Jill Kerby

2017:  A YEAR OF FINANCIAL SWINGS AND ROUNDABOUTS

Looking a gift horse in the mouth is never recommended, but there’s really no other way to review the personal finance events of 2017. 

In a land where ‘swings and roundabouts’ is the norm, 2017 was no different:  good news about the economy was tempered by bad news on the housing front; jobs growth was strong in the FDI sector, but there was little wage growth in the wider economy.

And yes, a well-diversified stock portfolio rewarded most asset holders, but few ordinary workers have any surplus earnings to invest and pension membership in Ireland continues to fall.

So how was the past year, financially, for you? 

Did your standard of living improve or stand still, as so many people are reporting? Was this the year that your family home came out of negative equity, or were you one of the 30,000 victims of the great tracker mortgage scandal? 

As a first time buyer, did you benefit from the easing of the new borrowing rules and the introduction of the Buy To Help scheme – or did these change overtake you in a market where prices kept rising?

Nearly all the official government indicators show an economy in recovery, with nearly 5% GDP in 2017, though this is distorted by the foreign multinational sector and the convoluted way it reports its accounts and value of the intellectual property it registers here.

Officially, inflation is still very low at about 0.5%, but the rise in the price of many imported goods – via the UK – is noticeable in grocery line check-outs even as the price of some raw food stuffs, like domestically produced vegetables has never been lower, putting Irish farmers under huge pressure.

Health, transport and education services continued to rise throughout 2017.

The overall tax take rose in 2017, but income tax growth was not as robust as forecasters predicted. Too many of those new jobs in the domestic economy are either so low paid or temporary that there is no income tax to be paid.

Even the relatively small change in the hated Universal Social Charge in Budget 2017 has been sited as a reason for the weaker than expected tax take at one point. Swings and roundabouts indeed…

One of the enduring disappointments of the last year, and of Budget 2018 is the negligible return on savings. Personal debt, including mortgage debt continued to throughout 2017, but the banks, post office and credit unions continued to lower their deposit interest rates and dividends. Bank of Ireland became the first Irish bank to introduce negative interest rates on large deposits while bank and post office closures and credit union mergers continued.

The only good news was that the government finally lowered the DIRT tax on deposit yields from 40% to 39% - it will fall again to 37% in 2018 – but 37% tax on zero is still a zero return.

The lack of reward for savers hasn’t discouraged those who do have some money to squirrel away but a combination of the housing shortage and nil returns on cash have fed the house price and rent bubble with over half of all house sales in 2017 undertaken by cash buyers.

The ECB stuck to its zero base interest rate in 2017, which is good news for euro-zone countries with substantial personal and national debt legacies, like Greece, Spain, Portugal, Ireland and Italy – but by the year end, this long-standing position changed in other countries like the US, UK, Canada. Where they go, we usually follow but perhaps no time soon.

Our debt legacy is one of the most enduring with 50,000 mortgage holders still in serious arrears at year’s end.

The best return of all in 2017 for any surplus earnings in Ireland (aside from reducing expensive debt like credit cards and personal loans) was a pension fund, if only for the 20% or 40% income tax relief on contributions. Underlying assets still grow tax-free and at retirement you can claim a tax free lump sum worth 1.5 times your final salary or 25% of the fund if you are self employed.

Well-diversified, risk-balanced pension funds also performed pretty well in 2017, yet membership continued to fall. The government claimed once again that plans are afoot to introduce a universal (sic) pension scheme (universal to the private sector only) but amid such a great housing crisis it was all talk and no action.

If 2017 proved anything at all – and not just here but in most western societies - it was that job uncertainty, housing uncertainty (and homelessness) and the growing cost, especially of medical services, has grown more acute.

Amidst all the talk about the rising economic tide, what seemed lacking was the sight of lots more little boats sharing the harbour again with the gleaming yachts.

RUNNING OUT OF TIME FOR THE IMPOSSIBLE-TO-BUY-FOR? READ ON

With just a few days left before Christmas, and readers running out of time and maybe a few ideas for what to get those impossible-to-buy-for loved ones, I have dusted off the MoneyTimes ‘Last Ditch Christmas Present List’ which is long on ideas and short on expense.

Of course, for the giver with no budget restraints there’s always the purchase of a Bitcoin or two. The original virtual currency, it was priced at a giddy €14,421 ($16,465) per virtual coin at time of writing, and a Daddy or Mammy Warbucks can make their purchase entirely on-line and not leave the leave the comfort of their own livingroom and laptop.

The virtual wallet in which Bitcoin resides comes with a unique passcode which you don’t ever want to misplace. Bitcoin, which would have cost about €800 this time last year is completely anonymous and outside the supervision or adjudication of banks and regulators so if it goes missing or is stolen there’s no one to turn to for restitution or compensation.

Compared to the original Bitcoin, (there are now hundreds of imitators) precious metals like gold, at just c€1,060 for a one ounce real coin at time of writing, looks like a bargain.

The price of gold has been moving sideways for about the last five years after slipping c18% from its 2013 all time high, or since the euro crisis in Europe eased after the Greek debt disaster was averted (just about.)  

Now that Bitcoin is heading towards the price stratosphere amid periodic gut-wrenching pullbacks a nice shiny gold coin at the bottom of a Christmas stocking is unlikely to cause quite the same heart palpitations if you’re the sort who can’t resist watching the daily virtual currency price rollercoaster. (My financial adviser’s view of Bitcoin’s price movement, for what it’s worth, is akin to his view of the 16th century tulip mania or the dot.com mania or Irish property price mania: “Crazy prices last only until the get-rich-quick wannabees decide they don’t make sense anymore and stop buying.”

Not quite as exciting or expensive as Bitcoin or gold, this is my tried and tested 2017 MoneyTimes ‘Last Ditch Christmas Present List’ :

-       A gift vouchers from your local neighbourhood shop, whether the butcher, baker or candlestickmaker …or the wineshop, restaurant, hotel, florist, beautician, cinema, electrician, clothing boutique or hardware store.  Just be sure to double-check any expiry date and then remind the beneficiary that they mustn’t forget to use it before the deadline.

-        A Gift-for-All card.  Extremely convenient and handy, these plastic cards are sold in your local Post Office and can be used in thousands of retail, outlets and shopping malls (including grocery stores and utility providers) around the country. Hopefully, whomever you give one to will spend it locally.

-        Prize Bonds. I’ve never been a fan of the Prize Bond company – these are not ‘investments’ as they pay no interest or yield.  They are a game of chance, but now that deposit accounts pay no real return either, a gift of Prize Bonds is a perfectly fine last minute gift you can buy at the Post Office and they remain current even if you win a prize.

-        Any coin collectors on your list? Check out the Central Bank’s www.collectorscoins.ie website. The latest issue celebrates the 350th anniversary of the birth of Jonathan Swift. It may not arrive in time if ordered this late, but you can download the page and details and pop that into a gift card. 

-        Theatre, music or art lovers on the list will enjoy getting tickets or becoming a ‘Member’ of their local concert hall or art gallery. Members of the National Gallery enjoy ticket discounts or free entry to exhibitions that charge fees. (Membership to most organisations like these can be done online and the documentation downloaded into a Christmas Card.)

-        Make a donation gift. There’s no shortage of good causes or charities that you could make a financial donation to on behalf of your entire family, or particular members (or even in memory of a loved one who has died in the past year.) 

-        Give a gift of time. You know the drill by now if you’re a regular reader: offer a set number of babysitting or grannysitting hours. Help someone milk their cows or dig their Spring garden. Offer to give music lessons or math grinds or any other kind of expertise you may have – cookery, candlemaking or car maintenance.

Finally, I know someone, a retired bachelor accountant who every Christmas anonymously tips €3,000 – the amount anyone can give anyone entirely tax free in the course of a year -  to a random stranger, usually someone he meets working in the hospitality or retail industry.   

A Happy Christmas indeed.

PROPERTY IS NOT THE PANACAE TO POOR DEPOSIT RETURNS

House prices are still rising at a rate of about 12% per annum according to Daft.ie; meanwhile, the average rent in Dublin will go up by 5%-6% each year until 2020, according to the property agent Savills.

No one expects much of a let-up in these soaring prices until at least 2020-21 when a big enough stream of new social and private properties will finally be for sale and the market begins to stabilise.

Which makes it all the more important that anyone thinking of making a property investment is extra careful in weighing up the pros and cons of being a landlord and to investigate other destinations for your money before you sign a contract, and especially before you seek a mortgage. 

Cash continues to be king when it comes to property. It is reckoned that at least half of all residential houses and apartments are still being bought by cash buyers, often older people, often new retirees with pension lump sums or a significant balance from the sale of other assets. These buyers typically reveal that they have been unhappy with the miserable nil returns from a safe deposit account.

Yet over the past 20 years, the average net return from residential property, both here and in the UK has hovered between 2% and 3%. The reality in Ireland is that high income taxes and costs like insurance, property tax, rates, on-going maintenance and repairs and refurbishment have take their toll on private property investment yields, despite the fact that rents in cities like Dublin, Cork and have pretty much exceeded pre-crash levels. 

Meanwhile, renters, who now make up 20% of the population, according to the recent Savills report, are horrified to see the relentless surge in rents due to the ongoing shortage of new developments (and social housing), further fuelled by strong employment and the population rise around Dublin and other cities.

A quick survey on Daft.ie of working class Dublin 8 (where I live) shows plenty of small two bed apartments renting for as much as €1,700 a month, the Dublin average, but purchase prices are typically in the €300,000-€350,000 range producing an annual gross yield from that kind of rent of between c6.8% and 5.84% respectively. Deduct all the landlord’s taxes and costs and they’ll be lucky to walk away with a clear profit of 2% or 3%.

What is now tempting some prospective landlords is the far bigger profits available by turning residential properties that may have housed a family into one where individual bedrooms and even a converted dining room are let as single units to two or three occupants who then share the kitchen and bathroom.  Others are buying ex-family homes for short-term tourist accomodation.

A recent PrimeTime Investigates programme highlighted the uglier side of this business – the properties with four, six, eight people per room that are breaking numerous local authority planning by-laws, tenancy and fire regulations. Fortunately the Revenue Commissioners are now understood to be investigating these cash-only rentals. Widespread tax evasion is also suspected.

Turning ordinary apartments and houses into AirBnB tourist accommodation are also proving to be popular with investors, despite being subject to all the same taxes as regular landlords attract.

The downside of cramming in tenants or opting to satisfy demand for short term tourist lets (without breaking the law is being a landlord is not an easy job and your biggest threat will always be the fickle State.

 will a toughaside from you still can’t escape changes in planning or tax legislation that, along with more overall supply, could have a serious impact not only yield, but capital values.

Where amateur landlords continue to go wrong is a) to underestimate how much government’s meddle in property markets and overestimate the possibility of a large capital gain. Working against that possibility is:

-       an increase in supply by c2020-21 that could have a dampening effect on yields;

-       future interest rate increases that will dampen house prices;

-       an upward adjustment in property taxes from 2019, the next rate setting date;

-       new regulations and legislation to provide greater security of tenancy and/or rent controls;

-       the reneging by the government on the restoration of 100% mortgage interest on residential property. (Partial restoration continues. It will be 85% from January 2018. If it stops there more landlords may opt to sell, putting downward pressure on prices.

Property is considered a long term capital investment (only speculators ‘flip’).  But it’s also a physically depreciating asset that carries maintenance costs as the boiler eventually dies, the roof needs replacing and fixtures and appliances wear out.

No matter how attractive Irish investors believe ‘bricks and mortar’ to be compared to volatile stock markets, investing in an single asset class like a single property carries more risk than most people imagine.

Finally, anyone thinking of linking a property to their pension fund needs to just keep in mind that you’re only adding another layer of risk - this time to your retirement plans.

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

WILL THE BANK OF MUM & DAD BE A HOLIDAY BURDEN OR A JOY?

Will the Bank of Mum & Dad be opening its virtual doors for business for the first time this Christmas?

Will it be tapped by teenagers looking not just for some extra cash to pay for a night out with their mates, but also by younger children, eager to take part in the holiday shopping experience? (“Oh, Mammy, can I get that for Grandda? He’ll love it. Pleeeaase?” 

With no money of their own, the elusive BM&D and credit line (“Ah sure, I’ll use the credit card”) is quickly identified by the kids as a source of retail pleasure and success.

I am of two minds about the Bank of Mum & Dad. 

Properly constructed and operated, even as a ‘virtual’ concepts, the BM&D can be an excellent learning tool for youngsters who see their parents saving money into it (child benefit payments, for example) for the good of the family and into which they can add their own money in their own “account”.  This accumulating money can then be drawn down for worthy purchases – school trips, family holidays, Christmas presents, family donations and eventually small loans that can be repaid. 

Savings rewards that parents mete out – like interest (no longer paid by post offices and credit unions on tiny sums) and even annual saving bonuses -  can act as important savings incentives and can even youngsters understand the downsides of instant gratification.

A child who is given their first piggybank at an early age, into which they ritually saved part of a weekly allowance, payments for special jobs around the house or garden, or birthday money can then graduate to either an account with the BM&D or a conventional post office or credit union account. The BM&D that adds a top up reward  - “For every €10 you save, the BM&D will add 5%, or 50c” – is always going to be more appealing.

Spending some of their savings or earnings on other people – at Christmas, for example – is an experience that young children really enjoy and if all goes well, the properly run Bank of Mum & Dad can also become a source of loans and credit (and yes, gifts) for stuff that matters:  school trips, college fees, weddings and yes, even house down payments because it has accumulated real and emotional/social capital from the chief savers/investors, the parents, as well as a the children.

Unfortunately, a recent conversation with an accountant friend suggests that the Bank of Mum & Dad (even if they don’t call it that) is too often just an endless drag on financial resources by adolescent and adult children who a) can read the guilt signals emanating from exhausted, working parents; b) have been discouraged to work in their spare time to instead devote as much time to the points races c) are already life-long consumers who know no better.

It’s a dangerous combination, she said, especially today’s middle-income parents of “high achiever” children who already live paycheque to paycheque.

“Inevitably, at this time of year [tax deadline] some client will admit to being approached by an adult child for substantial money – say for a downpayment on a house, but also for post-graduate fees or even a wedding.  It could be €20,000-€30,000.

“They often say, ‘we’ll have to take it out of our savings, or retirement lump sum, or borrow it’ for them. They ask if there are any tax deductions. They are often embarrassed to admit that they just can’t say ‘No’”.

For those semi-resigned BM&D parents, my accountant friend suggests they take tax, legal and financial advice. 

Accumulated cash gifts that exceed the annual €3,000 capital acquisition tax (CAT) exemption could eventually carry a CAT liability for the beneficiary if they exceed the €310,000 lifetime tax-free threshold between parents and children and the €32,500 limit for grandchildren. All third level/post graduate education costs are exempt up to age 25. That full time college student under 25 can live rent free (and gift-tax free) in a parent-owned property. So are wedding expenses paid for by the parent, but not the wedding gift that exceeds €3,000…or that house downpayment.

Banks of Mum & Dad work best if founded with the best intentions, like not wanting youngsters to be burdened by student debt upon graduation, or by recognising the big property wealth transfer that has happened in Ireland, by helping your less advantaged children to become first time buyers.

But realistically, unless you have substantial resources, most parents will need to assess the impact that cash gifts might have on your long term financial position. Can outright gifts be turned into zero interest loans? Are there tax implications? To avoid accusations of favouritism should you adjust your wills?

It’s Christmas. Is the Bank of Mum & Dad open or closed?

THE SELF EMPLOYED GET AN EARLY CHRISTMAS PRESENT

Are you self-employed? Thinking about it? Your timing couldn’t be better now that some valuable social welfare benefits have been finally extended to the self-employed, including sickness and disability benefit.

There are about 326,000 self-employed income-tax paying workers in Ireland, according to the Revenue (450,000, say the Department of Social Protection), quite low numbers compared to many other EU countries.  Ireland also does poorly in the number of new companies created each year and one reason often cited is that the self-employed and new entrepreneurs have a relatively small social safety net compared to people in other EU and OECD countries.

Here, the self-employed/sole trader and small business owners pays the same 4% social insurance contribution as every other worker, yet have been unable to claim the same benefits, like basic dental or optical treatments, sickness, disability or Jobseeker’s Benefit if their work dried up. The reason for the anomaly was the absence of the employer’s 10.75% PRSI contribution.

The great crash of 2008 highlighted how tiny that net has been for the Class S, self-employed. Employees were not the only ones to lose their jobs; so did the contractors and freelances who depended on those same companies for their livelihoods. Everyone’s fees dropped after the crash; our spending on artisan goods and services fell sharply while everyone’s taxes went up.

By 2016 the government could finally afford to make some reforms.

On the tax front, it introduced a €550 earned income tax credit for the self-employed, farmers and company directors who had not been eligible for the PAYE credit worth €1,650 (€1,830 from 2018). In 2018 it will rise to €1,150.

Last Spring the Department of Social Protection announced it was extending treatment benefits like dental and optical examinations under the Treatment Benefit Scheme to the self-employed and last week it was announced, at a cost of about €23 million, that the Invalidity Pension will also be payable starting next month.

The pension is a modest €198.50, is taxable and will only be payable to people under the age of 66 who, due to sickness or disability cannot work anymore and who have the qualifying number of PRSI contributions:

-       48 PRSI paid or credited Class A,E,H,S in the last complete contribution year r the second last contribution year before the date of their claim.

(This benefit is payable even if you have income protection insurance – something every self-employed person or small business owner should have had to protect their your income in the event of illness or disability up to age 65. The cost of income protection insurance is tax deductible at your highest rate of tax.)

When the government first suggested that it would consider extending PRSI benefits to the self-employed many wondered whether PRSI contributions would have to go up. Or if the new system could be voluntary, with people who could afford private dental/eye treatment or income protection insurance being allowed to opt out.  Instead, they found the money to finance the benefits …for now.

People decide to become their own boss for lots of different reasons: you might be stepping into a family business. Or you’ve worked for someone else and spotted a great opportunity to do something similar in a different way. Others become self-employed by necessity after losing a job and the hours can be more flexible if you also have a young family to care for. Artisans and farmers’ work, is clearly more ‘unconventional’ and is produced at a different work pace than that of the office or factory worker.

As every self-employed person knows, corporate life has some big attractions – a regular paycheque, a pension (if you’re lucky) and hopefully an opportunity for job security that will get you closer to the top of the queue if you need to speak to a mortgage lender.

Self-employment is riskier, but it also means you get to be the dictator or your own success. There’s no one else to blame if things don’t quite go to plan. It rewards people who can cope with risk and uncertainty and it suits people with imagination, are innovative and flexible. (There’s no question having a fully employed spouse or partner in the early days of self-employment will help you sleep at night.)

The best advice I ever got when I became self-employed 30 years ago was to get a good accountant and to start a pension. I did both and am eternally grateful I took it. But my accountant also told me that I would have to build my own welfare safety net of life, income and health insurances and to ring-fence at least one-third of my gross turnover into my tax payable account. Only after the Revenue got its cut, could I then pay myself.

These extra PRSI benefits are especially welcome for the self-employed on tiny incomes. The government has actually done the right thing.

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

HEALTH INSURANCE COMPANIES WANT US FITTER AND HEALTHIER

Many commentators believe that spending more money on the public health service will improve services and patient outcomes. Yet billions more has yet more money has been added to the HSE budget for decades, too often with less than sterling effect.

Preventative medicine and early intervention should be getting a higher priority from the HSE especially as our population lives longer. Treating medical conditions associated with old age, not in general hospitals and public care homes, but in local community and in people’s own homes is an important part of the solution. The Department of Health does appear to be trying to introduce new community and home based services but rearguard battles continue against its own expensive bureaucracy and many vested interests.

Fortunately for those 2.1 million members of private health insurance plans, there has been access to preventative health benefits for many years – like benefit payments towards the cost of GP check-ups, early intervention consultations, annual or bi-annual health screenings, physio services and other checks and treatments.

Now, the insurers are coming out with on-line fitness, diet and lifestyle blogs and programmes that app-savvy customers (with high expectations) will easily integrate into everyday lives and schedules.

The latest one is called healthcoach from Laya Healthcare that was launched a week ago, and is a unique, free fitness, diet and wellness programme for every one of their 580,000 customers aged over 18.

First, the customer fills out a short on-line survey (and for the record, I am a long standing Laya customer) and then makes an appointment for a 30 minute face-to -face, health and fitness consultation with a qualified health coach at one of the six, designated healthcoach clinics around the country. (Currently there are three in Dublin and one in Cork, Limerick and Galway.)

I met my coach, a nice friendly guy called Gavin, at the healthcoach centre in the IFSC in Dublin, who took my blood pressure, glucose levels, body composition (which tells you all about how much fat, muscle, bone density, water retention) plus a lung function and three minute fitness test that gives you an idea about cardio performance.

He then asked some more questions about my lifestyle habits, exercise routine and diet and then started to select the elements that will make up my bespoke eight week programme.  The technology is impressive and within a few minutes it all appeared on my healthcoach smart-phone app.

The app, which is easier to use (and very logical) than I expected, includes a Fitbit step-counter, a large range of healthy eating recipes and calorie counters for every meal and snack you are encouraged to eat as well as a huge range of short ‘live’ videos on everything from how to give up smoking to, or in my case, even how do the two recommended yoga exercises I’m supposed to do three times a week. Dieticians on healthy eating choices and how check my calorie intake.

There are also videos pep talks from qualified psychologists on how to keep my motivation up (reading is my favourite activity of all time) and how to keep at the (tiny) fitness challenges I’ve set with my coach. I’m not a gym or sporty person, so mine are based around walking a lot more and extra cardio work I can do around the house, but keen hillwalkers and runners get help on how to complete the Ring of Kerry, Hadrian’s Wall, Inca Trail or Camino Challenges. 

Signing up for healthcoach ‘challenges’ also unlocks your ‘healthy’ reward offers and retail discounts from the likes of Lifestyle Sports, Eason and Deliveroo.

Recently Irish Life Health launched their new fitness and wellness benefit to their ‘Benefit’ plan holders - all three plans cost under €1,000 a year and are popular with younger customers. It offers refunds up to €250 refund a year when those plan members sign up for individual fitness programmes, or a combination of visits to life coach, nutritionist or dietician, for sports club membership or fitness wearable, massage treatments.

“Younger ILH members will appreciate getting some money back,” Dermot Goode, of TotalHealthCover.ie the independent health insurance adviser told me last week. “But the big attraction of Laya’s healthcoach is that it is an automatic, free benefit for every adult customer, no matter their policy, and it includes that one-to-one, face-to-face personal consultation.

“Laya has spent a vast amount of money and time on this new automatic benefit,” said Goode, “because they know that ultimately, healthier customers make fewer, less expensive claims.” 

Up to now, the health insurers have mostly been targeting their big corporate customers with their wellness programmes. They’re now focussing on individual customers.

So I’m going to give my eight week healthcoach programme my best shot. My fitness and weight loss goals are extremely modest and do-able.

Best of all, the price is just right.

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

HOW SMART WILL YOU BE WITH YOUR CHRISTMAS SHOPPING THIS YEAR?

I don’t usually mention the C word in this column before December 1.  Much as I love the anticipation of Christmas Day – decorating the tree and house, cooking special foods, carol services and buying gifts for loved ones, I loath how it all starts in October.  Before Halloween. Which now starts in September.

That said, there is no getting around the huge expense that we go to for the annual holiday.  When all the bills are added up for food, drink, presents, Christmas trees and decorations, new clothes, entertainment and travel, the typical Irish Christmas bill can easily reach €1,500.

Ideally, you will have budgeted this cost, saved into a special Christmas savings account or even spread out the spending by buying gifts on sale during the rest of the year, by stockpiling some alcohol, joining a Christmas Club at the butcher. The last thing you want to happen is to have a large credit card bill arrive in January that takes months to clear…just in time to lament that you haven’t any spare income or savings for a summer break with your children or other loved ones. 

Which is why it is worth revisiting the newest and most innovative current account and savings product on the market, An Post’s Smart Current Account now been rolled out to nearly every one of its 700 post offices nationwide.

First introduced last June, this unique current account and debit card rewards account holders for every purchase they make in store or on line at these popular retailers – Lidl, SSE Airtricity, Oxendales, Elverys, Sunway Travel, OutdoorLiving.ie, GreatBreaks.ie, Kennys.ie and An Post Insurance.

The Smart Account combines a MoneyBack feature, along with Smart Wallets where you can designate regular savings or your MoneyBack rewards; a Smart debit card in partnership with MasterCard®; access to online payments and a user-friendly Smart Account 24/7 app to keep track of your cash back balance and purchases.  

So how much could using this account be worth to you?  It entirely depends on how much you spend but, for example, Lidl and SSE Airtricity customers will receive 5% cash on all purchases over and 10% back respectively. This money money is then paid into their designated account once a month and then into a designated Smart Wallet, if they wish.

Since I spend about €100 a week at Lidl, and about €1,000 on electricity over the course of a year I would get about €360 back in cash just for paying ordinary grocery and electricity bills. Add a modest two week annual family holiday with a spend of say, €2,000 with Sunway (5% back) or GreatBreaks.ie (7.5%) and I’d see another €100-€150 being lodged to the Smart Account.

There are minimum purchases to watch out for and the cost of running this new current account is €5 a month; someone who gets free banking may want to take that into account. But the payback is automatically earning a 5%-10% cash reward. No one with a typical bank saving account these days needs reminding that €10,000 on deposit at 0.25% will yield them €25 a year.

Other popular supermarket cash back schemes are not as good value as they once were. There was a time when you could use your accumulated cash points at any time to reduce your grocery bill, say at Christmas when your weekly spending spikes. Today you get a cash coupon that you can only use over very short durations, which I seem to keep missing and sometimes only in particular stores.

By comparison, this Smart Account ticks all the right boxes a widely accepted debit card but no overdraft facility to risk overspending; a generous cash back scheme in which the reward can be automatically saved in a designated wallet.  And setting it up and using it is secure and easy.

Yes, post offices (and banks and credit unions) are closing down in many rural and urban areas.  But there’s no turning back to on-line banking services and this new current account doesn’t carry any extra charges, outside of the €5 monthly charge for direct debits and standing orders or ATM usage.

A couple more big-ticket retailers (like an airline or health insurance company) would be a really welcome addition to the list of Smart Account retailers, but even with just the nine, An Post reckons that a family that buys a typical spread of groceries, electricity, insurance, holidays, books, clothes and sports gear will earn about €660 in MoneyBack payments.

Getting started even now may only put a small dent in your Christmas shopping bill, but it could pay off a big chunk of next year’s…

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

DON’T WASTE THE EXTENDED TAX DEADLINE:  USE A TAX ADVISER

No one knows for sure what the total value of uncollected tax refunds is every year in this country, but it could be in the billions of euro.  Since 2008 this state collects a disproportionate amount of tax from individual income earnings, yet so may of us consistently fail to ensure that we pay only the correct amount of tax.

Fortunately, storms Ophelia and Brian came with a small silver lining:  the Revenue have slightly extended their final on-line file and pay tax deadline to Thursday, November 16 due to the disruption caused to so many individuals and small business. 

The paper filing deadline passed was October 31, but you can still register with ROS, the Revenue on-line service, to file and pay your 2016 Form-11 income tax liability and to claim refunds or, better still, make a pension contribution that will lower your bill.

The process is pretty simple once you register with ROS (which can take 1-2 days, so don’t leave it to the last moment) but on all matters tax, especially if you happen to be a novice filer, I highly recommend that you hire an accountant, or use the services of a popular and well-known tax refund firms, like www.taxback.com .

Missing your filing date, or not filing at all, can result in penalties and surcharges, which is another good reason to hire a tax expert who will not only ensure you don’t miss deadlines but can deal with any Revenue queries or represent you in the event of an audit.

So are you a “chargeable person”?  You are if you have non-PAYE income like rental income (including from AirBnB or holiday home), or you draw down dividend income from shares or you have any kind of part-time income, say, by selling stuff on-line, or from giving grinds, or from any kind of contract work.  Anyone receiving a foreign pension also needs to file, even if it is paid net of tax.

Landlords can claim certain property-related expenses and capital expenditure to reduce their income tax bill. The self-employed and sole traders have many business expenses they can claim, even if they work from home. Again, your accountant or tax adviser will have a comprehensive list of all these tax-deductible expenses, and of course, all your personal tax credits and allowances.

The other side of the file and pay process is that it is a chance to further reduce your tax bill, especially if you’re self-employed or if you are employed by a company but are not a member of an occupational pension scheme, by making a pension fund contribution. Depending on whether you pay income tax at the standard 20% or marginal 40% rate, you can claim tax relief up to the maximum allowable amount, based on your net relevant earnings (which are capped at €115,000) and your age.

For example, up to age 29 years you can contribute 15% of net relevant earnings; age 30-39, 20%; age 40-49, 25%; 50-54, 30%; 55-59, 35% and age 60 and over, 40%.  What this means is that for every €100 you contribute to your pension you can cut your tax bill by €20 or €40, depending on which rate of tax you pay.  The €100 will be invested in your fund but your cost will only be €80 or €60 to your when your income tax relief is claimed.

Pension (and income protection insurance) tax relief remains one of the few generous tax breaks left for all private and occupational pension fund holders because– like nursing home expenses – it can be claimed at the higher marginal rate as well as the standard rate of tax. Too many self-employed tax-payers leave this benefit behind (even people with access to occupational schemes in which employers can also make tax deductible contributions.) Meanwhile, only one in three people know to claim for qualifying tuition fees.

Some common standard rate tax breaks you should remember to claim if you are filing on-line by November 16, are for a long list of medical and dental expenses that include not just the usual GP and consultant’s fees (not already covered by medical insurance), but prescription drugs and medicine, prescribed medical, surgical, dental and nursing appliances, the cost of an ambulance, in vitro fertilisation, gluten free foods for coeliacs and dental treatments including crowns, veneers, orthodontic treatment (like braces for your kids.) 

You can also claim tax relief for payments for deeds of covenants, for taking part in the Home Renovation Scheme and if you qualify for the Help-to-Buy Incentive as a first time home buyer.

Best of all, while these tax breaks can reduce your tax liability, the most welcome news is that you may have up to four years of previously unclaimed expenses that you can claim. Use a tax expert to find them all. 

OPHELIA’S AFTERMATH:  A CLAIMS ASSESSOR COULD BE YOUR BEST FRIEND

If ever there was a reason for using the services of a loss assessor, the aftermath of Storm Ophelia is it:  roofs blown off; trees uprooted; cars and buildings damaged by flying debris and flooding. The estimated cost of damage nationwide could be as high as €800 million.

All over the country, with electrical power and water services only just restored, home and business owners are completing their insurance claim forms. But how many know to use the services of a loss assessor, who will act on their behalf in what could be a lengthy and potentially expensive claim process?

Niall Daly, is the owner of an independent loss assessors, ProInsuranceClaims.ie in Co Meath, with sub-offices around the country. A loss assessor “can typically increase the payout of an insurance claim by 30%” and speed up a potentially long, drawn out process, these days mainly due to the shortage of trained adjustors in insurance companies.

“The insurance companies have made significant cuts to their loss adjustors.  Policy holders are finding that their claims call will be taken by junior, inexperienced staff who don’t properly understand the claims process.”

This is particularly the case after a big storm event like Ophelia and while a typical claims process can take about four weeks, it could take longer to process Ophelia claims.

Ideally, the first thing the householder should do is to contact their insurance company to report the damage. But many people will have to take some remedial action, even before the insurance company is alerted, action that might cost you money right away.

In such a case, you need to log every action, says Daly, or risk not being fully compensated by their insurer. “This means taking pictures of the damage and keeping all receipts for any tradesmen call-outs, repairs or vouched expenses.

You should be looking for an interim payment from your insurers for this, to ease some of the financial burden,” he says. This might even include the cost of accommodation if you have to leave your property. Most insurers will pay interim payments under the terms of the contract for natural disasters, he explains.

However, any arguments – and delays – that can emerge are usually over the total cost of the damage and repairs. The policyholder needs to keep in mind that the loss adjustor is there to act in the interest of the insurer, not you.

Contacting a loss assessor before you engage with the insurance company means you now have a counterparty acting in your interest and when the loss adjustor is assessing the damage (and doing everything possible to reduce the cost to the insurer). Attention to detail is crucial for a correct damage report.

A good example, he explains, is water damage to the property – a far more subtle claim than missing slates on a roof or a tree collapsing on a shed (or car) both of which can be easily verified and costed. 

“The loss assessor will always use a moisture meter to determine not just the immediate damage caused,” like ruined floors and carpets, damaged electrical devices and plasterwork. A moisture measure over 16% suggests the problem is more serious, says Daly and that once the property dries out the damage could be very extensive.

“Adjustors don’t use these meters for obvious reasons and prefer to settle quickly. A €5,000 visual damage assessment may seem fair, but often we find the actual cost of the damage could be €15,000 or €20,000.”

Roof damage after a big storm isn’t just about agreeing the cost of replaced slates or chimneys. “Where scaffolding is required, householders need to be very careful about the adjustor’s recommendation. A scaffolder without the correct insurance/public liability cover might cost less, but could ultimately cost you a great deal more. An assessor will make sure the right scaffolder is hired and is paid for by the insurer.”

Insurance companies are compelled by the Consumer Protection Code of 2012 to always “act fairly, honestly and professionally” with their customers, but they are not obliged to inform you of all the items that you are entitled to claim for, he explains. They can also be quick to try and convince policyholders not to hire an assessor on the grounds that it’s just an extra expense.

Not true, says Daly. Assessors are paid, as will be the quotations that builders and trades people will charge to assess the damage, out of the final award, which is typically 30% higher than an adjustor’s award recommendation.  The assessor’s fee is typically 10% net of the final award.

Finally, always deal with an experienced loss assessor company. Under the Central Bank’s Minimum Competency Code they must be an APA or Accredited Product Adviser or work under a supervisor who is.

Due diligence is the other safeguard you need to make a successful claim.

HAVE YOU MISSED THE BITCOIN EXPRESS?

Spotting financial bubbles are clearly harder than you may think.  Keeping well away from them, for many, is even harder. 

The latest bubble is the crypto currency Bitcoin, which in just the past year has gone from $575 in price to $4,262 at time of writing.

We only have to look at the property buying frenzy that began around 1997 here in Ireland to recall our own experience with bubbles. That one exploded – slowly, then practically overnight - when the property-as-investment bubble met its pin a decade later in 2008 with the realisation that we’d run out of buyers – and cheap finance – for the tens of thousands of surplus properties that were built here at such inflated prices.  Homeowners, worried about never getting on the property ladder, were unfortunately the biggest victims of all.

But Irish people have willingly participated in other, smaller speculative bubbles - nearly 600,000 people, encouraged by the government, bought privatised Eircom shares in July 1999 at the equivalent inflated price of €3.90 only to lose a third of their value.

Not long after that collapse was that of the NasDaq stock market in New York. Enthusiastic dot.com investors were far fewer than Eircom ones, but Irish pension funds were hard it and it triggered the downward interest rate adjustment by the US Federal Reserve and other global central banks, which in turn created the property bubbles in many Anglo-American economies.

Fools and their money have been parted many times by financial manias:  shop girls and shoeshine boys, along with lords and ladies, were caught up in the share mania of the late 1920s that turned into the Great Depression. Before that there was Tulipmania in the early 17th century; the South Sea and Mississippi bubbles a hundred years later.

And now there is Bitcoin.

Cryptocurrency proponents insist “this time is different’, but they should be reading the book of the same title by economists Carmel Reinhard and Kenneth Rogoff.

Today’s cryptocurrency mania is no different from all the others times when the inexplicable exuberance of the crowd, fed by soaring trading prices has led people to wildly speculate on a single asset; they are always certain they’ll know when to sell to the bigger fool and be out of the market before the price collapses.

‘Bitcoin’ was the first cryptocurrency and was launched in 2009 at the cost of only a few pennies. Its shadowy creators claim its production is limited to just 21 million units – thus ensuring a constant measure of value. To create a new blockchain of Bitcoins requires a lengthy and expensive computer “mining” process.

(Cybercurrencies are not held in physical form like cash currencies (or gold and silver coins, for example) or even in conventional bank deposit accounts. Instead, they exist exclusively as blocks in cyberspace, owned and then traded or sold directly by individuals (who hold then them in online purses) with no official third party intermediary, like a central bank or state revenue authority to regulate or or tax them. The blockchain miners are self-regulating.)

Today, there are over 830 cryptocurrencies like Bitcoins, most of them the equivalent of risky “penny stocks”. But some early traders have literally made overnight fortunes buying low and selling high. The market is now being flooded with ‘coins’ and they are being invested in and traded by some of the biggest investment banks in the world.

Cybercurrencies are supposed to be the ‘purest’ form of money with the value of each ‘coin’ set by willing buyers and the 260,000 retailers who participate in the cryptocurrency market. They may be easily portable (via crypto purses) and divisible (in coin ‘units’), two important factors for an viable currency but their “instrinsic” value and viability as a store of value (unlike an ounce of pure gold or silver) is still debateable.  And any asset that soars in value from €575 to $4,262 a unit in the space of 12 months is in a hyper-bubble that could prove very expensive to ‘the greater fool’.

I only know one Bitcoin owner personally who still has eight out of the 50 bitcoins his teenage son convinced him to buy a few years ago…at $2 a piece. He’s mostly spent the coins taking lovely holidays with travel operators and hotels that take these coins.

I’ve also had some recent discussions with some friends, readers and even Twitter followers who swear that crypto currencies, and especially the original Bitcoin will double in price as more and more corporations and individuals realise (as they do) that it is the only alternative to the corrupted currencies and physical bank ‘notes’ that we have no choice but to use.

They could be right. But not at this degree of volatility. At the top of this article I wrote that Bitcoin was $4,262 a ‘coin’ as I write. As I sign off…it’s price has fallen to $3,531.

Please send your queries to Jill c/o this paper or by email: 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.)