Dominic Coyleanswers your questions.

The age-old question of pensions investments

My wife is 55 years old and is paying tax at the standard rate. She is thinking about taking out a pension, but wonders at this late stage if it would be better to just join one of the many saving schemes offered by the banks or building societies, etc.

Mr F.B., e-mail

As a general rule, the tax advantages inherent in pensions savings make it a better investment option than other savings products offered by financial institutions.

There are a couple of issues in your wife's situation that need to be taken into account.

Most significantly, she can only judge the value of pension investment in the context of when she plans to retire. On the assumption that she intends to work until she is 65, I would suggest she has enough time to benefit from pension investment.

If, however, she was looking to stop work within the next couple of years, she might need to think twice.

She also needs to be aware of the tax relief available. While people keep saying that every euro invested in a pension is effectively worth €2 because of attendant tax relief, this is only the case for people paying income tax at the higher rate.

For ordinary-rate taxpayers, the tax relief is closer to 24 per cent - every euro invested is exempt both from income tax at the standard rate of 20 per cent and employees' pay-related social insurance (PRSI) at about 4 per cent.

This is still not to be sneezed at - for instance, it broadly equates to the Government "bonus" on the extremely popular Special Savings Incentive Account (SSIA) scheme, with the added incentive that your wife can invest considerably more than €254 a month.

The amount you can pay into a pension scheme and claim tax relief on varies according to age, but for someone in your wife's position, eg aged 55, the threshold is 35 per cent of earnings.

If she were in a position to make those sort of contributions, her pension pot should grow quite quickly.

The current turmoil in the markets might make one pause for thought, but the fact is that, over the long term, stock-market returns tend to smooth out some of the performance spikes such as the one we have been seeing in recent weeks.

Yes, the Irish market is now running at a loss for 2007, but it has been one of the best-performing stock markets globally in recent years.

Over the past 10 years - a period that not only covers the recent turmoil but also the collapse of the dotcom bubble and the post-9/11 traumas that undermined markets - the average Irish managed pension fund has achieved annual returns of 7.4 per cent per annum.

That is well ahead of inflation and also considerably in excess of what your wife might expect to make with most mainstream bank investment schemes.

Tax on stock gains

I was made redundant a while back and have had to sell my company stock as part of that. I am currently on the social welfare system and I was wondering if this will have any effect at all on the amount of tax I will need to pay on my stock gains.

Ms J.F., e-mail

The fact that you are currently on social welfare will not affect any tax liability you have from the sale of company stock. Tax on share sales is assessed under the capital gains tax regime and this is not affected by income.

Effectively, you will be paying 20 per cent on the gains you made on the company stock with the exception of the first €1,270, which is exempt from capital gains tax.

Any costs incurred in buying or selling the shares is deductible from the capital gain before it is assessed for tax. If the shares were acquired before 2002, you should also be able to index the purchase price in accordance with prescribed Revenue indexation multiples to offset the impact of inflation.

If the gain arises in the first nine months of the year, it is payable to the Revenue by October 31st. Otherwise, it is payable by January 31st in the following year.

Affordable mortgage

I have a mortgage on a property acquired under an affordable housing scheme. I seem to be paying a higher rate on that mortgage than I need to. I spoke to some people about moving the mortgage, but I am getting mixed messages. Some people say that, on affordable housing, I am limited to certain banks. Is that so?

Ms S.B., e-mail

Quite simply, it depends on who owns the property. Under affordable housing schemes, ownership - at least in the initial years - tends to be shared between the individual or couple and the local authority.

At a certain point, providing all mortgage payments have been met, full ownership transfers to the individual.

If you own the property outright, there is nothing to stop you applying to any mortgage lender for a loan. If, however, the local authority continues to hold a stake in the property, you will probably find yourself limited to certain lenders.

In general, EBS, IIB Homeloans and Bank of Ireland are the three lenders with products geared specifically for the affordable housing market.

EBS's HomeAccess variable rate product is currently available at an annual percentage rate (APR) of 5.4 per cent to new customers, with fixed rates running from 5.5 per cent APR (three-year) to 5.7 per cent APR (10-year).

IIB's Advantage mortgage is available at fixed rates of between 5.37 per cent APR (one-year) and 5.55 per cent APR (five-year). Its tracker mortgage options - which track the European Central Bank rate - range from 4.85 per cent APR to 5.38 per cent APR, depending on the size of the loan as a proportion of the value of the property - the higher the "loan to value", the higher the rate.

At Bank of Ireland, which offers what it terms the Breakthrough mortgage, the standard variable rate is 5.4 per cent APR, with trackers running from 4.8 per cent APR to 5.3 per cent APR. Fixed rates range from 5.1 per cent APR (two-year) to 5.9 per cent APR (10-year).

One thing to bear in mind when comparing rates is that these mortgages are available to cover 97 per cent of the price you pay over terms of up to 35 years. As far as I can see, these rates are fairly competitive.

• Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail to dcoyle@irish-times.ie.

This column is a reader service and is not intended 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 the columns of the newspaper.

No personal correspondence will be entered into.