Q&A:.Q I HAVE a small pension that is worth approximately €25,000. A former employer set it up for me and made all the payments into it.

As I won’t be retiring for a number of years and I do not want to invest more in the pension, I would like to cash it in. Assuming that this is possible, I am happy to pay whatever taxes would apply.

However, both the pension company and the Revenue Commissioners have in vague terms said this is not possible.

However, neither can refer to any specific legislation/rules that categorically precludes me from cashing in the pension.

Can you advise if this “cashing in” is possible and what tax would apply to it.

Mr BC, e-mail

A As a general rule, you cannot cash in money that is invested in a pension. The only circumstances in which it is allowed, as far as I am aware, is if you have been a scheme member for less than two years.

However, even then, you are only entitled to “cash in” money you yourself have paid into such a pension – not contributions made by your employer.

If you are entitled to cash in, you will pay tax at the standard rate – 20 per cent – on any refunds you receive. This is designed to offset the effect of tax relief on contributions made to the scheme.

It is unclear from your letter how long you have been a member of the scheme but, on the basis that all the contributions were made by your employer, I cannot see any way that you will be able to “cash in” the fund.

Offsetting share losses against gains

Q The probability is I will not be around if and when my bank shares recover. I don’t want to risk total loss if banks are nationalised so I’m considering selling now at considerable loss.

Other shares which I possess have done very well and still have considerable upside to them, in my opinion, so I do not wish to dispose of them as yet.

However, do I have to sell these profitable shares now and offset the profits on them against the losses on bank shares and so avoid capital gains tax (CGT), or can I carry the losses forward to some future date when it is more beneficial for me to cash in those profitable shares and offset the hopeful gains then against the painful losses now for CGT purposes?

Mr WR, e-mail

A Only you can decide if now is the best time to sell your shares. In a recent column I suggested that the scale of your loss to date was a factor in deciding whether to sell your shares. Several correspondents have taken me to task, noting that historical factors should have no place in such a decision.

They pointed out, correctly, that, regardless of performance to date, your decision now needs to be based more on an assessment of future prospects. If you think the shares will rise, you should hold on; if not, selling is probably the best option.

On the more specific point you raise, selling your bank shares at the moment will crystallise whatever loss you have experienced to date on that stock.

In relation to capital gains tax, the situation is that you can offset losses on assets such as shares against gains made in the same year. If you have no capital gains this year against which to offset your losses, the losses are carried forward until such time as they are offset against capital gains.

There is certainly no requirement on you to sell this year the shares on which you have made a gain in order to counterbalance the impact of the losses on your bank shares.

Trapped in a fixed-rate mortgage

Q I purchased a property in 2006 and currently have a fixed-rate mortgage of 5.6 per cent until 2013. I have attempted to negotiate with my lending institution to no avail.

I would be grateful for any advice that you could afford me.

Ms GD, e-mail

A There are many people in your position and, I’m sorry to say, there is little you can do to force the issue. Fixed rates are precisely that.

The benefit to the customer is that they have the security of knowing precisely how much their monthly mortgage outlay is. The banks would say this issue of security of income is also an issue for them. The rate they charge on a fixed rate is determined in part by the cost to them of the money they are lending to you.

If you break the rate on, in your case, a seven-year fix, the banks argue that it leaves them out of pocket – hence the break fee they charge. Each institution calculates this individually but some will charge the difference between the current variable rate to which you want to move and the fixed rate you currently pay.

Obviously this removes the incentive to walk away from the fixed rate, but the bank is breaking no rules in this approach.

I have always argued that bank actuaries, who set the fixed rate, are far more likely to have an accurate fix on future interest rate movements than individual mortgage customers.

Banks, as a rule, rarely lose out on a fixed rate although, as the tracker mortgage scenario shows, there are exceptions.

Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail to dcoyle@irishtimes.com

This column is a reader service and is not intended to to replace professional advice. Due to the volume of mail, there may be a delay in answering queries.

All suitable queries will be answered through this column. No personal correspondence will be entered into.