Q&A:Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com

SHOULD APPRENTICE START A PENSION?

Q

My daughter, who is in her mid-twenties, is a trainee solicitor with a Dublin law firm. Although an apprentice, she is being paid a reasonable wage.

When we talk about pensions, I emphasise to her the advisability of starting some kind of a pension plan, a PRSA perhaps, as soon as possible, even if her contributions were small and even though her employment prospects on completion of her apprenticeship are not certain. I would be interested in hearing what kind of advice you would give to someone in her situation.

– Mr K M, WATERFORD

A

As you will note, under the recently published National Pensions Framework, making some pension provision will become more or less obligatory. That gives some indication of the Government's thinking.

Pensions have had a bad press recently – not unreasonably given their very poor performance in the past decade and the unreasonably high costs in the Irish market. However, they continue to be the best way for people to save towards providing an income in retirement.

Whatever about your daughter, people paying tax at the higher rate would be advised to put as much as they can into their pension at the moment to maximise tax relief which is going to be reduced. Even then, the tax relief will be attractive.

Also, starting early means she has the time to build up a fund substantial enough to allow her eventually, as a retired solicitor, to retain a reasonable standard of living in retirement. People have no real concept of how much money they need to set aside for a realistic pension fund and, clearly, the earlier you start the better.

Starting early will also help in weathering short-term blips – as performance tends to even out over the longer term.

Using something like a PRSA means she will have the flexibility to stop and recommence contributions as personal circumstances allow.

IS STATE BOND AN ATTRACTIVE OPTION?

Q

I remember the promise of a State savings scheme along the lines of Post Office bonds in the last Budget, but have not been able to find much information on it since. Do you know when it might come into effect, and would you regard it as an attractive option?

– Mr A C, E-MAIL

A

The National Solidarity Bond will be introduced once the Finance Bill – the measure giving legal force to the measures announced in the Budget – completes its passage through the Oireachtas and is signed into law by the President. The Bill is still working its way through the legislative process which is why no great detail has emerged on the bond.

What we do know is that the bond will be managed by the National Treasury Management Agency, which is responsible for managing the State’s debt. Until we have more detail of the terms and rates on offer, I couldn’t give any opinion on how attractive an option it would be, although it will carry a sovereign guarantee, meaning your money will be safe unless the State goes broke.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.