From the postbag: Starting a pension, home equity release, selling shares and more JILL KERBY
DOT writes: I'm 26, with a PhD and just started my first job as a product manager in a small company. I'd like to start a pension fund but not sure about my options or how much the company would be willing to contribute.
JK: Since you've already started work, it sounds as if your company does not have its own pension scheme - or you would have been informed and encouraged to join. Your boss isn't obliged to contribute, but he must offer access to a PRSA - a personal retirement savings account.
Pensions still offer decent tax relief: for every €100 you invest, you will only pay €59. Meanwhile, you will also be contributing to the state pension scheme via your mandatory 4% PRSI contributions, but it can only be collected from age 68 (in your case).
You should start investing at least 10% of your gross salary every year into this PRSA or an individual one if you so choose. Time and patience is the best strategy for any pension fund. Check out- www.pensionsboard.ie - for details on how PRSA's operate.
Mr DMcM writes: My wife and I are in our late sixties, on a limited income and would welcome some thoughts on how best to borrow against our mortgage free home.
JK: Unfortunately, none of the Irish banks offer an equity release loan product (Bank of Ireland gave theirs up even before the 2008 crash.) Seniors Money, (www.seniorsmoney.ie, 1890 73 64 67) has been the main provider of equity release loans. They have not accepted any new applications since late 2012, but will put your name on a waiting list.
Meanwhile you can check out how the loans work. (Interest accrues from day one, but the capital and interest does not have to be repaid until after the borrower dies or the property has to be sold, say because the owner needs institutional care, etc.) The huge demand for housing in big cities, especially from students, hospital staff, etc. means that if you have a spare room in your home you could earn up to €10,000 a year tax free from the Rent-a-Room scheme. There is more info onwww.citizensinformation.ie/en/housing
Mr JS writes: In 2008 I purchased 2,696 Bank of Ireland ordinary shares at €1.065 at a total cost of €3,000including commission and transfer stamp duty through Davy Stockbrokers.
I have no other share investments. In addition to the drop in share value since2008 I am paying Davy an annual fee of€55. I can see my investment dwindling all the time and wonder what is the best, cheapest way to sell them?
JK: Irish banks are still very poor investment prospects whether for dividend income or growth. The only people who've made 'real' money on them are the vulture capitalists like Wilbur Ross. Your €3,000 would have been better spent buying a good, highly diversified exchange traded fund (ETF).
If you have decided to cut your loss, the cheapest way to do so is with Sommerville Advisory Markets, (see www.sam.ie) a discount stockbroker that charges as little as €15 for a simple buy or sell transaction.
Mrs EC writes: We are a married couple nearing our 60s with no mortgage and a sum of €200,000 in a fixed AIB account getting 2.1% interest.
Can you recommend any other financial institution with better rates and lower risk? We can put it away for three to five years. We already have An Post savings.
JK: Websites like www.bonkers.ie and www.nca.ie (National Consumer Agency) provide up to date comparison sites for deposits. Unfortunately, 2% per annum is about the best you are going to get from a lump sum deposit. All returns are subject to 41% DIRT unless you are over 65 with total income of less than €36,000 for a married couple.
As for lower risk, be sure to keep your individual holding at no more than €100,000 per institution (€200,000 per couple). RaboDirect and Nationwide UK (Ireland) are both higher rated banks than any of the Irish deposit takers.
A verison of this article also appeared in the Meath Chronicle and the Longford Leader