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The Sunday Times - Money Questions 22/02/09

Posted by Jill Kerby on February 22 2009 @ 22:21

JGL writes from Co Cork: I shall reach age 60 in August at which time I will be eligible to take a (defined benefit) sterling pension of approx £14,500 per year or a lump sum of up to £66,000 with commensurate reduction in pension down to approx £9,500 per year.  If I wait until age 65 my pension will be just over £1,000 per year more (some elements are paid at 60 without reduction).  The pension is payable by an Anglo-Dutch multinational. Given the current economic climate and the questions surrounding many pension funds, would your advice be to take the money at 60 or wait?   I can survive without the additional income, but we need to make our house more energy efficient and a lump sum to invest in alternative energy sources would be helpful. Also, there is the low sterling exchange to consider. 

 

This might be one of those ‘a bird in the hand’ moments, says Alan Morton, a director of the Dublin financial advisors, MoneyWise. You should first establish whether your employer’s defined benefit pension fund is currently underfunded or not (he suspects that it very well may be).  A limited pension compensation scheme operates in the UK, but it may not be sufficient to cover your pension entitlement if, in a worst case scenario, this fund was involuntarily wound-up. “No one can be sure what is coming down the line financially anymore,” says Morton. “If your reader was my client, and from the information she has provided you, I would suggest that she take the lump sum and the pension at 60 rather than delay it until age 65. As for the currency exchange risk, the sterling/euro rate may not be in her favour right now, but this may change.”  Timing a currency rate is not always possible, he added and there may be years when her sterling-based pension will be worth more than it is now against the euro.

 

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PG writes from Dublin: Do you know of any brokers that sell Insurance that covers tenants who refuse to pay rent or will not vacate. I was offered this indirectly by a management company.

 

I passed on your query to Sean O’Connell of The Insurance Shop in Fairview, Dublin who told me that he is aware that insurance, from UK underwriters, is available via property management companies to landlords who wish to cover rent arrears if a tenant disappears.  You might want to weigh the cost against the risk before you buy such a contract, he said. He suggests you contact the Irish Property Owner’s Association (www.ipoa.ie) for their views about the availability of this insurance.  Evicting a tenant is a “slow and costly business” in this country, say O’Connell, and to his knowledge there is no insurance policy to pay those legal costs, but the IPOA does offer assistance to members who are involved in disputes and eviction proceedings that come before the Private Registration Tenancies Board.

 

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MP writes from Dublin: Our VHI renewal notice (Plan D) states "The total cost of your cover for the period from 01/01/2009 to 31/12/2009 is €3,600.”  This is a 30.132% increase on 2008 premium of €2,766.42 euro. My husband and I are aged 79 and 67 respectively. I spoke with VHI to ascertain if the additional tax relief announced by the Minister for Health had been deducted.  It had and the explanation of the modus was that our gross premium is €5,950 less the combined tax relief for the two of us of €1,450, less 20% tax relief of €900. I maintain we are entitled to 20% tax relief on the entire premium which would bring our net premium down to €3,310.  I would be grateful for your opinion on this matter. 

 

The new tax reliefs for health insurance haven't come into force yet, says Dermot Goode, a Dublin-based financial advisor who specialises in the health insurance sector, but under the new levy regulation “The new tax credits must come off the premium first and then the 20% relief is deducted. In fact, the new gross cost of VHI Plan D for 2 adults (with the group discount) is €4,500 for renewals after January 1, 2009. The net cost is €3,600 when you deduct the 20% tax relief. If this member's calculations were correct, she'd be paying approximately €300 less than the market for 2 adults which can't be the case. I believe many people are confusing a normal price increase to cover the cost of medical inflation with the new tax credits.” He suggests that you consider switching to similar plans with either Quinn-Healthcare or Hibernian Aviva Health, both of which are cheaper than VHI Plan D. “Switching is straightforward with all insurers and assuming you've satisfied all your normal waiting periods, you should be on cover immediately.” 

 

1 comment(s)

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