Q I am 46 years old and single. Unfortunately, I have stage four cancer. While I am on sick leave, my income has been reduced by 50%. Since it is more than likely that I will not reach retirement age, which is 20 years away, can I collect my pension to have the money now? I don’t have any dependents, but what I do have are bills to pay now and maybe a wish list.
AN We are very sorry to hear about your diagnosis. In cases of ill health, it’s possible to access your pension fund earlier than the normal retirement age (NRA) applied to your pension plan, according to Eve Nolan of the Independent Trustee Company.
How benefits are paid will depend on your personal circumstances and can be classified under one of two headings: early retirement due to ill health or critical illness payments. In cases of poor health, which prevents a person from working, it is possible to take early retirement due to illness from their pension plan. You are entitled to an initial lump sum payment plus regular pensionable income.
This is calculated as a fraction of the final pay you could have received had you remained in the service until the NRA. The lump-sum payment would be tax-free, and pensionable income would be taxed at its marginal income tax rate. In cases of serious health problems, her full pension can be taken as a lump sum at a reduced tax rate, Ms. Nolan said.
This option applies strictly to cases where life expectancy is indisputably very short, unfortunately measured in months and not years. An initial lump sum calculation will be completed based on your years of service with the employer and your final salary. This amount is paid tax free.
The fund balance can be withdrawn as a taxable lump sum, but with a reduced rate of income tax applied at 10%. Ms. Nolan recommends discussing her options with a financial advisor, who will be able to provide a specific breakdown of the above figures.
Q My husband and I are on the Vhi. We have had the Health Plus plan for 40 years. We are both 70 years old. We asked Vhi if there was a comparable plan at a lower rate that would suit us, but they told us this is the best coverage for our needs. We would like to retain Mater Private coverage as we have had dealings with them in the past. Is there something that suits us better since premiums increase year after year and must be renewed in December?
AN Your options are very limited if you want to keep full coverage for companies like the Mater Private Hospital in Dublin, says Dermot Goode of TotalHealthCover.ie.
The current plan is designed to provide this level of cover, which is why this plan is so expensive at €3,861 per adult. Mr Goode suggests that he too consider the Vhi Business Plan Executive scheme at €3,495 each.
But you’ll need to check with Vhi to make sure coverage is identical in both plans, especially for all cardiac procedures.
Q My husband and I are in our early 70s. We managed to get some work done around the house this year with some money from our retirement fund. These are mainly renovations of an old extension and a renovation of our heating system. Our home insurance is pending renewal. Would I need to mention these updates or would they be within our current policy?
AN If you’re planning work, you’ll need to notify your insurer, according to Chris Wilkinson, head of products and proposals at Peopl Insurance.
You must inform the insurer if the property will be occupied, as well as the estimated cost of the work to be carried out and the estimated period of renovation. In her case, since she’s already completed the work, she’ll need to provide an updated rebuild value to her insurer, Wilkinson said.
If you’ve increased the square footage of your home, you can use the Irish Chartered Surveyors Society website to get a good estimate of what the rebuild value should be, based on your location and square footage, he said.
Your insurer will evaluate all the information and apply the necessary changes to your policy due to the greater or lesser risk of the work performed. Please note that any new furnishings or appliances may affect your contents insurance, which is often a separate policy.