GF writes from Dublin: I am a middle-earning professional aged 32. Half my €40,000 income derives from PAYE part-time work for the public sector, while the remainder comes from being a private consultant. I have no pension/superannuation arrangement, but I am keen to put something in place.
My public sector work allows me to join in on superannuation, while my private work could become part of a private pension scheme. Can you advise how superannuation/private pension products compare with a PRSA? Like most people I am at a loss as to where to begin my search for various retirement financial products.
Any accountant I have used just recommends a broker, but I have an intrinsic distrust of their methods and advice. Is there really such a thing as an independent fee-based adviser?
“Your reader is entitled to belong to a public sector pension scheme and, as a sole trader, to have a private pension/PRSA,” said Liam Ferguson, a pensions broker with Ferguson & Associates. “The amount you can contribute to your private pension at your age is up to 20% of your net relevant earnings, about €8,000 a year.”
Advertisement
Starting a pension early, says Ferguson, is a good idea, and the Pensions Board estimates that someone your age needs to put away at least 12%-13% of earnings every year to achieve a pension worth 50% of final income at the age 65, which includes the old age state benefit. Based on your current income, you should be investing about €430 a month into your pension plans.
Joining the public sector scheme should be straight- forward and your HR department will help you plough through the documents.
If you want independent pension advice, seek out a good fee-based authorised adviser (AA) who will strip out the commission from a private plan. The Financial Regulator keeps a register of AAs (1890 777777) or you can rely on word-of-mouth from friends and family.
You could also buy a standard PRSA (where charges are capped at 5% entry fees and a 1% maximum annual charge) from a good life and pensions broker who will identify a fund that has been performing well. Discount brokers such as Labrokers.ie and Myadviser.ie often undercut even relatively low PRSA charges.
Advertisement
No loss in moving SSIA to new bank
CE writes from Tallaght: I opened a special savings incentive account (SSIA) in June 2001 with the TSB (now part of Irish Life & Permanent) and filled in forms indicating that I had a choice of splitting the monthly contribution of IR£200 (€254) between its WisdomScope/EuropaScope investment schemes. I was not told I could leave the contributions in an ordinary savings or deposit account. Can I move my SSIA account to another bank with which I have a current account? Does moving the account constitute breaking the non-withdrawal clause for claw-back of the government’s 25% contribution?
You are within your rights to switch your account to another SSIA provider. In order to comply with Revenue regulations an SSIA transfer form will need to be completed by the two banks, but Irish Life assured me that there are no switching penalties and the current value of your fund will be transferred to the new bank provider.
Advertisement
The timing of your investment was unfortunate. Markets fell sharply from 2001, but have recovered quite well, and according to the company your two Irish Life funds have returned 9.4% per annum gross (including the government contribution). Had you started your SSIA a year later your fund would be up 15% per annum.
Credit cards buy cheaper currency
Advertisement
PJT writes from Waterford: I’m inquiring about the cheapest way of converting euros to sterling. I want to import a car to Ireland from Britain costing about £14,000 (€21,000). When travelling abroad I have found that the conversion rate for cash has always been worse than the rate charged by my credit card provider. Is there an advantage in buying goods using the electronic rate on the card rather than converting to cash. If there is, would it be worth my while using my card to purchase the car?
According to bank credit card officials, the transaction exchange rate that credit card companies achieve is based on the size of the tranche of money they have taken in on any given day and money market rates.
The huge volume of transactions involved is therefore likely to give card providers a better rate than a single bank or retailer (in the case of an airline or hotel chain that may offer to charge you in your home currency rather than say, sterling or dollars).
You may get a better rate if you buy this car, but I suggest you speak directly to the foreign exchange desk at your bank (or several banks) and to someone at your credit card provider, which will probably have to approve the increase in your credit limit anyway.
Advertisement
Jill Kerby is co-author of the new TAB Guide to Property 2005-06. E-mail her at the address below or write c/o Money Matters, The Sunday Times, Fourth Floor, Bishop’s Square, Redmond’s Hill, Dublin 2, giving a daytime telephone number. We cannot send personal replies or deal with every letter. Please do not send original documents or SAEs. Information and advice is offered without legal responsibility.