Personal finance: Your queries answered

Where to put my retirement lump sum?

Q: I’m one of the 9,000 public service staff set to retire before February 29th. Can you advise what’s best to do with the pension lump sum? How does the usual advice hold up in the present financial crisis?

The usual advice was: deposit it somewhere safe and accessible giving a reasonable interest rate, don’t invest it in equity because you cannot afford to lose it. Now that the euro zone is liable to collapse, and so is Ireland, even the traditional safe havens like the post office are questionable.

I have to travel regularly outside the euro zone to visit children, so where should I place this money?

- Mr BC, Dublin

A

The underlying advice still applies. Unless you have some immediate need for your cash you should place it in a low risk, easily accessible asset class and that by and large means cash deposits.

Tumultuous as the current environment is for cash savings, the situation is even more volatile in other areas, such as equities and property.

The issue of a euro collapse is one that crops up with alarming regularity, an indication of how genuinely worried many ordinary people are about the situation and the seeming refusal of political and other leaders to take the necessary steps to address it.

However, I still remain of the opinion that the euro will survive – if only because the alternative is too unknown and potentially appalling a vista for member states to consider – at least at this point. Is it possible that Greece or others will step away? Maybe, but that is more likely once stability has been restored.

What about Ireland? Given the open nature of our economy and the fact that so much of our foreign direct investment is here precisely because we are a low tax, English language entry point to the euro zone, I cannot see any way we would walk away from the euro while it exists.

Quite apart from all this – and the absolute bank guarantee on deposits – there is an underlying deposit protection scheme, guaranteeing the safety of up to €100,000 you might hold in each Irish member institution. The scheme operates under EU legislation and there is nothing to suggest that it will not hold good.

On a practical level, if you do travel outside the euro zone regularly for family reasons and feel that the exchange rate between those currencies and the euro will see the euro weaken, you might be advised to park some of your lump sum in local banks in those countries to meet your expenses on those visits.

Is insulation on my rental tax deductible?

Q

I have a house which I rent out. Recently I got additional insulation fitted to the kitchen and bathroom. Is this allowable against income tax? If so, would it be under capital at 12.5 per cent per year over eight years or under repair in the tax year.

- Mr SK, Dublin

A

While investing in insulating may be a good idea generally, it doesn’t appear that you will be able to offset it against tax on your rental property. It According to the Revenue, it does not come under allowable deductions in assessing taxable rental income. Nor does it qualify under the eight-year capital expenditure offset for wear and tear on fixtures and fittings.

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, Q&A, The Irish Times,

24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com