ADVICE COLUMN: Your financial questions answered

I GET lots of questions each week from readers so over the next two weeks, I’m going to re-visit some of the more frequently asked questions I’ve received, and what my response to each of them were.

Question

My son is going to have surgery shortly and I’ll have to take time off from work to help him. My questions are (a) will I be allowed to take time off (b) will my employer continue to pay me, and (c) if they don’t, am I entitled to a carer's allowance?

Answer

The answer to your first question is that yes, under the Carer’s Leave Act 2001, you are entitled to take temporary leave from your place of work, if you need to provide full time care to someone and given the attention your son is going to need, I expect your employer will approve your request.

When this type of situation arises, people are entitled to take carer's leave for at least 13 weeks, and up to a maximum of 104 weeks. But you must take at least 13 weeks off. If you ask to take less, your employer is entitled to say no. Another condition you must satisfy, is that you must have worked for your current employer, continuously for at least 12 months.

You must give your employer 6 weeks’ notice of your intention to take carer's leave, and if approved they will prepare a document which outlines when the leave starts, duration of leave etc. and they must give you this 2 weeks before your leave starts. And in case you’re wondering, they have to keep your job open for you while, you’re on leave.

Carer’s leave is unpaid, but you can still work as long as you don’t work more than 18.5 hours or earn greater than €350 per week.

And if you can’t work, and aren’t getting paid from your employer, you may be eligible for either a carer’s benefit if you have enough PRSI contributions i.e. minimum of 156 from when you started work to when you’re making the claim and 39 contributions paid in the relevant tax year or 39 contributions paid in the 12-month period before the start of Carer's Benefit or 26 contributions paid in the relevant tax year and 26 contributions paid in the year before that.

And the maximum weekly payment where you are caring for one person is €237 per week and €355.50 if you’re caring for more than one person. If you don’t qualify for a carer’s benefit, you may qualify for a carer’s allowance payment which is means tested and the maximum weekly payment from it is €236 if you’re caring for one person.

Liam, I have a credit card balance outstanding of €2,300 and I’m wondering if I switch to a 0% provider will it make much difference? I pay the minimum amount each month which is 2% of the balance outstanding and I think my rate is about 20%.

If you continue making the minimum repayment each month, it will take you 8 years before you clear your balance in full. And in the process, you will pay c. €2,086 in interest payments. It will take you this long because only about €8 of your minimum repayment (€46) is going towards reducing the amount you owe.

So, switching to a 0% provider will help, because the full amount you pay each month is coming off the capital, and not just 17% as is the case at the moment.

If you switched and received 0% for 12 months (An Post are offering this at the moment for balance transfers) and continued to pay your minimum payment each month, the impact would mean your balance would be cleared in 5 years 10 months, and you’d end up paying €891 in interest.

So, it is worth your while switching to a 0% provider, because it will accelerate the repayment of your balance by 26 months and save you €1,195 in interest payments in the process.

Liam, my parents are both 63 years of age, and I’m not sure if they qualify for a medical card or not. They have income from a farm they lease but not much else. They also have a small level of savings but not sure if that has any impact. Your help would be appreciated.

This is a question I’m asked very frequently.

And in order to qualify for a medical card, an individual or couple’s income has to be below a certain amount, and in the case of your parents, that baseline number is €266.50 per week. It can be increased if there are children who are financially dependent on them, along with another amount allowable for certain expenses e.g. rent/mortgage repayments, costs associated with travelling to work etc.

These amounts are added together and that’s the maximum amount they are allowed to earn each week. If they exceed this amount, they might still qualify, but that will be at the discretion of the HSE. If they believe their ongoing medical costs would cause them financial hardship, they may grant them a medical card.

And, in relation to savings or shares or any type of investment, an amount up to €72,000 for a couple is disregarded. A notional rate of interest is applied to the balance and added to their other income, so the interest earned is counted as income, not the value of the savings themselves.

Liam, I’d like to understand a calculation for making an AVC contribution to my pension. I’m 46 and my salary is €75,000. I’m currently contributing 5% of it to my pension. I have existing savings and I was thinking of taking €12,000 from them and making a once-off lodgement to my pension. My questions are, can I, what tax relief would I get back if I made that lodgement, and is it a good idea?

The maximum contribution you can make is made with reference to your age. Between the ages of 40 and 49, you can make a maximum personal contribution of up to 25% of your salary, up to a maximum limit of €115,000 (salary).

You have room therefore to bring your contributions up by 20%, and based on your salary and existing contributions, that means an additional €15,000 can be made to your pension fund. So, to answer your first question, yes the €12,000 you are thinking of making is allowable.

If you did, the tax relief that applies to any qualifying contribution, based on your salary is calculated at 40%, meaning you would be entitled to tax relief of €4,800 on that €12,000 contribution.

And to answer your last question, is it a good idea, just think of it this way.

If someone offered you €12,000 in exchange for €7,200 would you take it?

Of course, you would, you’d be mad not to. Which is why you should be taking advantage of the tax relief applying to pension contributions and contribute as much as you can and are comfortable with.

And a second reason why it’s a good idea, is because you are getting an immediate return of 67% on your investment because that’s the amount you need to earn if you wanted to turn €7,200 into €12,000.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at [email protected] or www.harmonics.ie