Q&A:Q My husband and I are both over 70 and have a medical card. Our income in 2008 was in excess of €73,000. However, a considerable part of this came from dividends received as shareholders in three banks. Without these dividends our income falls well below the €73,000 threshold. Since the dividends will not be paid for the foreseeable future, will we still be eligible for the medical card?
Ms D.McC., email
A Eligibility for the medical card is determined by your income at that particular time.
The threshold is €700 a week for an individual and €1,400 a week, or €72,800 a year, for a couple. It applies from January 1st for those not yet 70 and from March 2nd for people already in possession of an over-70s medical card.
While you might be earning in excess of €73,000 this year, it will be your income next March that counts - and if the lack of dividends brings you below the threshold at that stage, you can continue to use the card.
Only if your income exceeds €72,800 per annum at some point in the future does the question of eligibility arise - and remember that the threshold will be revised upwards annually in line with the cost of living.
Assessing couples
Q There are two items I feel need clarification regarding over-70s medical cards.
1. Individualisation applies to married couples in our income tax code.
Will individualisation apply to the criteria proposed to assess a married couple for cards?
2. The current medical cards are now valid to March 2nd, 2009. Will all income received between January 1st, 2009 and March 2nd, 2009 be exempt from the new 1 per cent levy for those who will lose their medical cards?
D.McC., Cork
A You are correct that individualisation does apply under the tax code in Ireland. However, when it comes to medical cards, the issue is not the tax code but the means test. This is a different thing entirely and, at present, is assessed on a family income basis, not individual income. As such, individualisation will not apply to the way in which you are assessed for the over-70s medical card.
There is slightly more cheer on the issue of the income levy. The rules are quite clear that the income levy will not apply to those people on a full medical card. It has separately been made expressly clear that anyone over the age of 70 currently in possession of a medical card can continue to hold onto that card, regardless of income, until March 2nd, 2009.
By definition, therefore, no one currently in possession of an over-70s medical card faces the prospect of the income levy until at least March 2nd next year.
Anglo Irish security
Q I have a substantial sum of money deposited in an account in the Anglo Irish Bank (Isle of Man branch). While I understand that 100 per cent of my funds are "guaranteed" by the Isle of Man and the Irish Government, I am alarmed at the recent plunge in the share price of Anglo Irish. Could this mean that the bank is going bust, and therefore the "guarantees" would be put to the test? Or is the low share price just a concern for shareholders and the bank with my money will survive? I sincerely hope that you can give me a simple answer!
P.S., by e-mail
A Ah, simple answers. There's plenty of demand for those currently in relation to the banks and precious few available.
Is the bank going bust? There's no reason to think so. However, the current assault on its share price indicates that investors clearly a) do not believe the bank executives' estimates of the likely scale of bad debts and, therefore, future profitability or b) may believe it but nonetheless expect that the bank will be taken over and existing shareholders' holdings diluted almost to nothing.
Is it possible that the bank guarantee, your safety net, will be tested? Regardless of the reason for the share price collapse, it is. The bank remains confident that it can survive as a profitable going concern. However, if depositors decided to move to withdraw their money, the bank could well be forced to rely on the guarantee. The Government is working to devise another solution - either by way of consolidation that would see Anglo Irish merged with another bank or by recapitalisation. There is no doubt that the situation at Anglo Irish has them rattled.
However, your position is secure. Whatever happens at the bank, anyone protected by the guarantee will suffer no losses.
Interest rates
Q I have an interest only loan for €450,000 for an investment property and have approximately the same sum invested at 5 per cent. I have been offered 6 per cent to lock in for another year but I am between two minds as to whether to repay the loan or lock in at 6 per cent.
V.H., Kilkenny
A Trying to calculate the future direction of interest rates is even more complicated than usual at the moment. At first glance, it would appear fairly straightforward - you are going to pay more for your mortgage than you are receiving on your savings and the sensible course would be to pay off the loan.
However, there are broader considerations. These are uncertain times and you might need to tap your savings at some stage. If you use all that money to pay off the loan, you might not have sufficient funds to meet any financial crisis. It is always a good idea to have about three to six months' funds available on fairly short notice, if possible.
So your decision will ultimately be determined more by such things as security of employment, whether you have family and whether you have any other looming financial commitments, rather than by interest rates.
In the short term - ie the next year - it appears that interest rates can only go down. However, that is only official interest rates. Lenders have made it clear that they are regularly paying above this level to secure funds, meaning that they will be more reluctant to pass on future rate cuts. In that environment, it is very difficult to determine whether you should or should not lock in at 6 per cent.
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.
