DOMINIC COYLEanswers all your queries

What happens to post office savings if the IMF come in?

Q

It appears that the IMF are nearing our doors, unlike what we were being told a few months back. My question is how safe then are funds (savings) in the post office?

I was told today that when and if the IMF arrives, our bank deposits will be reduced by 10 per cent as bank shares are gone. It is a very worrying time for small depositors.

– Ms M.McD, Galway

A

You’re right. It is a worrying time for everyone but it is not helped by the sort of news you have been given.

There is no basis for that assumption - bank shareholders and depositors are different classes of investors.

To be clear, given the knock-on effects for the euro-zone, it is very unlikely that the IMF will arrive at our door.

Our European brethern might, however, but while that too would be serious, they would be unlikely to tear up depositors’ protection.

As an employee can I invest in our BES?

Q

I would like to buy into a BES of the company I am working for, but I am worried about what will happen to my investment if the company goes into liquidation within the next five years. The company is doing quite well at the moment, but we won’t know how well it will do over the next five years.

If I saw the warning lights on, what should I do to get my investment out? Is there a specific contract I should be signing with the company?

A further complication is that I will be going travelling for 12 months. Am I still eligible to purchase the BES with the company?

I am in the lower tax rate group. With my tax credit my income tax would be lower than €2,000. Therefore would I get the 20 per cent BES tax refund back or will I only get back what I have paid during the year?

Is it ok for my boyfriend to buy into the BES of the company that I am working for?

– Ms WZ, e-mail

A

I am not quite clear from your letter whether your employer is currently offering a Business Expansion Scheme (BES) but I will have to assume for the purpose of this that they are.

BES is not something you can demand. It is something in which you can invest should the company decide it meets the criteria and wants to seek outside investment through this avenue.

As an employee of the company it would be open for you to participate in a BES. However you do not have to be an employee so there is nothing to stop your boyfriend investing either.

However, sound investment practice says an investor should not put all their eggs in the one basket. If this is the only investment you and your boyfriend are making, you might consider investing in different products.

You talk about “warning lights”. This refers to an article I wrote back in February where a BES scheme had been extended beyond the initial five-year term – ie the company had not paid its investors at the scheduled end of the investment term.

It was in that context I spoke of warning lights.

Once you have invested in a BES scheme, you are locked in for the period of the scheme – at least five years – unless you want to risk losing some of the tax relief available under BES.

On the scale of tax relief, you are limited by what you earn in a year but you can carry forward unused relief until 2013.

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