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Money Times - Febuary 7, 2017

Posted by Jill Kerby on February 07 2017 @ 09:00

NO ONE-SIZE-FITS-ALL SOLUTION TO A CASH WINDFALL

“I didn’t win the €88 million in the EuroMillions jackpot,” a reader from the Midlands wrote last week. “But I have recently inherited just over €120,000 from my late father, a former teacher. We were all a little surprised – I have three other siblings – since he and my late mother had lived quite well and we thought they only had their pensions and house which we sold for just over €250,000.

“My husband and I are in our early 50s, our youngest is nearly finished college. The other two live in the UK and Australia and have good jobs. I work part-time and my husband has a good job and pension. (He is also a teacher.)  Our house is paid off and we only have a few small loans, so we’re in no huge need for this money.  Any suggestions on where to invest it? (We have some savings which are paying only a tiny bit of interest.)”

I received quite a few emails and letters like this – and about sums as small as €5,000 - after the lottery win column. Most people only ever benefit from modest windfalls - an inheritance, a redundancy payment, a retirement lump sum or a capital gain after selling an asset like a property or a business they’ve spent a lifetime building.

Most people, in my experience, tend to be pretty conservative when they find themselves with an unexpected sum of money, even a large sum.  It’s size, relative to the person’s existing income and financial position will impact on investment decisions, say investment advisers. As will their immediate and longer term expectations for the money, their capacity to live with market risk and price volatility. Age play a big part too; a free-spending, ‘easy come, easy go’ approach is usually reserved for younger lottery winners or inheritance beneficiaries with few financial responsibilities and liabilities – like a mortgage and other bills, a family to support or chronic indebtedness.

In other words, there are simply no ‘one size fits all’ solutions whether the sum is €10,000, €100,000 or €1,000,000.

My correspondent from last week is also typical of the person who has no immediate money pressures who seeks some help in what to do with their good fortune. In such cases, financial advisers often report that after rewarding themselves and their loved ones with modest purchases, such clients often take a longer term view of the money, say, to pay for a wedding, or for retirement or to pass on to the next generation(s).

This is why the first step has to be a proper wealth review in order to confirm the status of this money, relative to their expectations and desires.  Has the person factored in the importance of clearing existing high cost credit card and personal loan debt, overdrafts, perhaps even higher variable rate mortgages or the real cost of long term liabilities, like medical and nursing costs in their advanced age?

No matter how large or small the amount at stake, a good adviser will ask you what your expectations are for your inheritance, retirement lump sum, capital gain, etc and plan around your answers.

No one can accurately predict investment growth consistently.  Which is why expecting positive results from a small collection of stocks or funds is also unrealistic.

The high tech stock you heard about – or even a single property fund producing high gross yields today, could still tank tomorrow, at great capital loss or be impacted, yet again by arbitrary government tax policies. The higher return, the higher the arrangement and management fund charges which will also eat into any return.

Only an independent, impartial financial adviser can advise our reader with the €120,000 inheritance where to invest her money, and only after a comprehensive, personal financial review.  It could be in the end that she and her husband simply won’t sleep if this money, which perhaps they ultimately want to leave to their grandchildren, was tied up in the bond or stock markets.

In that case, paying off the last of their debts and finding the safest deposit account might ultimately be where the cash remains. Or they might decide to disperse it as a contribution to higher education, or even seed capital for a grandchild’s business. 

What every beneficiary of an unexpected or earned windfall needs to accept is that genuinely suitable investment solutions are always going to be more bespoke that any popular, advertised ones.

And probably a lot safer too.

 

 

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Money Times - Januray 31, 2017

Posted by Jill Kerby on January 31 2017 @ 09:00

 

BIG LOTTERY WINS COME WITH MORE THAN JUST LOADS OF MONEY

As I write this column – a few days before it appears in your newspaper – rumours are swirling that a consortium of 30 shift workers at a pharmaceutical firm in Cork have won the EuroMillions windfall jackpot of €88,587,275.

Good for them. That works out at a tax-free prize of €2,952,909 each, more than enough money to pay off their bills, to buy a new car and house, and put all their kids through graduate school and probably buy a house for each of them too.

They’ll probably have enough left over to fill up a retirement fund and maybe even quit the day job and follow a few dreams.

A €2.9 million windfall is enough to change your life for the better but is less likely to result in the downside risks that come if just one person had scooped the c€88.6 million, a massive sum to have to navigate, probably for the rest of your life. That is, of course, if you don’t blow it recklessly or give most of it away, perhaps keeping a modest million or two for your own enjoyment.

I’ve only met one lottery winner, about 20 years ago and the sum he won was about £3 million.  By the time I spoke to him, he had about a million left having bought the inevitable new home, car, holidays and had generously given the rest away to his extended family, some friends and charities.  He was now concerned about the implications of his children possibly receiving very large inheritances while still at relatively young ages.

I passed him the names of some good financial and legal advisers, but I remember him saying that the process of giving away a large share of a million and a half pounds to his loved ones hadn’t turned out to be as happy an experience as he thought it would.

This is a common outcome for many lottery winners who nearly always say that you really find out who your friends are when you win millions.

Winning a huge windfall like c€88.6 million means you will certainly need a highly trusted team of financial, tax and legal advisers who might end up on the payroll for a long time. Even working out what do with €3 million, especially if you want to preserve much of the capital (after buying that new house, car, etc) will take time and probably more understanding of money and tax than you have. Too many are tempted to hand over the management to “the professionals”.

Whether it’s a huge jackpot or a diluted one, responsibly investing and divesting yourself of that kind of money requires a measure of faith and trust in the advisers you employ.

But it’s your responsibility in the end. Their respective roles are to help you work out a financial, tax and legal plan of action that reflects what you want to do with the money.

The financial planner should be experienced, trained and fee-based. (They shouldn’t necessarily charge a percentage fee of the winnings. 1% of €88.6 million is an annual payment of €886,000!)  Should the process of selecting a diverse, balanced, mixed portfolio of assets with capital protection and a modest risk/reward income return cost 1,000 times more than it would for a comparative pension fund?

The tax adviser will work with the Financial Planner to explain all the tax implications of your great windfall: there is no capital gains tax on lottery winnings here but all deposit returns (such as they are) is subject to 39% DIRT. Irish investment gains will carry up to a 41% tax bill. Investments in other jurisdictions will carry their own liabilities, including any inheritances that may be generated from the foreign investment. 

Gifts and inheritances in Ireland carry relatively small, life-time tax free thresholds:  just €310k between parents and child; €32,500 between siblings, to nieces/nephews and just €16,250 to non-relatives. Winners who want to set up family trusts for the benefit of future generations – and doing that badly could be catastrophic for your children if it’s not thought through with great care - will need tax and legal advice.

The solicitor you hire will also play an important role in setting up those trusts, completing property deals, preparing complicated wills, (perhaps in more than one country), even pre-nuptial agreements (where possible) and Enduring Powers of Attorney. Your lawyer will come in handy if disputes arise, especially if €88.6 million is at stake.

I’ve heard lots of suggestions about how the big winner (or maybe, the smaller ones) should proceed. “Take your time” and “protect the capital in the short term” sounds about right.

Finally, forget the notion that winning millions (or tens of millions) won’t change your life. It will. But the last thing you want is that your good luck turns into someone else’s misfortune.

 

(The new TAB Guide to Money Pensions & Tax 2017 is now out. €9.99 in good bookshops. See www.tab.ie for ebook edition.)

 

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Money Times - Januray 24, 2017

Posted by Jill Kerby on January 24 2017 @ 09:00

 

WOULD YOU WELCOME A UNIVERSAL INCOME FROM THE STATE?

Could the idea of a ‘basic income’ take off here?

A number of countries are experimenting with paying a selected group of citizens in different cities a basic monthly income as part of a wider social programme to address, they say, the profound changes in the nature of work, jobs and social support structures.

The best known pilot projects have begun in Finland, Holland and Canada where thousands of people are being paid monthly amounts in lieu of conventional unemployment or social welfare benefits, or are receiving universal monthly payments that will be subject to some income means tests, that is, some higher income is clawed back in the form of taxation.

The theory behind the basic income payment is that conventional social welfare payments are complicated, expensive to administer and distribute and act as a work disincentive because of the loss of social welfare benefits once you get a job. In Ireland, this disincentive has already fostered a range of supplementary ‘back to work’ benefits and family support payments for the job finder who remains on a low income. These extra schemes require extra bureaucrats to manage them and little or no savings for the state.

In the case of universal payments, rejected by a large majority of voters in Switzerland, the idea is that everyone receives a monthly or annual income from the state that eliminates the convention unemployment and welfare payments with higher earning clawed back by degrees.

In Ireland’s case this bill is over €20 billion, divided between a variety of pensions, unemployment and illness/disability benefits, child focussed benefits (from universal child benefit to school uniform and book allowances) and other family related benefits and supplements.

Basic income and universal payments are catching the attention of both private policy analysts and governments that recognise that the old benefits systems no longer seem very suitable given the changing nature of work and life long careers. (The coming robotics revolution is predicted to result in the loss of even more conventional manufacturing and service jobs.)

The huge cost of running our current social welfare systems is set to rise as western populations age and make increasing demands on pension and health services. In nearly every country these are paid on a ‘pay as you go’ basis direct taxation, not from invested sovereign wealth funds, Norway being the notable exception in Europe.

So how do these pilot projects work?

The most advanced one, but limited one is Finland’s where 2,000 citizens already on unemployment benefits were randomly selected in December to participate in the pilot for the next two years. Their first payment arrived this month.

Minimum unemployment benefit in Finland amounts to €560 a month and for the 2,000 is replaced with the equivalent in a basic income payment.  This time, however, even though the person remains registered with their unemployment office, there is no weekly signing on, though they may still be offered a job placement. Turning it down could result in up to 40% loss of the payment. However, any casual, part-time or full time income earned will not result in any clawback of the payment, though housing benefit, for example, could be affected by the additional income the person earns while receiving the basic income.

The question the Finn’s want answering from this pilot is whether a basic income results in better employment outcomes or job creation among the sample group. Unemployment is 8% in Finland.

While the Swiss have rejected a referendum for introduction of a universal income payment of c€2,330 a month to every adult and c€583 to every child last year (the total cost would exceed their annual welfare bill), in the city of Utrecht, the Dutch authorities have begun a more detailed pilot involving six different basic payment control groups and basic income payments.  One group will receive the benefit with no impact on additional income they earn; some will be paid extra for voluntary work; some will see some of the benefit clawed back depending on higher earnings, etc. The basic monthly payment has been set at €1,000.

The province of Ontario has begun a similar experiment in four centres with a no-strings-attached payment of Can$1,320 a month to selected individuals age18-65 on existing unemployment benefits (of about $700 a month) and $1,820 to people with disabilities(who currently receive $1,130).Their employment, health, education, food security, living arrangements, rates of illness, etc will be monitored and then compared at the end of three years.

This conversation will come here eventually.

So far, polls suggest that a majority of Finns, Dutch and Canadians support the idea of basic or universal payments. But the polls also show that people are not willing to pay higher taxes to embrace any new system. 

Pitching just the right size basic or universal payment will be the ultimate key to the success or failure of this radical proposal.

(The new TAB Guide to Money Pensions & Tax 2017 is now out. €9.99 in good bookshops. See www.tab.ie for ebook edition.)

 

 

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Money Times - Januray 17, 2017

Posted by Jill Kerby on January 17 2017 @ 09:00

 

IRISH LIFE BRIEFING PULLS NO PUNCHES ON FINANCIAL HEALTH

Every January Irish Life, the state’s largest purveyor of life insurance, investment fund and especially pensions, outside of the state itself, produces an annual report, which it shares with the financial media.

For the company itself, last year was a good year. Investment returns in 2016 were positive with global equities up 10% on average and average eurozone government bond returns up nearly 5%. Irish property funds returned c11% and their popular, diversified MAPS fund of mixed assets was up a respectable 7.7%. 

The company, owned now by Canada’s largest insurer, Great-West LifeCo, also bought out Aviva Health and the remaining interest in GloHealth in 2016. It sensibly kept GloHealth chief executive Jim Dowdall to run the new health provider, now called Irish Life Health who reminded everyone that in 10 years another 42% of public hospital beds will be needed just to keep up with the extra over-65s.

Irish Life is the only company now that provides customers with a menu of essential financial products: life insurance, investment funds, pensions and health insurance.

And while I firmly believe that the best way to furnish yourself with all these products is to carefully investigate the wider marketplace yourself, or, ideally use impartial, independent fee-based advisers to help you, this simply doesn’t happen for the majority of people.

Outside of the public sector, fewer than half the working population have a pension fund and will rely on the state pension for regular retirement income.Ditto for life insurance among working adults with dependents. Those who do have private pensions are failing to invest enough into them.

Health insurance has a higher take up rate because only because the c€15 billion collected from compulsory taxation for the HSE is so badly managed.

But is was Irish Life’s survey of pension provision in 2016 that showed just how under-prepared this country is for the surge of older people – Ireland’s baby boomer generation – that are now joining the ranks of the retired in ever greater numbers:

-       In 2016 the average age at which individual Irish Life customers first purchased a pension was 44 years, almost 10 years older than the average age in 2000. The investment outcome for those ten lost years is devastating and amounts to tens of thousands of euro less in the retirement fund.

-       Only three in 10 (28%) of those not yet retired have a financial plan to help them prepare for retirement.

-       Only half of those under 50 have ever discussed financial retirement plans with their partner. This increases to 75% for those with 10 or less years to retirement.

-       A majority of respondents said they would like at least 53% of their current income on which to retire (excluding the state pension.) They ‘expect’ to have 44% of current income.

-       Irish Life now recommends a realistic pension income target of 1/3 of final salary PLUS the state pension “yet… 90% of people currently on our Defined Contribution plans are not on track.” Instead, most will see a salary replacement of just 18% plus the state pension.

-       Two thirds of retirees (64%) surveyed said they reduced their spending in retirement; 63% of them in hindsight, would have changed the way they prepared for retirement.

-       A positive result is that 69% of adults support automatic pension enrolment at work. A separate initiative Irish Life conducted in 2016 with a client company willing to adopt auto enrolment resulted in pension participation rising to 90% from 58% and maximum contributions rising from 42% to 82%.

The most urgent message from the survey is the one about retirement income expectations.

Even assuming current income is say, €50,000, 53% in retirement will be €26,500. The current state pension is €12,391.60. A c€39,000 income would be very welcome indeed.

But to achieve a pension income of €26,500 in the form of a guaranteed annuity you require a pension fund worth at least €500,000 for a single person with no dependents and over €800,000 if you were funding for a dependent spouse, for example.  Average pension funds are in the region of €100,000 at retirement.

With average income funding of just 18%, the worker earning €50,000 would end up with a pension of €9,000 a year. No wonder most of the working population expects to depend on the state pension, which in this case would help provide total income of €21,391 a year.

It’s a brand new year.

It’s not too late to do something about retirement planning and funding. In finding better returns on savings that are currently returning nil to zero interest or in protecting dependents and your family’s health care costs. Call a good adviser.  Failing that, at least check out the Irish Life website or other life company sites. 

The alternative – doing nothing – gets scarier with every one of these annual briefings.   jill@jillkerby.ie

 

(The new TAB Guide to Money Pensions & Tax 2017 is now out. €9.99 in good bookshops. See www.tab.ie for ebook edition.)

 

 

 

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Money Times - Januray 10, 2017

Posted by Jill Kerby on January 10 2017 @ 09:00

 

WHEN SAVINGS PAY NOTHING…YOU NEED A CONTINGENCY PLAN

The frustration of ordinary savers with historically low returns could turn to horror if negative deposit interest rates ever arrive on these shores.

Already the European Central Bank, charges -0.4% negative interest to discourage commercial and investment banks from leaving deposits with them (the ultimate ‘safe’ deposit taker). Negative rates also apply at the central banks of Switzerland and Denmark and in both countries some commercial banks now charge their customers negative rates. Here, Bank of Ireland charges a negative rate to corporate depositors who leave more than €100,000 overnight.

At the end of November 2016, the ECB estimated that the value of negative yielding Government bonds (the biggest form of debt that countries buy and sell to each other) in the world is was $8 trillion and rising. This means that buyers of German 10 year bonds for example, now pay the German government a small rate of interest every year, rather than receive an interest payment from the Germans. 

How crazy is that?

Would you willingly pay your bank for leaving your life savings with them, which they can then lend out at 4% (a mortgage rate) 10% (person loans), 15% (overdrafts)?

What are the safe alternatives? A mattress? A hole in the garden?  Hardly.

Not coincidentally to the negative interest rate phenomena, is the strengthening drive by governments and central banks to keep rolling out cashless banking and cashless purchases.

Denmark, where most financial transactions are now cashless happens to be where negative interest rates are being charged to commercial and individual savers: in a place where practically no one takes cash anymore, and your income and wealth is expressed as digital numbers in on-line accounts and plastic money cards, there is practically no alternative but to accept the power of the central bank or government.

Could an entirely cashless society happen here?

Cash purchase limits already apply in many EU countries, including France (€3,000, €15,000 for non-residents); Italy (€999.99); Denmark (equivalent of €1,340); Spain (€2,500, €15,000 for non-residents); Portugal (€1,000); Greece (€1,500); Belgium (€3,000 and no cash amount for real-estate purchases).  Other countries that limit cash payments are Slovakia, Poland and Bulgaria. The Swedes have no limit, but traders are not legally obliged to accept any cash payment.

What options do any of us with any surplus income or savings have to low to negative deposit yields and the encroaching threat of digital and plastic ‘money’?

-       You can try and find a genuinely solvent bank/institution that still provides a safe, positive yield. Global Finance magazine produces an annual survey of the top 50 ‘safe’ banks every September. (Not a single Irish, UK, Italian, Spanish or Danish bank make the list. The top 10 include 4 German, 1 Swiss, 2 Dutch, one Luxembourg and France bank and Canada’s Toronto Dominion bank (in 10th place). See www.gfmag.com or better still, consult a professional adviser.

-       Use your savings to pay off any interest debt you have, like credit cards, personal loans, mortgages.

-       Buy real assets that pay positive annual yields: an investment property that produces a profit from rent after all charges and tax. Shares that pay a stream of positive yielding dividends.

-       Depending on your age, ability to live with risk, use savings to buy low cost, diversified investment funds. A tax efficient pension is the best long term option.

-       Consider private, but high risk family lending with a portion of your savings or P2P lending.

-       Look into the merits – and downsides – of shifting some cash into real money, physical gold or silver coins or bullion, stored in a safe depository (where you will pay a fee.) Consider it insurance. Precious metal prices are volatile and an ounce of gold pays no yield, but gold always has an intrinsic value and has no third party (ie Central Bank) liability risk once it’s in your possession.

 

Before you ‘encash’ or withdraw your savings, or buy a potentially higher yielding asset or investment, or substitute some of your cash for ‘real money’, do your own research. Understand and accept the potential risks and rewards of non-deposit asset ownership.

Some stock markets and investments are booming, some are floundering.

Property in Ireland is returning big yields again due to post-crash shortages and feeble lending by still fragile banks. But ongoing costs and taxes remain high and the state remains the biggest price manipulator.

Deposits are simple and easy; getting a positive return on your savings is not.  Always search for the best independent, impartial financial advice from a professional, experienced, fee-based adviser who will model their suggestions to match your profile. 

 (The new TAB Guide to Money Pensions & Tax 2017 is now out. €9.99 in good bookshops. See www.tab.ie for ebook edition.)

 

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Money Times - Januray 2, 2017

Posted by Jill Kerby on January 02 2017 @ 09:00

 

WE CAN’T PREDICT THE FUTURE BUT WE CAN IMPACT OUR OWN OUTCOMES

Was 2016 as bad a year as so many people on my Twitter line seem to be suggesting it was? 

I suppose if you are mildly obsessed with the passing of celebrities, the pro-Brexit vote and Donald J Trump becoming US president, then 2016 may not be your favourite years.

As a pessimistic optimist, who has finally admitted to herself that I’m only as good a forecaster as my decorative, but not very bright King Charles Spaniel, Jet, I’m only willing to predict that 2017 is - again - going to bring with it all sorts of personal finance surprises. 

This might be because of Brexit and its potentially negative impact on prices, and because of Trump’s vague promises to cut the US corporate tax rate in order to lure offshore US companies back home.  That might very well impact on existing and future job growth from this key economic sector.

But for every swing there is a roundabout and if I had a young person about to graduate from secondary school I’d be encouraging them to think about working in IT and finance/banking/insurance:  there is a already of shortage of workers and graduates to service both these industries based especially in the IFSC in Dublin and that’s only going to escalate if we attract foreign and UK banks and re-insurers from a post-Brexit City of London.

With interest rates finally turning – first in the US after the Fed raised its base rate to 0.25% - and the great bond bull-market coming to an end (yields are jumping as the price of bonds fall), 2017 may very well be a watershed year for American savers.

As anyone living on either side of the Atlantic with life savings or surplus income sitting in a deposit account knows, there has been practically no return on their cash once inflation and the cost of living is taken into account. Throw in the cost of banking and the hidden subsidies that savers unwittingly pay to keep borrowing rates low (especially Irish tracker loans) and 2016 was an even worse year than 2015, 2014, 2013, etc.

Will the ECB eventually follow the Fed and finally end its vast programme of ‘quantitative easing’- the purchase of government and corporate debt from private financial institutions in order to supply them with cheap credit to pass on to the market?  QE hasn’t dragged the eurozone out of stagnation but has furred up the ECB’s own balance sheet with what is surely going to become depreciating bond assets. 

When bond market bubbles meets their pin, the outcome, say the experts I read, could be uglier than when the sub-prime mortgage derivatives market met theirs back in 2007-8. At the very least, they think some serious direct money printing in the US will be one consequence and that will feed into higher prices, wage demands and higher interest rates.

Expect some ‘trickle down’ effect on this side of the pond, though the ECB cannot, under its rules, just turn on the printing presses to meet any inevitable price/wage demands.

Outside the realm of speculation – I don’t have a crystal ball and neither does anyone else – there are plenty of things you can do to make 2017 a better financial year than 2016 might have been.  This week we’ll start with spending/savings actions you can take that will make a difference.

-       Work out a family budget – everyone’s income, including pensions, child benefit, teen’s part-time earnings; tax paid, savings, debt, household outgoings and discretionary spending. These are your personal finance building blocks.

-       Price compare all your insurance and utilities as they fall due. Check out www.bonkers.ie. You will save c20% on average, claim Bonkers. Gas/ electricity/phone/broadband; motor, home, health insurance bills of say, €5,000 a year means a €1,000 savings.

-       Price compare the cost of servicing your loans at bonkers.ie. Then arrange a cheaper, consolidated credit union loan. CU interest is not compound, but charged on the diminishing balance of the debt.

-       If you smoke – at €11 a pack – cut back or quit. 20 fags a day is costing you €4,015 a year.

-       Cut out €10 a week worth of junk or processed food from your weekly g4ygrocery bill and you save another €520.

-       Bring that €3.50 daily café latte (x 240 days) with you to work in a thermos cup and you’ll save c€840 in 2017 minus the cost of the coffee from home.

-       Bring a lunch to work and save at least €5 a day or €1,200.

-       Cut up the credit card and replace it with an interest-free debit or top up card. Save a FORTUNE.

Next week, an investment and wealth creation plan for 2017. 

I wish you a very Happy New Year…and so does Jet!

(The new TAB Guide to Money Pensions & Tax 2017 is now out. The first 10 readers who contact me at jill@jillkerby.ie and includes their home address gets a free signed copy.)

 

 

 

 

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Money Times - December 22, 2016

Posted by Jill Kerby on December 22 2016 @ 09:00

 

DEADLINE LOOMS FOR FOUR YEARS OF VALUABLE TAX REFUNDS

Are you short a few bob this Christmas?  Are you dreading the credit card bill in January?  Having trouble paying the mortgage/car insurance/electricity bill? 

Then you may be in for an unexpected windfall – big or small – if you’re prepared to set aside a little time and make a little effort between now and 31 December…and claim a tax refund.

The Irish tax year runs from January 1st to December 31st.  Anyone who is self-employed or has non-PAYE income is familiar with their big tax deadline – October 31st – when they must file and pay their tax due for the previous year. (Non-PAYE income includes share dividends, rental income, a capital gain from selling an asset.)  

But the Revenue gives everyone one last chance for a refund, but that means getting the paperwork – on line is the fastest way – into them by 31 December, which happens to be a Saturday this year.

Last October  (and cynics would say this is uncharacteristic of the nation’s taxman) the Revenue actually wrote to more than 137,000 PAYE workers who have not applied for any tax refund in the last four years.  These people are on record for making some sort of claim some time before 2012, but the Revenue was suggesting that if they checked their pay slips and expenses receipts again, they may find that they have another refund coming for expenses they incurred since then.

And that’s the key message:  we all have a four year rear window of past expenses refunds that can be claimed from the Revenue.  They best known are for qualifying medical or dental expenses, for claiming some income tax relief on contributions to a pension plan, payments towards nursing home care for an elderly relative and for the hugely valuable Home Carer’s Credit of €1,000, which is payable to single earner couples with one or dependent people, including children under age18. (It was €810 up to 2015.)

So have you claimed for your family’s medical and dental expenses for the last four years, or for the special food or supplements they need or devices and even approved treatment done outside the state? (These must be expenses that have not already been paid by a private health insurance plan.)  Anyone who has had root canal or a crown might see a €200 refund; €5,000 worth of braces for a child could net a working parent €1,000.

But what about claiming that 13.5% VAT back on the cost of putting in new windows or extending the kitchen under the Home Renovation Scheme that was introduced a couple of years ago?  On a €20,000 renovation that’s a €2,700 VAT refund (albeit over a two year period). Did you need bridging finance to buy a home in the past four years?  The interest you were charged can also be claimed. Some homeowners can also claim mortgage interest tax relief. 

Meanwhile, if you’ve been in a private tenancy arrangement since 7 December 2010, this is your last chance you claim rent relief for the past four years. (It’s being withdrawn on a phased basis since 2011 and will be gone at the end of next year.)  From 2012-2016, a single person under age 55 could have claimed a total, maximum tax credit of €720; singles and couples/widows under age 55 could have claimed a total, maximum tax credit of €1,440; married couples/widows over aged 55, €2,880.

Another refundable expense that people forget about is tuition fees (as opposed to the €3,000 “registration charge”) for qualifying undergraduate and post-graduate courses.

For example, a student (who pays income tax), parent, grandparent, godparent or even a friend picking up all or some of the cost of full-time fees at an approved college would be entitled to a 20% income tax refund up to a maximum €7,000 per annum. Unfortunately, the government includes a ‘disregard’ amount, which was €2,250 in 2012 and went up by €250 increments each subsequent year. (It is now €3,000). Nevertheless, for someone paying the maximum €7,000 per annum, four years of full time course refunds would still be worth €3,500.

Tax refunds can be made for having a guide dog, for being a seaman, or for work clothing expenses if you’re a nurse. If your employer picks up the cost of your health insurance, you can claim the 20% relief on up to €1,000 worth of the cost of the plan. (Individuals with health insurance get the tax relief at source.)

Nearly all tax refunds are paid at the standard 20% tax rate, though some – pensions, nursing home expenses – are paid at the marginal 40% rate.

So don’t delay. Check out the myAccount site on the Revenue’s website (www.revenue.ie). Make it a very Happy New Year.

Do you have a question for Jill?  Please email her directly at jill@jillkerby.ie.

 

 

 

 

 

 

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Money Times - December 13, 2016

Posted by Jill Kerby on December 13 2016 @ 09:00

 

MISSING RENEWAL DEADLINE MEANS AUTOMATICALLY HIGHER NEW YEAR PREMIUMS

Nearly half the customers (45%) with a private health insurance policy will have a renewal date in January 2017 claims the Central Bank, which regulates the industry.  After your Christmas credit card statement, it will probably be the least welcome bill you will pay as the New Year dawns.

But as patients waiting for a public hospital operation or to see a specialist can attest -  that number has reached the 550,000+ mark – an insurance plan is the difference between endless frustration and diminishing health, and timely, efficient treatment in a comfortable, calm, clean facility.

The Central Bank study focusses on renewals, with 85% of consumers “renewing the same policy with the same provider”. Auto-renewal by-passes consumers making contact with their insurance provider “to ensure that they are being offered the most suitable cover available to meet their individual needs and circumstances.”

Happy days then for VHI, Laya Healthcare and Irish Life Health (which was created out of the merger of iAviva and GloHealth.)  With such a tiny market, the Central Bank’s warning to shop around is all the more important if you want to avoid overpaying next year.

But this isn’t exactly news.  Specialist health insurance advisers like Dermot Goode of TotalHealthCover.ie, a regular contributor on national and regional radio stations has been urging everyone with health insurance for years (that’s over two million of us) to never just grin and bear an annual price hike or allow your plan to automatically roll over.

 “Anyone who still has the same policy for even two years is paying too much,” is Goode’s familiar mantra. Anyone who is still paying for the old VHI Plan B (and higher) or Laya’s HealthManager variation plans from several years ago is unnecessarily paying astronomical premiums. 

These are the consumers Goode suggests who are often older and clearly wealthier (but not necessarily smarter) than a typical younger person or young parents on a restricted budge. They clearly haven’t checked out the market and especially the corporate versions of their own plans which are often re-designed for large companies. Under our Lifetime Community Rating pricing system, every plan on the market   must be available to everyone and not just to a business client and their employees.

Anyone still on the old comprehensive Laya HealthManager plan, which my husband and I had when it first came out and kept for many years until the price went through the roof, is now paying a whopping €355 a month or €4,262 a year!  I frequently meet such people during my personal finance seminars.

I’m still with Laya (which grew out of the original Bupa Ireland that broke the VHI’s monopoly in 1996.)  But my current policy, Simply Connect Plus, which also offers great private hospital cover and day to day expenses, only costs us €1,160 each though it’s price (without the usual affiliation group discount) now costs €1,246. I know my premium will be at least that next July, so I will shop around again using Dermot Goode’s website tools.

Health Manager is a great plan, but not great enough to justify paying €8,527 a year for the two of us.  The biggest difference between the two – as far as I am concerned – is that I must not pay a modest, but only once in a year excess for an in-patient event.  Our bill until next July if we stick with Simply Connect Plus will be least €2,500.  Expensive? Sure. Extravagant?  No.

Dermot Goode insists that there is still some pretty good value in the health insurance market if you are willing to take the time to the kind of cover you want and how much you can afford to pay. You can use the comparison tools on the HIA.ie or providers’ websites, but there are hundreds of plans to confuse you. Use a good broker (of which there are many specialising in healthcare.)

Finally, here’s two vital tips: Do your children need to be on your plan. No. You can buy suitable ones for them (kids go free deals are back, so check them out) that will be much cheaper than an adult one.  A big attraction of the new Irish Life Health plans is the free on-line GP consultations; families on tight budgets and working parents are already finding this benefit a godsend. 

Are the very cheap, lowest level, public hospital access only plans worth having? You won’t get a private bed, they usually don’t cover specialists or provide other out-patient benefits.  At the very least you want a plan that lets you jump long consultants queues and private hospital treatment (including daytime A&E emergencies).

Yes, the run up to Christmas and New Year’s Eve are busy times but give yourself a head start on 2017 by adding one more shopping trip – for as low a health insurance bill as possible.

Do you have a question for Jill?  Please email her directly at jill@jillkerby.ie.

 

 

 

 

 

 

 

 

 

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Money Times - December 6, 2016

Posted by Jill Kerby on December 06 2016 @ 09:00

 

Ah, Christmas…you’re back and just as pricey as ever? Read on

The Wednesday was bright and cold when my friend Susan and I arrived in Newry at 11am to do some Christmas shopping. 

Since neither of us had been there before (and I have no sense of direction) we took the wrong motorway exit and ended up snaking through Newry’s one way traffic system behind a great many other Irish-reg cars. I eventually pulled into the bus station where two other middle-aged women were standing on the footpath, one of whom was staring into her mobile phone.

I wound down my window.

“Excuse me, sorry to bother you. But can you direct me to the Buttercrane Centre?”   “Ha. That’s what we’re looking for,” the one on the phone replied in a Dublin accent. “We’re lost too.”

It was that sort of day. We did find the centres – about half a mile away, bookending the canal that runs through the town. Both malls were full of Irish shoppers, filling up trolleys with clothes, toys and lots of booze. I’ve never seen such happy, welcoming merchants.

This was my first act of treason against the Irish consumer state. (Ordinary holidays abroad are acceptable given the quid pro quo with our visitors.)  As it turned out I only spent a few hundred pounds/euro and made up for it a little by going to the Irish Craft Fair at the RDS on 1 December (as I have done for over 30 years) where I ticked off my last present.

Fin. Finito. I’m done Christmas shopping and in record time. But between the differential on the price of alcohol between North and South (due to much higher excise tax here), the sterling/euro differential and the fact that so many of the Newry shops were also offering a €1 to £1 price peg, I figure I saved about €100 or 25% of my shopping outlay that Wednesday.

My biggest purchase?  A £150 faux leopardskin coat in Miss Selfridge for my drop dead gorgeous Brazilian godchild (who can carry such a look). It was already reduced by 50% and then knocked down – as a pre-Black Friday special - by another 25%.

I’m not sure I’ll do this again next year – I enjoyed the day out with my girlfriend more than the shopping - but savings like these are especially hugely welcome to  people with young families and far more limited budgets than mine.

If you can’t go North, and you really do enjoy the giving side of Christmas, you still need a shopping strategy that avoids leaving you with a smoking credit card and repayment migraine in the New Year.

So, once again, here is my Christmas spending survival guide.  It has faithfully served me – and I hope my readers – for many years:

-       Make lists : Gift recipients; Christmas tree/ornaments; food and drink; entertainment (movies, panto, zoo); Christmas clothes; holiday travel (petrol/train fares). Bring the list with you.

-       Set a spending budget. Use either cash, a debit card or a credit card when shopping, not all three.

-       Kris Kringle:  Ideal for large extended families. Set a price limit and/or do a themed Kris Kringle:  home made food items, chocolates, services.

-       Choose a gift theme for adult recipients. You can control your spending by opting for...books, DVDs and CDs, plants, food, alcohol. (See Christmas Gift Tips)

-       Compare prices. Use the internet, especially for toys, electronics. You can save time and money, but watch out for shipping charges and deadlines. If you can, shop in Irish owned shops.

-       Pace yourself. Leaving too much to the days before Christmas will result in impulse buying. Never overdress (you’ll get hot and bothered); don’t bring children or a reluctant spouse with you unless they are reliable load bearers. Don’t shop on an empty stomach.

-       Be security conscious. Wear a zipped handbag across your torso when shopping; don’t let anyone see you key in your credit/debit card passwords. Watch your shopping bags. Pickpockets love Christmas.

-       Beat the crowds and shop early. Get out when the crowds are thickest.  

-       Set a shopping time limit, say, a maximum four hours. Stop for a break midway. Check your lists. Once you get tired you’re at risk of overspending.

-       Recycle. This doesn’t just mean giving away gifts you received that you didn’t like. It also means recycling your precious and loved things that the person on your gift list may have admired. This is ideal for people with grandchildren, godchildren, nieces and nephews for whom they can start ‘bottom drawers’, for example.

I still have Christmas cards (and e-cards) to send out; packages to post to Canada and Australia; the tree to go up; lots of baking to do and a day’s worth of wrapping. The (frozen) goose awaits its oven…

And these are the best-spent hours of all…Happy Christmas.

 

 

 

 

 

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Money Times - November 29, 2016

Posted by Jill Kerby on November 29 2016 @ 09:00

 

TEENS AND PARENTS NEED TO THINK OUTSIDE THE ACADEMIC BOX

Christmas may be coming, but in households all over Ireland parents and teenaged children are also anticipating something of far more significance:  where they will go for their post-secondary education.

CAO forms are being carefully scrutinised as the Leaving Cert exams loom and the majority who do continue their education will opt for an academic course in a college or university, rather than an apprenticeship or other qualification, and that is a terrible shame as well as a waste of time, talent, enthusiasm and money. It is one of the contributing factors to why we have a pretty consistent college drop-out rate of first year students – about 20%-25%.

According to Solas, the Further Training and Education Authority, not enough sixth year students and their parents are being directed to explore the vast programme of training programmes and apprenticeships that can lead to well paying jobs and careers. A university degree even for children who struggle academically is the ‘golden ticket’, especially for middle and higher earning families.

I met recently with both Solas and the Cavan Monaghan Education and Training Board (CMETB) about how 2017 will see an even greater broadening of post-Leaving Cert courses, other training programmes and apprenticeships, including a post third-level graduate ‘apprenticeship’ in financial services that will be rolled out at the National College of Ireland. (25 new apprenticeships were added in 2016.)

Long gone are the days when training programmes were mainly directed at the unemployed; and apprenticeships, of which there are 9,000 were nearly exclusively trades-based, Nikki Gallagher of Solas told me. 

Further education takes in everything from construction, manufacturing and technology sectors, in finance as well as construction, food and hospitality, medical services, manufacturing, and science and technology. There are job training schemes for budding hairdressers, artists, craftworkers, as well as medical device and aerospace technicians. Would your young person like to become an equestrian instructor?  There’s a 44 week, internationally recognised course starting in January at the Castle Leslie estate in Monaghan, Catherine Fox of CMETB told me.

Apprentices are employees and paid while undergoing their training. But others on courses, depending on the institution, may qualify for meal, travel and accommodation allowances. Some further education colleges may charge a small annual fee (usually less than €1,000) but Institutes of Education do not.

Even more significantly is that both institutions can offer the same further education course that can act as launch pads for university degrees that may not have been achieved via the CAO system.

Many nursing and related students at Irish and UK universities were accepted in year two of the degree programme after doing their first year in a science/nursing course at a higher education college, Fox explained. “FET students benefit from smaller classes and continuous assessment. They’re usually very disciplined and focussed. And they will also, in many cases be saving on the cost of fees for one or even two years before completing their degree at a college or university.”

The diversity of people undergoing further training to meet the needs of our new smart economy, is quite astonishing – there are 250,000 full and part time higher education and training places - 33,000 at higher education colleges and institutes. There is a course for school leavers (and even pre-school students), as well as mature adults; for the unemployed and people with full time jobs. Inclusion means Solas provides literacy and language training for minorities, refugees and newcomers who all want a good job or career. 

So why do so many young people end up in academia…and drop out?  Or fail to work in their graduate area?

Fox and Gallagher (both third level graduates) believe too much emphasis is put on academic achievement at junior level. Too  many of our young people are never given a chance to explore non-academic interests or the range of jobs and employers looking to hire and train them, in the case of apprenticeships.  Too many parents mistakenly equate high paying, secure, jobs with the professions..

And there’s the rub. Young doctors, lawyers, academics (in the case of my family) spend up to 10 years achieving higher degrees before landing their first permanent position.  Unlike the young, apprenticed qualified electrician or aerospace technician or even investment analyst who started earning at 22 or 23, and was quickly on their way to financial and personal milestones (which even include a pension), the professionals’ were delayed will into their 30s. 

Too  many young workers are all facing employment conditions their (older) parents did not: unpaid internships; temporary and part-time contracts, and very little security outside the public service. By only focussing on third level academic degrees and ignoring other paths, like further education training and apprenticeships you only add to that uncertainty.

This holiday, explore the training and apprenticeship options (especially with your non-academic children). Tell them they are free to study and train for any job or career.

Here’s where to start: www.solas.ie and www.fetchcourses.ie

Do you have a question for Jill?  Please email her directly at jill@jillkerby.ie.

 

 

 

 

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