Q&A:Q IF, HYPOTHETICALLY speaking, Ireland were to leave the euro zone (for whatever reason) and re-adopt the punt as legal tender, what would happen to savings in bank accounts and money invested in prize bonds? Would all savings remain in euro, for banks which are Irish-owned (eg AIB), nationalised (eg Anglo Irish) or foreign-owned (eg Rabobank, Ulster Bank), or would savings be converted into punts? And likewise for prize bonds?
Mr J.W., Dublin
A If Ireland were to leave the euro zone, the currency in which your savings were held would be the least of your problems. Bluntly, the State would be a basket case. Bad and all as our current situation is, one of the few saving graces is that we are part of the euro zone and can rely on the support that being part of that larger, more stable group and currency offers.
That was evident from the report this week from Germany, where finance minister Peer Steinbrück identified Ireland as being in difficulties and said: “The euro zone treaties don’t foresee any help for insolvent countries but, in reality, the collective would have to be helpful to those in difficulty.”
As a standalone currency, in our present parlous economic situation and with the dripfeed of reports of questionable operations at some of our largest financial institutions, we would find ourselves prey to currency speculators. Comparisons with Iceland would be more than just a bad joke; they would be very real.
Having said all that, the truth is that no one in any position of authority has seriously countenanced such a situation, thus no one has determined what would happen to savings currently denominated in euro.
My best guess is that money in prize bonds and in any Irish- domiciled financial institution would be converted to punts or whatever the determined conversion rate was at the point of departure from the euro zone.
The situation with accounts held by institutions that would remain within the euro zone is even less clear. It is possible that these would continue to be denominated in euro, although it could operate in the same manner as Irish accounts with UK group Northern Rock.
Medical card or levy
Q From March 2nd, I will no longer be entitled to an over-70s medical card. Can you please tell me if, in future, I will have to pay the levy of 2 per cent on my gross income, from which I was exempted when I got my medical card some years ago.
W.P., Dublin
A The State is increasingly awash with levies. There is uproar at the pension levy and most of us are currently coming to terms with the income levy introduced in the last Budget. Then there is the health levy . . .
I’m assuming this is the one to which you refer. It is levied on all income at a flat rate of 2 per cent (2.5 per cent on income above €100,100). As you say, when you turned 70, you received a medical card and a dispensation from this health levy. The good news for you is that the two are not linked.
Well before the Government introduced medical cards for all people over 70, provisions were in place to ensure no one over that age had to pay the health levy. While you may lose your medical card, you will not have to worry about the health levy.
The bad news is that you probably will have to concern yourself with the new income levy. This is again charged on all income, except social welfare payments, at a rate of 1 per cent (up to €100,100), 2 per cent on amounts over that, and 3 per cent on sums above €250,120.
State guarantee
Q I live in the UK and have a one-year fixed bond with Anglo Irish Bank, a substantial amount invested.
Should this financial crisis bring a total collapse of the country, will this then render the guarantee worthless?
S.B.L., Britain
A In a word, yes. The State guarantee means your investment in the one-year fixed bond with Anglo Irish is fully covered regardless of whether you reside in Ireland or Britain and regardless of the address of your bank branch.
However, a guarantee from the State is only as strong as the viability of the State. If the State goes bust, the guarantee will be little comfort. Having said that, for all the pervading gloom, there is no serious suggestion of any serious likelihood that Ireland Inc will default on its debt.
This is not a frivolous exercise and countries go to great lengths to ensure they will not find themselves in such a position.
Waiting for windfall
Q I have an elderly uncle and aunt who need to do some renovations to their cottage, costing about €15,000. I advised them some 18 months ago to hang on for the windfall from Irish Nationwide. Now the renovations are essential and the work would wipe out most of their savings.
There does not seem any point now in holding on and I feel foolish in suggesting that they hang on for a few months just in case. I’m sure lots of people must be similarly confused with the position of Nationwide and even the EBS.
Mr D.G., Belfast
A Eighteen months ago, you were certainly correct to suggest that they hold on in anticipation of what was widely expected to be an imminent and significant windfall.
You are also correct that we now live in a very changed world. There is no guarantee, now, that Irish Nationwide members will ever receive a windfall. The prospect is dimming all the time.
On the other hand, you say your elderly relatives’ home needs “essential” renovation that will require the withdrawal of their Irish Nationwide savings. If they proceed they could miss out on a windfall (however unlikely); if they don’t, the eventual cost of repairing their home could prove more expensive still. In all the current circumstances, I’d be inclined to renovate.
Please send your queries to Dominic Coyle, QA, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail to dcoyle@irishtimes.com
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 questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
