The Sunday Times - Money Questions 19/04/09

Posted by Jill Kerby on April 19 2009 @ 21:57

NW writes from Dublin:  I have money invested in schemes like Standard Life Bonds, AIB Eurobond, Bank of Ireland Asset Management and Hibernian Investment funds etc. Obviously all of these products have lost value. Are they likely to recover in the medium time - I am in my 70's - or should I just liquidate all of them?

Most investment advisors are generally reluctant to advise older clients to have a high exposure to stocks and shares and other volatile assets.  The main problem with such exposure is that as a retired person you are unlikely to have the future earning capacity that a younger person would to make up for investment losses. I spoke to Dublin based independent advisor, Vincent Digby about your situation (his website is www.Impartial.ie) who said that not only is capital preservation “as important an issue for your reader as capital growth” but that you should be clear about your personal needs and objectives for your before you make any decision to cash out any or all of these funds. “This is always the criteria that should drive asset allocation” says Digby.  Before he could advise anyone about cashing out, he says he’d need to know more about your particular circumstances and whether these funds have been producing an income or not. “It’s possible that your reader has sufficient other assets – pensions, cash savings and property that is generating income and he isn’t touching the capital in these funds.”  You should have your portfolio reviewed as soon as possible (this stock market rally may not last) and check first to find out what penalties, if any, may apply in you do decide to encash them.  Once this is done you should be in a much better informed position to consider other options, such as secure cash deposits, a combination of cash, bond and cash funds and inflation-linked bonds.  



SH writes from Dublin: My daughter is a post-doctoral researcher currently being paid from a European Union Marie Curie scholarship. Her sponsoring college in Ireland is the University of Limerick, through which her Marie Curie monies are paid. She has completed two years research in MIT in Boston and is currently back in UL for her third year of the scholarship, which ends in October 2009. She opted out of the university pension scheme at the start of her scholarship. The University of Limerick is currently deducting the pension levy from her scholarship salary even though she is not in any pension scheme. Is this a valid action on the part of UL? How can one be obliged to pay a pension levy when one is not a beneficiary of a pension?




The fact that your daughter is on the university (ie, the state) payroll means that she would automatically have been liable for the pension levy, but your point that she should be exempt since she is only in temporary post and not a member of the pension scheme hasn’t been missed by others like her:  your daughter should contact the Trinity Research Staff Association which is protesting at their inclusion in the levy as well.  On their website - http://www.tcdlife.ie/trsa/?Pension_Levy - they discuss this anomaly and encourage research staff to send letters to their local TDs to lobby to lobby the minister for finance for an exemption and to organize a petitions. According to the website, “There is a clause in the [legislation] where a case can be made to the minister for finance to exempt a group or class of employees based upon specific conditions of their employment that distinguish 

them from other classes or groups of public servants.”  The Association has also made available a draft letter to send to public representatives and a list of all the e-mail addresses of Dail TDs.





DD writes from Cork:  I took a redundancy package from my job in July 2004 and the company allowed me to take an income stream spread over seven years which I receive fortnightly. Since the income levy was introduced it has been deducted from my fortnightly income. But as this was a redundancy package, does it come under the rules which exempt redundancy payments from this levy?  I would appreciate your view on this matter.


According to the Revenue (statutory redundancy payments are exempt from the income levy as are ex-gratia redundancy payments in excess of the statutory redundancy amounts, subject to certain limits. These limits are “up to €10,160 plus €765 per complete year of service in excess of the statutory redundancy.” This basic exemption “can be further increased by up to €10,000 if the person is not a member of an occupational pension scheme.”   If your statutory redundancy falls within these limits then the levy should not have been deducted.  I suggest you go back to your company and speak to the HR manager or finance officer to confirm whether or not you are liable under the Revenue exemption rules which you can access here: http://www.revenue.ie/en/practitioner/law/income-levy.pdf)


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