Q&A:I am a small investor and feel a bit exposed as a few of my investments are in property and my pension is largely in equities. I have heard some commentators recommending diversifying some 5-10 per cent of a portfolio in gold and I am wondering what is the best way to do this?
What is the best way to own gold in a pension?
Any assistance would be greatly appreciated.
Mr G.S., e-mail
AIf you are largely exposed to property and equities, I am not surprised that you are currently feeling a bit exposed. Between them, the value of investments in these two areas have dived in the past couple of years.
However, it is somewhat illuminating that you are still taking your reference points from “commentators”.
Presumably, these are much the same people who were advising people to jump on board the property bandwagon until it actually went over the cliff.
There are a couple of key timeless pointers for investors which have largely been lost in the hedonistic days of the boom.
You will note a couple of them referenced in the main piece on these pages today. The most significant is the need for diversification.
This is a lesson that, in recent times, has generally been lost on Irish investors – whether they are small scale like yourself or giant institutional players.
Diversification would certainly indicate that you should not be betting your future in large part on just two asset classes – and the two most volatile at that.
But that is not to say that it would be advisable for a “small investor” to be making direct investments in gold or any other more specialised area.
Certainly, you should look at getting some exposure to commodities, including gold, in your portfolio in the same way that most advisers would suggest you should have some exposure to fixed income products like government or corporate bonds.
However, smaller investors will generally find the best way of doing this is through funds that are invested in commodities or bonds, rather than by direct investment in the underlying asset.
I would also be sceptical about putting as much as 10 per cent of your pension into a single commodity, be it gold, oil or anything else – although I know there are those who have suggested otherwise.
My suggestion is that you consider paying a relatively small sum to a qualified and independent investment adviser to get a proper overview of your best approach given your individual circumstances, attitude to risk and available funds. That might be the best investment you make.
Income levy liability for elderly patients
Q I am a 72-year-old with an occupational pension. Although entitled to a medical card, I don’t have one, mainly because our GP medical centre is not on the medical card list.
When I turned 70, my wife and I decided to stick with the centre because the doctors are good and offer a much wider range of services than usual, which keeps us out of the overcrowded Beaumont Hospital.
I had assumed that I would be exempt from the 2 per cent income levy, but my pension fund tells me that unless I actually hold a medical card, from January 1st next, they must deduct the 2 per cent.
Is this correct? The Revenue already accepts that I am over 70. Linking the levy with the medical card infringes on my right to freely choose my doctor and forces me to give an interest-free loan to the Government.
To cap it all, in my case the levy will yield significantly less revenue than the cost of the medical card which the arrangement all but forces me to take up. It seems daft to me. Has my pension fund got it wrong?
Mr B.B., Dublin
AThere are a couple of issues here. First, your entitlement to a medical card does not, as far as I know, tie you in to a particular doctor. Yes, you need to list on the form a GP who is willing to take you on to their list, but regardless of who that might be, there is nothing to stop you continuing to use your current medical advisers who you are happily paying for the privilege. At least that would give you the card. I cannot see anything that would oblige you to use the listed doctor, although I will admit I'm no expert when it comes to medical card procedures.
It certainly seems sensible to get a card – regardless of the levy issue – because there will be situations when you might need medical care outside the GP environment and a medical card could be worth having.
On the more substantive matter, the rules on the income levy are quite clear. Effectively, everyone earning over a set threshold is liable to the levy. There are certain exemptions. These include medical card holders.
Under the new rules, medical cards are only available to people who meet certain income requirements – regardless of age (the previous regime of granting a medical card to everyone over 70 regardless of income has been discontinued since March of this year so the fact that you are over 70 has no bearing on the issue).
If you don’t have a medical card – for whatever reason – the only relevant measure is income.
The income threshold in general is €15,028 or €289 per week.
For people over the age of 65, the threshold rises to €20,000, or €384.62 a week/€1,667 a month.
If you receive more than this, the company administering your pension would be obliged to deduct the levy in the same way they would deduct any income tax liability.
However, there is a provision in the income levy rules that allows a married couple to reclaim income levy paid where their combined income at the end of the year is under €40,000 (eg, twice the €20,000 individual threshold).
So, yes, you are giving the State an interest-free loan but, as it stands and assuming you meet the new medical card income criteria, that is your choice.
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
