The Sunday Times - Money Questions 08/11/09

Posted by Jill Kerby on November 08 2009 @ 14:15


YM writes from Dublin:

I am an unemployed lady in my fifties and am living on savings.  I have not been in PAYE employment for about seven years.  I believe I have paid enough contributions over the years for a 75% contributory pension, someone has told me I could sign on for more credits towards a pension. (If there is any money left in the country to pay anyone a pension!) Is this correct and how would I go about it?

You should contact the pension section of the Department of Social and Family Affairs at Social Welfare Services, College Road, Sligo, Tel: (071) 915 7100 or Locall: 1890 500 000 or by e-mail at http://www.welfare.ie/ to establish exactly how many PRSI contributions you have made and the size of your state pension at age 66. They can then advise whether you should make some voluntary contributions or not towards securing a maximum state benefit. Since you will reach your pension age after April 6 2012, you will need to 520 paid contributions (10 years paid contributions) and not more than 260 of the 520 contributions may be voluntary contributions. 


KK writes from Carlow:

I will be 65 and retiring in September 2010 and I have a pension with New Ireland worth approximately €8,000 invested in a safe fund. Would you please advise me if it would be worth my while investing the maximum amount in AVC's for 2009-2010 and if so what percentage of my pension and AVC's can I take as a lump sum on my retirement. I earn approximately €40,000 per annum.  

I’m not entirely clear if the €8,000 you quote is the investment value of your pension fund with New Ireland or the size of the actual pension you expect. Either way, your pension fund/income is quite small. Had you qualified for a full, 40 year service pension at retirement, with sufficient funding by both you and your employer and satisfactory investment returns if yours is a defined contribution scheme, you could have ended up with a pension €26,666 per annum or two thirds your final €40,000 salary. As it is, says Dublin investment advisor Liam Ferguson of Ferguson and Associates, you personally can still make AVC contributions in 2009 and 2010 worth 40% of your total net realisable income which would boost the value of your tax free lump sum, which can amount to no more than one and a half times the value of your final income, or your final pension income.  This percentage contribution must include any normal contributions you already make into your pension fund.  Your employer could, if he wanted, fully fund your pension, but this is an option usually only reserved for very senior employees or executives who have a funding shortfall.  If you are a married person and sole earner, you are unlikely to pay any tax on the higher income that is produced by topping up your AVC, says Ferguson, as your total income, “even including a state pension, is unlikely to exceed the tax free, €40,000 per annum income threshold for married couples. The Commission on Taxation has recommended that a higher than standard rate tax relief replace the current tax relief rates for pension contributions and if this is introduced in the Budget, it will give your final pension value another boost, says Ferguson. Just make sure your fund is protected against any investment risk between now and then.  

MP writes from Kildare:

My husband, who is 80, spent all of his working life in England and has a UK company and state pension, but not an Irish state pension.  He has lived in Ireland since 1987 and received an Irish medical card at age 65 and earlier this year was informed by the Department of Social Welfare that he was entitled to hold his medical card. Am I correct in believing that my husband's UK state pension gives him automatic entitlement to an Irish medical card under EU rules?  At age 60 I became eligible for a small UK state pension on the strength of my husband's contributions (I am now 68).  I am not in receipt of an Irish social welfare pension.  When I retired from teaching in January 2004 I was advised I was eligible for an Irish medical card under EU rules. I applied for and received a medical card in February 2004. I have had two review dates since then. My next review date will be in February 2010.  Again, am I correct in believing that my UK state pension gives me automatic entitlement to an Irish medical card?


First, it is the Department of Health and the HSE that determines who is eligible for a means tested medical card, not the Department of Family and Social Affairs. The fact that you have UK state pensions is not relevant. Irish medical cards are available to the holders of UK pensions, but they are means tested. Your husband clearly has passed his means test. If you are concerned about whether your qualification for a card is still valid, I suggest you contact your local health board or get onto the HSE in Co Kildare at the following number: 045 876001.


HFQ writes from Dublin:

We hold a "qualifying account" with I. Nationwide. Can any benefit accrue from a possible demutualisation in the future?

I doubt it.  My husband once had a similar qualifying account, which he opened a number of years ago in the hope of a carpet-bagger’s windfall, but the chances of Irish Nationwide ever being demutualised are, I suggest, slim to zero.  This bankrupt institution is either going to be subsumed into some other creation of the Department of Finance as a ‘third force’ in banking here, or it will remain on life-support from the taxpayer as a zombie bank or be simply wound up.  Your ‘qualifying’ account is now redundant, and you might want to fashion an exit plan for your cash from it, at some point. 

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