear. It’s job – for the last 5000 years has been to simply endure as a store of value during times of inflation, war and general economic uncertainty.  It is why the price of an ounce has risen from c$250 an ounce in 1999 to nearly $900 an ounce today.  (It was $801.50 two weeks ago on January 15th.) Some commentators, including the Irish gold bullions dealers, Gold and Silver Investments in Dublin predict the price will rise to over $1,200 an ounce this year as the risk of inflation returns due to the huge supply of debt and credit by central banks since last autumn. You can buy it in a number of different forms – gold coins and bullion which carry a c10% premium on top of the spot price due to the high demand for physical gold and as gold certificates from the Perth Mint of Australia, (which I own) which represent the value of a quantity of physical gold that you have purchased and which is kept in the Perth Mint vaults. You can also buy gold in the form of an ETF – an exchange traded fund, that trades like a share on a stock exchange or you can opt to buy gold mining stocks which have underperformed the spot price for the past year. If you buy physical gold there are delivery and insurance charges and you will need somewhere safe to store it (at an annual charge). ETFs are a relatively inexpensive way to buy the shares, but there is counterparty risk to consider (ie the trading firm) and you will have to pay a broker sales commission and a (low) annual fee of probably less than 0.5%.  Gold certificates carry a sales commission of between 2%-4%, but there is no annual charge or storage charge and they involve no counterparty risk.  See www.gold.ie for information about gold in its different forms.  

 

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