Q&A

DOMINIC COYLEanswers readers personal finance questions

Switch to sterling may not provide the answer

Q

Is sterling a good investment at the moment, given the turmoil in the euro zone?

– Mr ME, Dublin

A

There are an awful lot of jitters out there about the euro, but, in pure investment terms, there is little evidence supporting a move into sterling.

Despite the chaos and brinkmanship now typical of the euro, the currency has actually held up remarkably strongly against some of its major international competitors, particularly sterling and the dollar. If you look at sterling, the euro today is within a penny of where it started the year, around 85 or 86 pence.

There have been fluctuations. The euro went as high as 90 pence in July. Since March it has generally been ahead on the year, and that remains the case.

Looking at the longer-term picture, the trend is of gradual decline for sterling, which, between 2004 and 2007, was at just 70 pence on the euro.

Although we worry about the economic and market woes of the euro, the UK economy has its own travails, as last week’s report from the Reform think tank attested, calling for a decade of austerity in our near neighbour – something unlikely to boost its currency in the short term.

Similarly, the US has its own economic issues, and the dollar, which started the year just below $1.34 to the euro, was last week trading roughly one US cent weaker, at just under $1.35.

The euro hit a high of $1.48 back in May. Despite a ropy September, it has still been largely ahead during the year.

Losing faith in the pension promise

Q

In the light of the poor returns on pension savings, the pension levy, inflation and the reduction on income-tax savings on contributions, as well as the poor regulatory rules, is it still worthwhile paying into my pension AVC or should I simply take all my salary after tax and save any surplus to living requirements in a biscuit box under the mattress?

– Mr TO’N, by e-mail

A

Perhaps surprisingly, given the issues you raise – most of which I sympathise with – the answer is no.

Despite all the efforts of this and the previous government to undermine private-sector pension saving, you will never be able to provide adequately for your retirement by sticking the money under the mattress, colloquially or otherwise.

For the moment, tax relief remains for pension contributions, although this is slated to be hit again in the Budget.

The one point on which I would take issue with you is “poor regulatory rules”. The rules may be rigid, but they are certainly not poor in the sense of the “poor” bank regulation of recent years, for example.

Getting it right on tax relief for student fees

A

Last week we said college registration fees were not subject to tax relief as they were not tuition fees. I have been alerted by the Department of Education and several other people to the fact that, since the last budget, people are entitled to relief on all fees above €2,000, up to €7,000 a year. This was introduced to provide some relief for people paying the “student contribution” for two or more students.

Apologies for the confusion.

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

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