Question of Money - May 6, 2012

Posted by Jill Kerby on May 06 2012 @ 09:00

Follow Aussie rules to move fund down under

JK writes from Australia: I have moved permanently to Australia. My pension fund is with Mercer in Ireland. My last estimate was worth approx €40,000.   I have been paying into an Australian fund for two years.   

How should I approach Mercer regarding the transfer of my Irish pension fund to my Australian fund?  Would I have to pay tax/penalties if I take this course?


As a large pension administrator Mercer handles regular queries from former Irish pension fund members who have emigrated and want to know the best way to proceed with their accumulated pension fund.

The Mercer official I spoke to told me that the successful transfer of a fund to another country usually depends on how similar or different are the pension fund rules of the new employer and new country. Irish and Australian pension funds rules regarding pre-retirement access to funds, are quite different, said the official.

He suggested that you contact the Mercer ‘JustAsk’ telephone helpline at 1890 275 275 or email it to JustASK@mercer.com&subject=Query for JustASK where you will be put in touch with your employment pension scheme administrator. This person will provide you with a short checklist of questions, including your new company’s equivalent of our Revenue registration number that will help determine whether the fund transfer is possible or not. 

Any costs involved in a successful transfer, said the official, will be paid by your former employer here in Ireland and not by you.



Keeping track

AH writes from Dublin: My husband and I took out a mortgage in 2007. I’m not sure if we were fixed or variable back then but in 2010 we fixed it for two years as my husband became unemployed. A few weeks ago we received a letter from Bank of Ireland to say we were shortly coming out of the fixed rate and they offered us a tracker mortgage, which we obviously have accepted.

My query is, are we part of the couple of thousand customers that BOI didn’t offer a tracker to when they should have, and would we be due back any money which we might have over-paid when we fixed again in 2010?


Karl Deeter of Irish Mortgage Brokers & Advisors suggests that the first thing you do is check your original mortgage contract and letters of offer from the bank to determine what kind of mortgage you took out in 2007. You can do this by checking the mortgage contract and letters of offer from the bank.

“For your reader to be offered a tracker now, as her 2010 fixed loan expires, suggests to me that she and her husband were probably tracker mortgage holders back in 2007 but ended up opting, for some reason, for a three year fixed rate. In 2010 they decided to go onto another fixed rate because of the husband’s employment circumstances.” Bank of Ireland are not offering trackers anymore, he said, unless they are obliged to under an existing mortgage contract.

Just over 2000 tracker loan customers were compensated by the bank last year, at the instruction of the Central Bank after it was found that they were not permitted to revert to their tracker mortgages after going onto fixed rates for a period and were put onto more expensive variable rate interest repayments instead.  But before you – or even a mediator like the Financial Services Ombudsman - can determine if you too overpaid your mortgage before 2010 you need to be absolutely clear about the repayment terms of the original 2007 mortgage – was it a fixed, variable or even a tracker loan?

If you can’t find all the mortgage correspondence from the bank for 2007 and 2010 in which any reference to a tracker rate will be noted, says Deeter, you can request copies from the bank compliance officer under Section 4 of the Data Protection Acts 2003 and 2008.

Once that’s done, you should be in a better position to decide whether you have a case to pursue with the bank or the Financial Services Ombudsman.



Joint venture

CO’S writes from Dublin:  My wife and I are both working as teachers. Next year she will be job sharing. I earn €43,000 and she earns €53,000. Will I be able to transfer any of her allowances to me? We both are taxed separately as a married couple. What can we do to reduce my tax and can I benefit from any of her allowances? She will be earning around €27k or half of her present income.



Since you are separately assessed for income tax, you each have a standard rate cut off point of €32,800 in 2012. This means that you both pay standard rate tax of 20% on your first €32,800 and 41% on the balance of your individual earnings.

From next year your wife will only earn €27,000, therefore you should opt for joint assessment. As a couple, your 20%, standard rate income tax cut-off point will be €65,600, (a maximum €41,800 for one spouse, provided the lower earning spouse has income of at least €23,000.) You can then split the €65,600 as follows: €27,000 to your wife and €38,600 to yourself. The balance of earnings will then be taxed at the marginal tax rate of 41%.

As a separately assessed married couple you cannot transfer allowances between each other this year, but you will be entitled to a refund at the end of the year if you pay more tax under separate assessment than you would have paid under joint assessment. This is another good reason to be jointly assessed next year.



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Question of Money - 22 April, 2012

Posted by Jill Kerby on April 22 2012 @ 09:00

Foreign share dividends can be a taxing problem

JO’B writes from Dublin: I receive dividends from foreign shares, Great West Life in Canada and Aviva Insurance in Britain. Tax is deducted at source in Canada and the UK on these dividends.  I am not sure what percentage is deducted and why. How do I declare this income for ROI (Republic of Ireland) tax returns? Do I get any credit for having already paid tax abroad on these dividends? I cannot find the answer to my question anywhere.

The Canadian tax authorities impose a 25% withholding tax on Canadian share dividends held by non-residents. (See http://www.cra-arc.gc.ca/E/pub/tg/t4058/t4058-e.html#P141_13999 )
You are obliged to report those dividend payments in an annual Irish tax return and to pay any Irish income tax due. Irish share dividends automatically include a 20% withholding tax so you can apply for a tax credit for the 25% tax you already paid to the Canadian authorities, but if you are a 20% standard rate taxpayer you will not be credited with the additional 5% tax paid in Canada. If you are a higher rate (41%) taxpayer, you can apply for a tax credit on the 25% Canadian withholding tax paid against your 41% Irish income tax liability on the dividend income.

UK dividends are treated differently. When you obtain a dividend from a UK company whose shares you own, it will normally show the net dividend and a tax credit which is equivalent to 1/9thof the net dividend. Only the net dividend is taxable in Ireland, that is, the cash amount received exclusive of any tax credit.  For example, if you received a UK share dividend worth €1,800, the dividend voucher will show a tax credit of €200 (1/9th). Assuming your tax rate is 41% you will pay 41% tax on the €1,800 or €738.

In order that you complete your tax return correctly, you might want to seek the help of a tax advisor before the pay and file tax deadline of end October, or mid-November if you file online.


Fickle fund

MM writes from Co Tipperary: In 1998 I received a IR£50,000 (€63,000) insurance settlement for a bad personal accident and it was put into an investment fund with AIB but fell in value so much that we could not encash it without further loss. By 2007 it had increased substantially, but I found out too late after which it fell in value again. The fund is now worth about €50,000. I don’t know whether to leave it any longer or cash it in. It has been 13 years now without anything to show for it.

The conventional view is that stock market related investments need at least a decade to absorb set up costs and charges and to allow that time to work its magical compounding effect on your money. That’s the theory and it does sound like it worked in your case, with your fund performing well by 2007.  The markets are fickle, however and it sounds like your fund plunged with the late 2008 crash and still hasn’t fully recovered.

However, you haven’t revealed any purpose or plan for your money and perhaps this is where you should start, before you make any decision to keep it invested or to cash it in.  Do you need or want this money to buy something like a house or further education?  Is it going to boost a pension or other retirement plans?  Does the investment itself, specifically the assets it has purchased, suit your age and risk profile after all this time?

Once you’ve answered all these questions then it might be time to speak to a qualified, independent, fee-based advisor to help you answer whether or not this investment fund is appropriate to your needs and plans, how high are the ongoing costs and what investments might be more suitable.


Tax break

CH writes from Co Wexford: I am a UK citizen permanently resident in Ireland since 2000. My income consists of a UK local authority occupational pension of approximately €775 per month and the UK state retirement pension. I have no income originating in Ireland.  I pay £150 income tax per month to the UK Revenue on this income.  I am not liable to income tax on any of my income in Ireland as our income (my wife and I) is below the tax-free threshold. I used to file an Irish tax return but was told I no longer had to about three years ago.

I have been recently been told by the local Irish Revenue Commissioners that I am liable for the universal social charge (USC) on my UK occupational pension. I would contend that as the USC is a tax on income, the double taxation rules should apply. I would be most grateful if you could help to clarify this matter with the relevant department.

I asked the Revenue Commissioners to comment on your tax position. First they noted that “Where an individual is resident in [this] State [Irish] income tax is chargeable on both his UK occupational pension and his UK state pension. An occupational pension is chargeable to the USC, in Ireland, whereas a social welfare type payment is not.”

However, as a UK local authority pensioner, your occupational pension is “only taxable in the country in which the pension arises, in this case the UK. Where such payments are chargeable to income tax in the UK, then they are not chargeable to income tax in [this] State and consequently the USC would not be chargeable.”

It would appear from this explanation that both your UK occupational and state pension will be exempt from the USC, but you should consider meeting with your local tax official to confirm your exemption.


Phone Charges

MO’L writes from Dublin: What would be the least expensive way of selling infamous Vodafone shares for someone not used to share-dealing?

The cheapest way to buy and sell shares is to have an on-line, execution only trading account and to bypass the stockbrokers. But there are usually set up or annual charges so if this is a once-off transaction, it might be worth dealing with the lowest cost broker you can find. Sharewatch, for example, offers an execution-only telephone transaction charge in the region of €40 (see http://www.sharewatch.com/sw2011/tradingfees.html).



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Question of Money - April 1, 2012

Posted by Jill Kerby on April 01 2012 @ 09:00

With Mortgage relief comes responsibility


MF writes from Limerick: In 2007 I purchased a house for my daughter. The house was legally transferred to her and I have continued to pay the mortgage. I have a house of my own and it is mortgage free. Would I be able to claim mortgage relief from the Revenue for her house?

I’m afraid not. This property is not your principal private residence so you are not entitled to claim any mortgage interest relief; nor is it an investment property that you own that you could have offset up to 75% of any mortgage interest paid against the rental income (along with other qualifying expenses).  Instead, this is a second property that you bought with a mortgage only to put your daughter’s name on the deed of ownership.

I asked tax advisor Sandra Gannon of TAB Taxation Services in Dublin to comment on your letter and she raised an interesting point: “From the information provided it appears that a separate mortgage was taken out in order for your reader to buy this property for his daughter. He says that his own home is mortgage free, but perhaps it was never mortgaged.

“Either way, it would have been very unusual for the bank to allow the ownership of this second property to be transferred to the daughter while the mortgage remained with him, unless it was secured against his own home.

The only way mortgage relief can be claimed on this property is if your daughter becomes the legal owner of the mortgage, says Gannon. “However, the lender would need to be satisfied that she had sufficient income and independent means to pay the loan herself; only then would the father’s home be released from acting as security, if that is how the loan was arranged.”

Assuming the transfer of the mortgage to her is possible, there would be nothing stopping you from continuing to pay this mortgage for your daughter if you so wished. 

But it might be a nice gesture for your daughter to at least refund you the annual mortgage relief to which she would now be entitled as a first-time buyer in 2012. The relief could be worth up to 25% of the interest paid up to €3,000 reducing thereafter to 22.5% and 20% until it is abolished for everyone in 2017.

Finally, you may want to ask your own tax advisor about the fact that you have gifted her this property and continue to gift her the cost of the annual mortgage payments.

CAT free gift exemptions between a parent and child have fallen by half in the last few years and the annual CAT gift threshold is just €3,000. Depending on the value of these gifts, and any other inheritances or gifts she may receive from you or other sources she may have a potential CAT liability to pay.

Separate issue

Terry L writes from Dublin:  On the death of my parents some years ago, I recieved a sum of money close to the then maximum tax-free threshold for parent-child inheritance.  

My spouse's elderly parent is in poor health and, when she passes away, my spouse will inherit a sum in the region of €150,000.  What is our tax position on this second inheritance, given that we are jointly assessed?  Will the value of both inheritances be added together to calculate the tax payable, or is the tax-free threshold separate for each partner's parental inheritance?   

Also, if both inheritances are added together for tax purposes, would it be better for us to opt to be assessed separately for tax for the next few years?

Inheritances and gifts are the individual's alone and liability is that of the beneficiary, even if the person is jointly assessed with a spouse for income tax purposes.

The €150,000 inheritance your wife may receive will therefore be capital acquisition tax (CAT) free, assuming the tax free threshold between a parent and child does not fall below that amount when the inheritance is received and if your spouse has not previously received inheritances or gifts that would trigger a CAT lifetime threshold being exceeded.

Calculating aggregated sums for CAT purposes can be complicated and a tax advisor should be consulted.


Seeking relief

AB writes from Dublin: I purchased our home in 2004 jointly with my wife for €500,000. It was not my first mortgage but my wife was a first time buyer. Does she qualify for the relief announced in the December budget to help people who bought during the peak?

The December budget introduced enhanced mortgage relief for people who bought their homes as first time buyers between 2004 and 2008. Your wife, as the first time buyer during this period, is now entitled to claim 30% mortgage tax relief on her half of the mortgage repayment for the next five years to 2017 when it will be abolished for everyone.


Safe for Summer 

PW writes from Navan: My son is returning to the same summer job at a hotel in America that he had last year under the student visa programme. However, he is pretty sure that another, better paying job will be available a month later.  It took nearly a month last year for the hotel to sort out getting him off emergency tax and his worry is that he’ll be gone to the next job before that happens. First, is there anything he can do to avoid emergency tax or get it back quickly before the summer is out? (Otherwise his father and I will have to send him the money.)

Students are often put on emergency tax rates when they take up summer employment, though most employers, here and in the US or Canada, will try to sort it out quickly.

It might be worth you or your son contacting Taxback.com before he goes to the States this year to find out what he might be able to do himself to avoid being put on emergency tax or at least to know what will be involved in claiming the tax refund when he gets home at the end of the summer. There is a section devoted to tax refunds for students: http://www.taxback.com/usa-tax-refund-j1.asp









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Question of Money - March 11, 2012

Posted by Jill Kerby on March 11 2012 @ 09:00

Check the numbers before you sell Vodafone shares


PS writes from Dublin: I am left with about €3,000 worth of Vodafone shares from my – failed - original investment of €8,000 in the Eircom share flotation. Are they worth holding onto and what would the tax situation be if I sold them now? Your advice would be greatly appreciated.


Only you can decide if you have the time and inclination to hang onto your shares in the hope that they may someday reward you sufficiently. If you check Vodafone’s five year share performance on financial websites like Yahoo Finance, you will see that their price has ranged from about Stg137p to171p (as I write) with some huge highs and lows. Over the past 52 weeks alone the range has been between about 154p and 185p.

If you decide to sell your shares, you can offset any loss you’ve made on them against any other capital gains from other shares, less your personal capital gains tax allowance of €1,270.You can carry any remaining loss forward to the next year.

Working out exactly how much of a loss or gain has been made by Eircom/Vodafone shareholders is complicated, because of how a pat of he company was sold off (Eircell) and how bonus shares were also issued at a rate of one Vodaphone share for every two Telecom/Eircell shares held. 

Vast amounts of space have been dedicated to the formulas and calculations on Askaboutmoney.com and other consumer boards, but I suggest you hand over your query to an accountant or tax advisor and let them do hard lifting for you.


GK writes from Dublin: I have become a resident in Ireland for tax purposes.  I own a rental property overseas that has a tax year from April to March.  The tax year in Ireland runs from January to December.  Can you advise how I partition the rental income and expenses across differing tax years and apportion the credit for tax that has been paid in another country that has double taxation agreement with Ireland. Can you refer me to a document that I can use to understand my tax obligations with regard to rental income.


You also need to consult a good tax advisor about your overseas property, its tax treatment here and in the other country and whether your wider tax position also comes into play.

Meanwhile, the Irish Revenue Commissioners produces a useful leaflet, ‘A Revenue Guide to Rental Income – IT 70’ that you can download from its website here: http://www.revenue.ie/en/tax/it/leaflets/it70.html  It should provide everything you need to know about what expenses can be deducted, how profits and losses are calculated, when any tax is due and the records you need to keep. It even includes a section about foreign rents.


KC writes from Co Wicklow: Due to a period of unemployment, overspending and robbing Peter to pay Paul I have a credit card debt of €26,280.26. I have been paying the minimum payment up until November when it became impossible to service the €650 per month. I’m back in employment, as is my wife but we’re struggling with our bills having no money for food near the end of month. On top of a €6,500 overdraft, direct debits are bouncing every month, but we’re still paying the mortgage, though interest only for the past six months.

The credit card has been revoked after I asked the bank to freeze the interest last December. Now they are (finally) offering me three options: to get a loan to pay the balance; send in a budget plan of what I can afford and they will send it to their controllers or make them a settlement offer of 85% of the debt, but the balance will stay on my record as a bad debt for five years.

The credit union will approve a loan for €23,000 and I will then have to find the remaining €3,280. I would appreciate your opinion on these options.


Two financial advisors I spoke to about your debt problem both agree that because your credit record is probably already impaired you should not immediately take the third option and make your card provider the 85% settlement, but rather try to negotiate an even larger write off.

“Your reader stands to lose little by having a worse credit record than he already has,” suggested Karl Deeter of Advisors.ie . “The upcoming Debt Settlement Arrangement which will engage with lenders via a personal insolvency trustee may get him a better result, if he can wait it out until the DSA is in place, probably sometime next year.” 

Vincent Digby of Impartial.ie advisors, also believes the write down “is not a large enough carrot” but thinks you cannot possibly know the true extent of all your debts, arrears and any interest penalties and what you have left to live on every month “until you do a proper and realistic budget for monthly expenditure.”

Even though you are employed again, Digby isn’t convinced that a credit union/bank loan will be sufficient to restructure your credit card debt at affordable monthly repayments given how you are struggling to pay your interest only mortgage, the overdraft AND put food on the table.

“If the sums don’t add up then it may be time to call in MABS and/ or start negotiating with the Bank for a more substantial settlement.”

You should also make an appointment to see your mortgage lender about further forbearance measure for those payments. Good luck.


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Question of Money - March 4, 2012

Posted by Jill Kerby on March 04 2012 @ 09:00

Negotiate before you fall into negative equity trap


CP writes from Westmeath: I wonder if you could help us get out of a mortgage with a sub prime lender?  We took out a €270,000 interest-only mortgage in the good times at a rate of 6.5%.  We are now unable to pay the full amount each month and, although we are not in negative equity at the moment, if we carry on being charged the interest on interest I fear we could get into negative equity.  Of course our credit rating is now bad.  Can you suggest any way out of this?  We are very happy to look at alternative types of mortgages.

You may not be in negative equity – yet - but it certainly sounds as if you are quickly moving in that direction as your arrears and interest penalties add up.

Unfortunately, lenders are not remortgaging properties with mortgage arrears and very few are doing so if the property is in negative equity, says Rachel Doyle, the head of mortgage services at PIBA, the Professional Insurance Brokers Association.

She strongly recommends that you write to your subprime lender and request a meeting with them so that you can try and work out an affordable mortgage payment schedule.  I suggest you also contact MABS, the free money advice and budgeting service that can help you evaluate your total debt position.  They may also be able to assist you in presenting a financial statement to your lender and other creditors.


AE writes from Dublin: We returned from England in 2005 to care for my elderly mother and bought a €600,000 house, borrowing €320,000. It is now worth, possibly, €350,000. Having lived through two recessions in England I knew at some time something would happen here, albeit not to such an extent.

My husband is 62 and will be 79 before the mortgage is paid off. I do not think this is feasible, least of all because he is freelance and I can't see him still being able to work at that stage. We are struggling as it is. It is unlikely that a carer’s allowance I have applied for will be successful.

Did PTSB act in an irresponsible manner by giving us such a large mortgage and do we have any redress in this matter? (I thought you could only issue a mortgage up to age 65?) At the time, my main concern was my mother and children and it was a year before the penny dropped as to the extent of our mortgage. I know neither of us will be capable of working so long and I'm constantly worried about what will happen to us.  

First, you do not say if you are in mortgage arrears, although your letter suggests that you don’t believe the mortgage is sustainable over the next 17 years.  Nor do you say what outcome you are seeking in questioning the legality of the approval of your mortgage application. Is it to have a portion of your debt written off or to have it nullified? By your own admission, you seem to have been aware of the impending financial difficulties here before you applied for the loan.

The Free Legal Aid Centre and New Beginning are two lobby groups acting on behalf of consumers who are facing repossession, who in many cases did not have suitable incomes and should never have been sold a mortgage and now do not have the means to defend themselves against a lender’s legal action. They prioritise cases where there is already a court date for the repossession order. 

You may or may not qualify for their help – yet. But if you believe you were missold this mortgage on age grounds, you could seek legal advice or take your case to the Financial Regulator. Good luck.



EOK writes from Dublin: I bought some shares many years ago in both Bula Resources and Waterford Wedgwood. Both companies are now gone and my money is lost but I do have some profits on some other shares and I want to offset the capital losses. However I can't find all the share certs and don’t know exactly how many shares I own in each company. The stockbroker I originally bought the shares from is no longer in existence and I am wondering if there a simple way I can find out for sure how many shares I own.

The best place to start looking for your lost share certificates is Computershare Investor Services (Tel 01 447 5566) or Capita Registrars (Tel 01 810 2400), two companies that may have your defunct and current certificates on file. You should contact them by telephone first. If they hold the certificates you will be sent out an ‘indemnity for lost certificate(s)’ form that will also need to be countersigned by a bank or insurance company or by Computershare itself. Both processes involve fees that vary according to the value of the shares. 

Recovering lost share certificates can be a costly and time-consuming event. All important documents, including pension and life insurance contracts, mortgage deeds, loan agreements, birth and marriage certificates, wills and passports should be kept in a file case or document box, where everything is properly labelled.  Let your next of kin know the location.


JC writes from Dublin:  I am considering how to leave my estate in the most tax efficient manner to my three children. I am aware that the tax threshold has been reduced in recent years.

I have a joint bank account with the children who were added onto the account some years ago. In the event of my death how would the Revenue deal with such an account? Would I be deemed to have a quarter share of this account and would the revenue compute a quarter of the account as the inheritance from it to one of my children?


Some financial assets are allowed to pass outside of a will or intestacy and so can be paid out right away.  These include the proceeds of joint bank accounts. However, a Revenue clearance certificate may be needed by the personal representative of the deceased person in order for the financial institution to release the funds to the other account-holders, or to the deceased person’s estate, where, as in your case a quarter of the money is yours.  The Revenue also note that in the absence of this letter of clearance, the financial institutions are prohibited by law from releasing monies (other than current accounts) lodged or deposited in the joint names of the deceased and another person or persons” and where the total amount held in the joint account exceeds €50,000.”

You should discuss all of this with your solicitor when preparing your Will.



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Question of Money - February 26, 2012

Posted by Jill Kerby on February 26 2012 @ 09:00

How to reach the heights with your summit funds

MD writes from Dublin: I have two EBS Summit Funds, one is Mutual, the other is Investment. Both funds are in Growth. What is a Mutual fund? What is difference between Mutual and Investment funds? Q3: Which is the best to be in?


A ‘mutual’ fund is another description of a pooled, unitised investment fund that people with a regular amount of money or a lump sum can purchase that is then managed on your collective behalf by professional fund managers.  In your case, Irish Life Investment Managers (ILIM) manages the Summit Funds on behalf of the EBS. 

There are four EBS Summit funds - Summit Balanced, Global Leaders, Growth and Technology, each one targeting a different group of sectors, assets and geographical areas. They also represent different degrees of risk. You need to double check in which fund or funds your money is invested, but the Summit Growth Fund includes a wide range of global consumer goods and services, mostly located in Europe and the USA. 

I suggest you speak to an independent, fee-based financial advisor about your holding.  Better-late-than-never this person can properly explain to you exactly what it is that you have bought, how much the investment is now worth and whether the fund (s) are suitable for your needs. If it isn’t, the advisor will be able to present you with other options.


NJ writes from Dublin: Last year I purchased shares in a French company listed on the Paris stock exchange. On receipt of my dividend from the Irish broker I discovered that both French tax of 27% and Irish tax of 20% had been deducted. Can I apply for an exemption for either of these deductions?

On your annual Form 11 income tax return you will be asked to record the gross dividend you were paid by this company, the French withholding tax and the Irish "Encashment’ tax, says Barry O’Donnell, a director of Foreign Tax Returns Ltd, a Dublin tax services company.

“There is a complex formula used in order to work out whether a further credit is due in Ireland in respect of the French withholding tax already suffered on the dividend,” says O’Donnell. “But you will be able to claim a full credit against your tax liability for the Irish encashment tax paid by your broker on the receipt of the dividend. If you have no tax liability you will be given a full refund of the encashment tax.”

A tax advisor can help you correctly claim a refund.


JC writes from Dublin: I have a cash offer of €160,000 on my house, my principal private residence. I owe Bank of Scotland €113,000 on a tracker mortgage with a 21 year remaining term. The interest rate is 0.6% above the ECB rate, or 1.6%.

I am wondering if the bank will settle for less than I owe them to clear this mortgage, which I believe is unprofitable for them. If you believe they will, what should I offer them? I didn’t talk figures but they have asked for my offer in writing. I realise it has to be an attractive offer to them as well as for me.


The banks that have a particularly heavy exposure to tracker mortgages – like Bank of Scotland Ireland, the PTSB and Bank of Ireland, are certainly keen to get these loss-making mortgages off their books and to put their customers onto better value (for the bank) standard variable rate ones for the duration of the loan terms.

If you were offering to trade in your tracker in exchange for an standard variable rate (SVR) mortgage, you might be able to convince them to give you a very competitive interest rate or maybe even write-off part of your outstanding balance, but Karl Deeter of Irish Mortgage Brokers in Dublin is not very optimistic the bank will do so once they find out that you already have a buyer for your property.

“If your reader had a bank account full of cash ready to clear the loan, that might be one thing. But if they find out there is a buyer, which they will because you can’t show them the cash upfront, then they will likely refuse. The bank will probably be of the view that they don't really need to give a discount to someone who is going to sell anyway.”

“Still,” says Deeter, “there’s nothing to lose from trying.”  Good luck.  


SC writes from Galway: I have a question about fire brigade charges for domestic homes: is there a specific levy on insurance policies of 1.5% for fire charges, which is not being passed onto local authorities?  Also, imagine my shock upon checking my home policy and finding out that I'm only covered for €1,500 (buildings and/or contents). This is totally inadequate cover for any standard sized domestic home. If I had a domestic fire incident, then two fire brigades would be likely to attend that's €460 x i2 = €980 and God forbid the incident wasn't dealt with within 60 minutes, the bill would rocket to €1,840! Surely it is in the insurance company’s interest to have realistic fire brigade cover considering their action and professionalism would minimise the size of the insurance claim.


It is not correct, says Sean O’Connell of the Insurance Shop in Fairview, despite such a claim last year by Dublin’s Lord Mayor, that insurers designate a 1.5% of the buildings insurance value to the cost of fire brigade call-outs. Some home insurance policies simply state that they will cover the cost of valid claims for call-outs, “without specifically stating the amount or a ceiling, while others will indicate the amount they cover.” he says.  Royal Sun Alliance, for example, fall into the former category, says O’Connell, and Zurich Insurance, the latter with a €1,500 payment limit.

“The best thing to do is to always check the contract carefully,” for exactly the reason you state: a large fire with multiple fire tenders could leave you with a very large bill and a much higher renewal premium the next year.



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Question of Money - February 12, 2012

Posted by Jill Kerby on February 12 2012 @ 21:24

Safe but sorry returns from German State bonds 


MM writes from Dublin: Could I ask you about German government bonds? Specifically the minimum purchase amount, investment periods, are they fixed rate, what are the Irish/German tax considerations, where in Ireland can I buy these bond, and finally your views on them as a safe investment?

German government bonds, just like those of other countries and the corporate variety, are sold as a form of IOU to institutional and private lenders.  In return, they receive an annual ‘coupon’ or rate of interest and the return of their capital investment at an end of an agreed term. Also known as gilts, or fixed income securities, government bonds are sold by stock-brokers who place your order on the bond market, based on the term of the bond and the amount you wish to spend. 

You can deal directly with a stockbrokers or use the services of a fee-based authorised advisor, who can also explain the somewhat complicated pricing method used for bonds, the yields they pay, and any tax liability you may have on both the yield and the sale or trade of the bonds, says independent financial advisor Vincent Digby of Impartial.ie  “Minimum purchases from a stockbroker can sometimes be as high as €10,000 - €25,000,” says Digby.

Since Germany is regarded as the strongest economy in the EU, and is far more creditworthy and likely to repay their ‘sovereign’ bondholders than say, Greece, Portugal, or even us, German bond prices are comparatively high at the moment, he says, and the yield is very low. This could change in the future, which is why some people trade in and out of different bonds to try and improve the income that they generate.

Your money may be safer in a German government bond than a Greek one, but all medium to long term bonds can be susceptible to the effects of inflation that can eat away at the spending power of both the fixed annual rate of return and the long term value of your capital.

The excellent motleyfool.co.uk financial website has an archive of educational articles about bonds. This one is a good place to start: http://www.fool.co.uk/news/investing/2010/09/27/a-brief-history-of-bonds.aspx?source=isesitlnk0000001&mrr=0.25

SS writes from Dublin:  We are British citizens living in Ireland since July 2010 after taking early retirement ages 59 and 55. Our only income is our occupational British pensions.  We now pay Irish income tax, PRSI, etc., because our occupational pensions are classed as income and we are not classed as pensioners until we reach the age of 66. We have no income generated in Ireland and do not claim any benefits.

We will both qualify for full British state pensions at ages 65 and 66 as we both had a full working life but they are worth about half the Irish state pension!

We recently read that under EU rules we might be able to receive an Irish state pension based on our Irish contributions since moving here and British national insurance contributions combined - is this correct? 

As we now live permanently in Ireland and have paid all the contributions required we feel that we should at least be paid the pension rate for the country we reside in.

Under bi-lateral social security agreements (European Regulation EC No 883/2004) your Irish and UK social security contributions can be combined and possibly result in you and your spouse each qualifying for an Irish contributory old age pension from age 66.

The application forms you will be asked to fill out for the Irish state pension includes a section that asks if you have ever been employed in an EU country other than Ireland and ask you to provide the relevant details. If you have paid sufficient social insurance contributions here, the Department of Social Protection with then calculate if and how much of an Irish or combined Irish and UK pension you will receive. 

The formula they use, and a case study can be found here on the excellent Citizen’s Information website: http://www.citizensinformation.ie/en/social_welfare/irish_social_welfare_system/claiming_a_social_welfare_payment/social_insurance_contributions_from_abroad.html#l7320b or you can visit your local Citizen’s Information Centre.


NM writes from Dublin: My son, who lives in England owns 14,000 shares. He wants to sell these shares in order to purchase a family home in England. Four years ago, I organised the sale of some of his shares through AIB with absolutely no difficulty, since last year new regulations have been brought in and it is proving much more difficult. I have been told that he will have to set up a bank account here that will take time and effort. Is there any quick way of getting over this problem?

I spoke to NCB Stockbrokers who told me that share dealing regulations have tightened up in recent years and that they cannot sell your son’s shares on your instruction. He would need to have an account with them, and to do this he would be required to satisfy identification and anti-money laundering terms and conditions.

Because your son lives outside the state, NCB would also require that he furnish them with a letter of introduction from their own bank in the UK.

If your son wished to sell the shares himself, he could open his own on-line, execution only brokerage account. He should check out sites like TDWaterhouse.com.  He just needs to make sure he has all the necessary documentation, such as the share certificate, to prove that he is the actually owner of these shares.



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Question of Money - February 5, 2012

Posted by Jill Kerby on February 05 2012 @ 09:00

 Wifes pension payout depends on tax position


EO’D writes from Dublin: I will qualify for a contributory pension, but if my wife does not qualify for a contributory pension  -  she may not have enough contributions - can I claim her as a dependant? 

She has recently started part time childminding. To qualify for a contributory pension, what would she need to do, if she registered as a sole trader, and did annual returns would this qualify her? If the family she works for were to tax her, would they need to register as an employer, how would that work.

We want to be above board, but the money is small - approximately €200 per week - and we are wondering is the whole thing worth-while.

Without knowing the details of your wife’s social insurance contribution record or her age, it is impossible to tell if she will qualify for a contributory or part-contributory old age pension when she reaches retirement age. 

If she does not qualify, then you will be able to claim the Qualified Adult allowance for her which, for qualified transition/contributory pensioners is currently worth an additional €153.50 a week to the qualified adult on top of the pensioner’s own €230.30 payment. This €383.80 total weekly payment rises to €436.60 if the qualified adult dependent is over 66.

There are slightly different rules that pertain to the transition year pension at age 65 and the state contributory pension. To qualify in her own name for the latter, that is, if she reaches retirement age on or after 6 April 2012, your wife would need to become insured before age 56, have paid at least 520 full rate employment contributions or make up the balance with high rate voluntary contributions provided she has previously paid at least 260 full-rate employment contributions.

She must also have paid a yearly average of at least 48 paid or credited from 1979 to the end of the tax year before she reaches 66 or a yearly average of at least 10 full-rate or credited contributions from 1953 (or the time she started insurable employment if later to the end of the tax year when she turns 66. (This year average of 10 may qualify her for a minimum contributory pension.)

If your wife earns €200 every week, exclusively from a single family, it may not be appropriate for her to register as a sole trader. The Revenue can certainly advise her and her prospective employer about whether she is a direct employee or a self-employed service provider.

As an employee earning less than €352 gross a week, she would be exempt from PRSI but her employer would pay an 8.5% contribution. As a sole trader, earning up to €500 a week she will pay 4% PRSI contributions on all her income. In both cases she will have to pay the universal social charge but now that the earnings cut-off amount has increased to €10,036, she will only pay 4% USC on the €364 balance of her annual earnings or just €15.

Aside from your wife’s PRSI position, you should also check out how her earnings might affect your current tax position. Most couples are jointly assessed for tax and this could push you into a higher tax bracket, affect means tested social welfare benefits, or, on the plus side if your earnings are sufficiently high, even reduce your total tax liability by allowing you to enjoy the higher income tax band and rates that apply to married couples with both partners working.

Finally, opting out of the income tax system is not discretionary. If your wife takes this job, she has to pay her tax and other liabilities, as does her employer. The Department of Social Protection website provides downloads on PRSI at www.welfare.ie.  A good tax advisor or accountant can advise all of you about your tax and PRSI obligations, whichever way her new job is arranged.

BO’S writes from Dublin:  Every year I claim a refund for medical expenses from the revenue. Last year, in 2011 I received 20% back on my 2010 medical expenses. I submitted a medical expenses claims for last year, 2011 and to my astonishment Revenue said I have an under payment of €1,658 for 2011 and as such they will reduce my credits by €844 for 2013 and the same again for 2014.
I did nothing wrong and cannot see for the life of me how I could have an underpayment of this amount. Every year up until now I have always received money back for medical expenses etc. They are the one's that made this mistake and I cannot financially afford to pay them back this amount in two years as my wife is job sharing next year and money will be tight enough. Plus, I availed of the 'cycle to work scheme' last year for the full amount€1,000 and as such entitled to a tax credit for this.
Surely someone in the Revenue has made a big mistake.


Mistakes happen,  TAB Taxation Services advisor Sandra Gannon has suggested that if the claw back of the €1,658 in your 2011 tax bill is correct, it is because the Revenue have discovered some discrepancy in your income tax position and the tax band and credits you are entitled to. Your medical expenses claim is what prompted the wider review.

You need to get a full explanation for this underpayment notice and how many years for which it pertains. Your inspector of taxes at your local tax office or an independent tax advisor will be able to provide this.

If the €1,658 is correct, and it is to be repaid in two equal amounts of €844 in 2013 and 2014, you should also find out how it is repaid so you can budget accordingly. It is possible that €70 will it be deducted every month, directly from your salary for the two years.


MS writes from Dublin:  Is it necessary to claim a deduction for losses against a capital gain liability at the first opportunity or can a loss claim be carried forward to future years.

I have a capital gains tax bill to pay for 2011 and will also have one for 2012. I have a capital loss for 2011. Would it be best for me not to claim the 2011 loss for 2011 but leave it for 2012 when the CGT rate will be 30% as opposed to 25% for 2011.

Unfortunately you can’t choose when to pay the tax you owe on a gain.

If you made a gain from the sale or transfer of an asset between January and the end of November, you are obliged to pay your CGT (less your personal CGT allowance of €1,270) by December 15thof that year.  Any gain you earned in December has to be paid by the next January 31st.

The CGT rate for any gains you made between January and the 6thof December 2011 was 25%; after December 6th2011 the rate increased to 30%.

However, capital gain losses can only be offset against another CGT gain which occurs in the same year as the CGT loss, or they can be carried forward and used against any future capital gain.


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Question of Money - January 29, 2012

Posted by Jill Kerby on January 29 2012 @ 09:00

Taxing issue of my wife's adult dependant payment


CC writes from Dublin: I receive the Contributory Old Age Pension. I also receive the increase for a Qualified Adult (my wife).

On 15/03/2008 in Document SW118, the Dept. of Social Protection stated as follows: "From 24th September 2007, by law we must pay the Increase for a Qualified Adult directly to the spouse or partner concerned unless the qualified adult wants to have someone else collect it for them". From this it appears that the Increase for the Qualified Adult forms part of the income for income tax purposes of the Qualified Adult (spouse or partner).

Can you confirm that this is correct? The answer to this question is important in calculating our Rate 1 Band (taxed at 20%) and, therefore, the amount of income tax we must pay. We are assessed jointly for income tax. 


The increased payment may be paid directly to your wife, but it is considered, for tax purposes, as the income of the Contributory Old Age pension recipient under their PPS number.

How your income tax is calculated is complicated and you have not furnished me with any figures, but I am going to assume that the reason you are asking this question is because you have received a letter from the Revenue suggesting that you have underpaid your income tax.

If there is an underpayment, it hasn’t been triggered by your €11,976 contributory payment plus your wife’s €10,728 which amounts to less than the €36,000 tax free income you can earn as a married, pensioner couple over age 66 but under age 80.

Instead, an underpayment may have occurred if your total income from all sources exceeds this tax free threshold any you were treating your wife’s payment as her own income under the tax individualisation rules for married couple.

Couples in which both partners are earners, enjoy a standard rate tax rate of 20% on income up to €65,600 with any balance subject to 41% tax. Income of up a maximum of €41,800 can be transferred between the working spouses, subject to the lower earning spouse declaring income of at least €23,800.

If, however you are a single income couple, as you appear to be, the first €41,800 of income will be taxable at the standard rate of 20% and any balance at 41%. If you have assumed in the past that your wife’s Qualified Adult payment of €10,728 allowed your joint income to be treated under the married couple, two earner tax band arrangement, you may have underpaid your taxes. 

I suggest you speak to a good independent tax advisor or your Revenue Inspector of Taxes to establish exactly your correct band and tax liability.

DO’C writes from Wexford: I am a 57, a married man and have been in receipt of a monthly payment from an income continuance scheme for ten years. This is paid by an insurer and is administered through my former employer. I am also in receipt of a social welfare invalidity pension including a payment for my wife.

My contribution rate for PRSI is class A1 but I have been advised by the wages clerk with my former employer that he thinks that I should be on class M. My understanding is that this would offer me a considerable saving but would this be in my interest or would it leave me at a disadvantage regarding my contributions towards the old age pension?

Also, is it possible to have part of my invalidity pension paid to my wife so that she would then be entitled to a PAYE tax credit?

I’ll answer your last question first. A spokesperson for the Department of Social Protection said that in exceptional cases, they have paid part of social welfare payments, to the recipient’s spouse, giving the example of a chronic alcoholic. The Department can also pay the invalidity pension allowance you receive for your wife to her directly, if you agree.

However, the current PAYE tax credit of €1,650 is only available to each spouse or partner in a marriage or civil partnership if both pay PAYE on their earnings. If your wife has no independent earned income – a portion of your pension is not her income, it is still yours - she is not entitled to the tax credit.

Class M is the PRSI band for occupational pension recipients who no longer make PRSI payments. The wages clerk is correct in saying that you would save money transferring to this band but if you want to ensure that you receive a state contributory pension at age 65, you may need to keep paying your PRSI contributions on the Class A1 band, depending on how many you have already accumulated.  You can check the number of contributions you will need on this latest DSP brochure:  http://www.welfare.ie/EN/Publications/SW14/sw14_jul11/Documents/sw14_jul11.pdf


KH writes from Dublin:  My wife and family will be emigrating to the US this summer. We have lump sum of €10,000 that we want to convert to dollars to secure the current interest rate (though with it climbing, it might be best to wait and see).
The problem we’re having is the best way to set this up. Should we just get cash (though I think we will be limited on the amount we can bring into the US) or a US bank draft or traveller’s cheques? (Are they even used anymore?) Would we need to declare it? Should we get a dollar bank account here, which would then have to be converted back into euro if we encashed it to bring it to the US, thus losing the benefit of the hedging? We can’t open a bank account on the other side until we get a US address.


The advent of electronic banking means that you can eliminate most of the transfer methods you’ve mentioned and their associated risks –like losing the bank draft or traveller’s cheque (the latter can be replaced at another cost), or carrying the cash safely through the airports and perhaps having to explain its presence to the nosy security or custom’s officials.

So first, open a US dollar account in your own bank and convert the €10,000 into dollars, locking in the favourable euro/dollar exchange rate, on whatever date you wish. There will be a currency exchange transaction cost but you may earn a little interest on your dollar account until you are ready to electronically transfer it to your new bank account in the States. NIB told me that the electronic transfer cost of the equivalent of €10,000 in dollars to a US dollar account would be just €10.

The transfer of a sum this size shouldn’t cause you any difficulties, the NIB official said, once you have satisfied your new bank’s money laundering terms and conditions and alert them to the date of the cash transfer.



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Question of Money - January 22, 2012

Posted by Jill Kerby on January 22 2012 @ 09:00

I need the best route out of my freeway SSIA fund


NH writes from Dublin: I contributed €254 per month into an SSIA (Special Saving Investment Account) which I did not cash when the scheme ended. In fact, I put more into the fund, the Quinn-Life Euro Freeway fund, which is now well down from its heights. The value is now less than the amount I’ve put in.

 In light of ongoing problems with the Quinn Group, albeit not, they say, with Quinn-Life – they say this fund is “ring-fenced” and completely safe - do you think it would be better to cut my losses and cash-in?

 I am, thankfully, not in pressing need of cash right now and would be happy to leave things as they are in the hope that they may come good eventually: the niggling fear is that I may lose all if Quinn-Life collapsed.

Quinn-Life is still owned by the Quinn Group and is neither for sale, nor in any danger of ‘collapse’, said a spokesman for the company. However, there is no compensation scheme for life assurance investment holders (unless you are a customer of Standard Life, which comes under the UK investment compensation scheme.)  If Quinn-Life were to collapse you could lose all or some of your investment.

As to whether you should encash your fund or not, this is something you should decide upon only after weighing up the actual loss: Quinn-Life’s website shows that the Euro-Freeway fund has lost -36.8% over the past five years, the period in which you have increasing your contribution to the fund. However, during the previous five years of the SSIA scheme, 25% of all your contributions were a gift from the state, and the fund produced a positive return. Also, if you do encash right now there won’t be an exit tax to pay if there is a loss, but because it is a life assurance investment and not say, an equivalent exchange traded fund (ETF) that trades directly on the stock market, you won’t be able to carry forward your losses to mitigate other capital gains tax liabilities.

Instead of crystalising your losses – you admit you don’t need the money and “things might come good some day” – you could consider a free switch to a different Quinn-Life fund.

Past performance is just that, but over the same five year period to 13 January, 2012, since you started adding more money to the Euro-Freeway fund, to 13 January this year, the Biotech Freeway fund produced a cumulative gross return of +58.3%, the Latin American Freeway Fund, +39.9% and the Technology Freeway fund, +25.2%. Only the Celtic Freeway fund, at -64.4% produced even worse returns than the Euro-Freeway.


MG writes from Dublin: Is it possible for a parent to loan his son money to clear his mortgage without the son incurring a tax liability?

There is a lifetime tax-free gift threshold between a parent and child that is currently €250,000 before any capital acquisition tax of 30% must be paid.  So long as your son’s mortgage is below this amount, and he has not received a previous gift that would be liable to CAT, he will have no tax liability to pay.


PM writes from Dublin: My brother-in-law, 65, is an citizen and resident of Ireland and has been advised by the UK state pension fund of his British pension entitlement as he worked for a few years in the UK. They also advised him that he could practically double his pension by making a payment to cover some missing years of contributions. If he does this, the pension his wife receives will also be increased though she never worked in the UK. He has a small pension fund currently invested with Acorn Life Galway which he intends to continue as he will need to carry on working for the foreseeable future.  He would like to use part of his Acorn pension fund to finance the amount required to enhance his UK pension. To avoid any tax complications Acorn will need to make payment direct to the UK State Pension Fund.  This appears to be covered under the Revenue rules, however Acorn are dragging their feet. Perhaps this is the first time they have come across this opportunity. Is it possible for you to confirm whether it is acceptable to make such a transfer as envisaged above?

According to pension consultant Clive Slattery of Friends First, a former senior Revenue pension official, there is no Irish Revenue rule that allows a private pension fund holder to part-encash their fund or for their pension provider to do so in order to transfer the money to the UK state pension fund in order to purchase an enhanced state pension payment (the latter of which is possible in the UK.)

The financial advisor and pensioner trustee Eddie Hobbs of FDM Ltd added, “Perhaps your reader is confusing this idea with the 25% of his pension fund that he can take tax-free, that he might then be able to pay to the UK state pension authorities to enhance his and his wife’s pension benefit.”

Your brother-in-law needs to speak to his Acorn Life representative again or write to the company for clarification on this matter.  Given his confusion over what is possible, he should also consider engaging an independent pension advisor when dealing with Acorn, who could also help him decide what to do with the remainder of his pension fund if he does use the tax free portion to buy additional UK state pension benefits.



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