PERSONAL FINANCE: DOMINIC COYLEanswers your queries

What is the limit at the Post Office ?

Q

I am confused about the Post Office’s limits on holdings in certificates and bonds. The application form states the maximum permitted is €120,000 for an individual and €240,000 for a joint holding. I took this to mean that I could invest €120,000 in my own name and up to €240,000 jointly with another person.

However, in correspondence with the Post Office, they state €120,000 if held in a sole name or €240,000 if held in joint names. Which I gather means that if you invest €120,000 in the sole account you cannot invest anymore in a joint account. They compute half of a joint investment with any sole one and it cannot exceed €120,000 in total. Have you come across this anomaly? - Ms M.W, DUBLIN

A

Given the tax free nature of investments in An Post savings certificates and bonds, there are, understandably, limits on how much you can invest. This limit is €120,000 for a holding in your own name and €240,000 if you hold the certificates in joint names. You can hold some in one name only and other in joint name but your individual total remains €120,000. For instance, a holding of €70,000 in savings certificates in your own name would leave you free to hold up to €100,000 of certificates in joint names – with €50,000 of that sum being deemed to belong to you. An Post closes each issue of savings certificates at some point, opening a new one under slightly amended interest terms. Your upper limits apply to all holdings of certificates, not to each issue.

Separate limits apply to savings certificates and to bonds. Thus, you could hold €120,000 of savings certificates and €120,000 in savings bonds.

Can I cash in my pension?

Q

While working in the private sector I paid into a pension scheme. I also opened a few lump sum AVCs. I am now 56 and unemployed. Recently, I received a statement from the pension company (it was actually five statements because the AVCs were in separate schemes) showing the contributions paid, the accumulated value, the transfer value, the projected fund at normal retirement age (60) and the projected pension at 60.

At this stage, it appears that transfer value (which I presume is what it’s worth now) is roughly half of the contributions made and amounts to about €80,000.

Is there anything I can do with the pension at this stage? Can I cash part of it (or all of it) even if I had to pay tax and how much tax would I be likely to pay?

- Mr J.P., DUBLIN

A

You will not be allowed to cash in your pension savings before you reach the retirement drawdown date specified in the contracts - both the main pension scheme and any Additional Voluntary Contribution (AVC) schemes. The basis on which tax relief is granted is that the money is locked away until retirement. It is accessible only in very limited circumstances, and that relates to occupational schemes of people who leave within a short time of starting with the scheme. The transfer value is an actuarial valuation and does not necessarily match the actual current value of the scheme - although it should be pretty close for AVCs and other defined contribution schemes. Your fund will be treated in the same way as any other pension monies held by the fund manager in terms of benefiting from profits. The fact you are no longer contributing will not affect that.

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