Question of Money - January 15, 2012

Posted by Jill Kerby on January 15 2012 @ 09:00

Pensioners grapple with PRSI and USC challenges


WO’S writes from Co Kerry: As a pensioner, who worked in the UK for 13 years, I qualified for a medical card in Ireland, I was exempt from paying PRSI or health levies on earnings prior to 2011. Since January 2011 I have been subject to USC but I am wondering if it is correct that from January 2012 I will be subject to both PRSI on all income and also to the USC?


The universal social charge (USC) does not apply to any Irish social welfare pension payments (or to any income on which you have paid deposit interest retention tax.)  However, it does apply to any other ‘relevant’ private occupational pension or other private income that exceeds €10,036 per year (€193 per week) whether the pension holder has a medical card or not. The relevant income threshold was raised in the last Budget from the 2011 limits of just €4,004 annual relevant income (€77 per week).

If you are over age 70, and your non-social welfare income, or deposit income qualifies for USC, the first €10,036 of income is taxable at 2% and the remainder at 4%.  Anyone over age 70 with relevant income in excess of €100,000 will pay USC of 7%.

If you are over age 66, all pension income is exempt from PRSI payments.

If you are unsure of your USC or other tax liability, you should have it checked out, either by your inspector of taxes or an independent tax advisor.  Given how many errors have been reported, and how confused they have left so many pensioners’, double-checking all the figures will provide you with peace of mind, if nothing else.


FM writes from Kildare:  My mother signed over a piece of agricultural land with no site value to me several years ago. I am a part-time farmer and have another job. I did some work on this land and spent €30,000 - €40,000 on it.  In 2011 the value of the land is now worth between €10,000-€20,000 more than I spent on it and due to a previous arrangement this sum must be paid to my brother. Is there any tax liability arising out of such a transaction?


You write that the land had no site value, but the Revenue would maintain that every asset has a value, and in the case of a land transfer, the owner – your mother – would be liable to capital gains tax for the original owner if it’s value has increased since they first owned it, and a possible capital acquisition gift or inheritance tax liability to the person who receives it, in this case, you.

Now that you are transferring this land to your brother in the form of a gift, you will need to determine its value when you received it and its current market value. If the price has risen, and it sounds as if has, if only due to the amount you have spent enhancing its value, you may have a capital gains tax liability of 30% to pay on the difference (after taking into account your annual tax free allowance of €1,270).

Depending on whether the land is worth more than €33,208, the tax-free threshold between siblings, your brother may have a CAT liability on the difference, also taxed now at 30%. (The CAT limit between a parent and child when the land was first transferred to you was approximately €500,000; today it is just half that sum.)

I suggest you speak to a tax advisor or your Revenue inspector or taxes about any potential liability this piece of land has raised for you and your relatives.


DK writes from Co Donegal: A few months ago I switched €50,000 to Australian dollars. My questions are, in the event of a euro breakup, Irish sovereign default or our reverting to an Irish currency, with any of these three events resulting in an Irish default of say 30% or 40% devaluation in the currency, how safe would my Australian dollars be from devaluation? What control would the Irish government and EU have over my dollars? Would I be better with my savings in a bank and currency totally outside the eurozone and finally, what effect would a devaluation like this have on new car prices in Ireland?


None of the Irish banks are able to predict what will happen to foreign currency deposit accounts in the event that Ireland were to revert to its own currency, presumably, the new punt. However, there is plenty of evidence to suggest that when a currency defaults – the depegging of the Argentine peso from the US dollar in 2002 is such an example – the new currency is usually devalued quite soon to boost exports and economic growth. Such would be likely to happen here as well. Again, no one can say how a non-Irish bank, especially one operating outside the eurozone would respond to such a ruling by the Irish Central Bank.

If you are concerned about the risk of our leaving the euro, you are perfectly entitled to move your euro or non-euro currency savings to another EU or non EU jurisdiction, subject to the terms and conditions set by the particular deposit institution.  Only you can decide whether the extra costs involved and the currency exchange risk is worthwhile.  You must also inform the Revenue of you offshore account in an annual tax return and pay Irish DIRT or income tax on any interest you earn, where applicable. 

Finally, if we go off the euro and back onto the punt which is then devalued, all imports, including cars will be much more expensive, at least until our economy recovers and our currency strengthens.






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Sunday times - Question of Money - August 14

Posted by Jill Kerby on August 31 2011 @ 09:00

Forget saving for your child and pay your debts instead


ST writes from Dublin: I have recently started saving the child benefit of €140 per month to use for the education of my daughter who is one year old. Could you please advise on the best accounts for regular saving over the long-term. I currently put it in her credit union account, but am sure that we could be getting a better interest rate elsewhere. 

You don’t say how much of a dividend your credit union is paying but chances are it isn’t as much as the fixed deposit rates on offer from many high street banks or An Post.  We post the best rates on the market in our weekly ‘Best Buys’ column.

However, I think you need to consider more than just the best yield. Deposits are subject to 27% DIRT tax, which is likely to rise, and price inflation will erode the long term spending power of your savings. Leaving your children’s savings in an Irish bank, under the management of the Irish state (like the Solidarity Bond) or entirely in euro currency also carries certain risks in these turbulent times.

Do you have expensive credit card balances, with high double digit interest rates, that could be cleared faster if you used the child benefit money? Eliminating expensive debt at 18% or 20% makes more sense than getting a mere 2%-3% return from a savings account, even one ostensibly for the children.

If you are fairly debt-clear, it might be worth taking time now to find out more about the merits of buying precious metals or, when the markets settle down again, a low cost investment fund (like an ETF) made up of great, global companies into which you could pay on a monthly, cost-averaging basis.

Research these options yourself, or use the services of a good fee-based financial advisor.



Immobile shares


EC writes from Dublin: I am writing seeking advice on Vodafone Shares.  My mother passed away in August 2009 leaving 34 of Vodafone Shares.  We have looked at the option of transferring these shares over to one of the charities she supported.  However, the cost of the stockbroker's fees are greater than the value of the shares, the charities I have contacted are not in a position to accommodate this request. Surely there must be lots of people who find themselves in this situation, i.e. a holder of shares dies and it's left to the executor to dispose of them.  Would you have any suggestions?


It is unfortunate for the charities that the cost of transferring the 34 shares, worth only about €1.82 each now, is about €60. It would be helpful if the share registry company and your bank, which is also required to facilitate such a transfer – would waive their fees if the shares are being donated to a registered charity.  Perhaps you could ask them, and if that doesn’t work, offer to lobby for such a change on behalf of the charities.

Meanwhile, you might as well hold onto the shares in the hope that their value enough to someday justify the cost of the transfer.


Silver lining


GE writes from Dublin:  I have been researching a little buying silver instead of gold. While I am no expert or have anything to do with finance, I have discovered that silver is in lower supply than gold, because it has industrial uses as well as money and there has been huge demand for both in places like China. Many articles say it is underpriced compared to gold.  Any views?


Silver prices shot up over the year, peaking in early May at about $50 or €33 an ounce and then fell back sharply, mainly due to substantial profit taking. As I write, it is now selling for just under $38 or €26.50 an ounce (down 4% in 24 hours – a big swing.) You can follow the live price of silver, as well as gold at www.goldprice.org.

Silver prices are said to be more volatile, compared to gold, because it has both industrial and monetary uses and is affected by supply and demand. For example, industrial silver for the photographic industry effectively disappeared with the advent of digital cameras and computer photo files, but demand is growing strongly as an essential metal in the bio-medical industry and for high technology goods.

Silver is also a form of money – or could be again, which is the other reason why its price has soared during these uncertain times.  I was lucky enough to be persuaded back in 2005 to buy silver as well as gold:  the price of silver has risen by 186% since then compared to 139% for gold. 

Will it repeat this performance?  No one knows, but people who think pure silver (and gold) has more intrinsic value than paper and ink money issued by central banks and subject to being debased or devalued by them, prefer to keep some of their savings in precious metals.   






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Sunday Times - Question of Money - August 28

Posted by Jill Kerby on August 28 2011 @ 09:00

Son may move to Australia if mortgage not forgiven


AH writes from Waterford:  Is there a chance that the government will intervene to reduce mortgage debt for people who can show that they were missold their mortgage at the peak of the Celtic Tiger?


My son and his wife were given a mortgage offer – in writing, by their lender for €340,000 mortgage in early 2006.  They then went to a well known mortgage broker – they were following advice to shop around for the best rate – and the broker got what they were told was an even better deal of a €440,000 tracker mortgage from the same lender.  They took it but now due to my son losing his job (they also now have a baby) they are now unable to pay their loan.  My husband and I are helping them meet the mortgage, but the house is only worth €250,000, even if they could find a buyer and they are keen to emigrate to Australia where they both lived before the got married.  We don’t want them to emigrate, but unless they can reduce this debt, I can’t see how they can stay.



Your son’s case may be of interest to the New Beginning group of solicitors who are interested in taking legal action against the banks for reckless lending. Their website is www.newbeginning.ie.


Meanwhile, there has been a great deal of speculation recently about whether there will be a programme of mortgage debt forgiveness introduced by the government and banks and whether, as UCD economics professor Morgan Kelly has suggested, that there is already a €5-€6 billion write down built into the capitalisation of the banks.


With concerns about moral hazard risk still being expressed, many commentators are now suggesting that the case by case review of distressed mortgages will continue, with lenders providing some forbearance to homeowners who can cope over the course of a year with a revised repayment schedule, as laid down by the Revised Code of Conduct on Mortgage Arrears,


In some cases, the banks will undoubtedly agree to some debt forgiveness, perhaps if the alternative is for the mortgage holders to hand back the keys and decamp to the other side of the world. I’m not suggesting that this is what your son and his wife are about to do, but where there is a small shortfall/or arrears between the sale price of a house and its market price, it isn’t unthinkable to imagine that the lender will settle for the lower value.


If your son and daughter-in-law believe they have no choice but to seek work abroad, they should speak to their lender (and perhaps to New Beginnings) now and explore their options:

Can the house be rented and the mortgage repaid?  If they have no arrears (because you are helping them with repayments) but will if your support ends, can they seek the sanctuary of the Mortgage Arrears Code, qualify for more reasonable repayment conditions and STILL rent the property out if they find work in Australia? Can the house be sold and would the bank accept and write off a loss if they emigrate? If the bank declines to write off the shortfall could they afford to repay it once they find work in Australia? This would help safeguard their Irish credit record, should they want to return home some day.


German muscle

I am wondering about an advertisement from PNI Mortgages in the national press advising that if a person wanted to open a German bank account, that they would do the paperwork. The costs are €150 for a current account and €200 for current and deposit account.  I am interested and the set up costs are not an issue, but I am wondering who PNI mortgages are and more importantly who is the German bank and if they are regulated?



PNI Mortgages are based in Delgany, Co Wicklow and is regulated the Central Bank to sell mortgages.  The German current and deposit bank accounts they are offering to help people open, is with HypoVereinsbank, a German subsidiary of the largest Italian bank Unicredit. You will need the services of a notary to complete the paperwork. I didn’t find PNI’s website particularly helpful, but it does provide a telephone helpline.


The e-banking account comes with a HVP Maestro card, with which you can withdraw funds. Variable rate interest of between 0.25% and 1.05% is paid, but the latter only on sums of €25,000 or more.


You should know that UniCredit, the Italian parent bank of HypoVereinsbank was one of the banks, along with the giant Societe Generale of France that the markets sold off heavily earlier this month over concerns about the vast amounts of sovereign debt they are carrying. Since the end of February, Unicredit’s share price has fallen from about €2 to just 89 cent at time of writing, which reminds me of the huge fall in bank shares prices that the Irish banks experienced throughout 2007 and 2008.


Anyone thinking about opening an account in another country should always choose as financially sound bank as possible and only deposit up to the sum guaranteed by the bank’s deposit guarantee scheme.


The third estate

GP writes from Carlow: My sister died leaving an estate worth €895,000 to be divided equally between myself and my two surviving sisters. I was the nominee for her credit union account and received from the CU a cheque for the €14,700 in her account plus a Death Grant of €1,300 for a total of €16,000.  I cashed the cheque, but later her solicitor wrote to me and asked me to return the Death Grant portion saying this was to go to the estate and not to the nominee.  (The Credit Union manager said he never heard of this before.)  I returned the €1,300 to the solicitor and this was included in the estate which was divided equally between the three of us.  When the solicitor returned my IT38 Form he had included in it the funds that were nominated to me in the Credit Union as well as my share (1/3) of the estate.  Probate tax was paid on the total amount of these.  After reading Larry Breen's recent article in your pages about how Credit Union accounts, up to a specified limit, are not subject to normal probate rules but are paid out based on a member's signed nomination I now think that I should have paid Capital Gains Tax on the money that was nominated to me in the Credit Union some of which I could have written off against share losses. I also think I was entitled, as nominee to the Death Grant of €1,300.


First, the tax that you and your sisters have paid on your inheritance is capital acquisition tax (CAT), not probate tax, which no longer exists, though there is a probate process.

According to Sandra Gannon of TAB Taxation Services in Dublin, the money nominated to you by your sister that was in her credit union account may be described as ‘shares’ by the credit union, but it is considered savings for inheritance tax purposes and is subject to CAT, not CGT.  As for whether you had to share the credit union savings insurance with your sisters, you should have this clarified in writing by your Revenue Inspector of Taxes and then, if applicable, ask your sisters to refund the amounts they received, less the CAT. 






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Sunday times - Question of Money - August 21

Posted by Jill Kerby on August 21 2011 @ 09:00


By all accounts its easy to set up a euro exit strategy


MS writes from Dublin:  For some time you have highlighted  the possible danger to holders of Irish Euro accounts if Ireland exits the single currency in the future. Please advise how an Irish citizen can open a euro account in another 'euro' country.


Irish people who own holiday homes or investment property abroad – in Spain, Portugal, France, Italy  – are able to open euro accounts with no difficulty (aside from the usual bureaucracy and the fulfilling on anti-money laundering requirements.)  There is no EU restriction on EU citizens opening bank accounts in a member state, but it is left to individual banks (and they sometimes leave it to individual branches) to decide whether they want to accept your business.

One of the easiest ways to open an ‘off-shore’ euro account is to do so by travelling to Northern Ireland. Ulster Bank and National Irish Bank both have sister banks in the north – Ulster Bank and Northern Bank respectively and they will both open accounts for their own Republic of Ireland account holders as well as non-customers.  You need to bring all the required anti-money laundering identification with you and NIB, which is owned by the Danish Danske Bank (which is outside the eurozone altogether) recommends that you get a letter of introduction from your own bank to bring with you; because it is a cashless bank, it will impose a 1% charge on the value of cash deposits.

Finally, If you have a sizeable sum – at least €200,000 - that you want to deposit in another EU country – you can use the services of the fee-based, independent financial advisor Vincent Digby of Impartial.ie.

It can arrange for the setting up of DeutscheBank euro deposit accounts in Germany that pay 1.9% interest without the client having to travel. The minimum cost for this service is €500, he says. 



Cheque it out


AB writes from Dublin: Can you explain why the banks in Ireland take five days to clear a cheque?  They bleat on about preventing fraud, which they should well be able to do without taking five days. This is this is simply customer unfriendly. Is it true that in Sweden it just takes one day to clear a cheque?


I called my own bank, and asked them how cheque clearance works and this is what they told me:

A friend gives you a cheque over the weekend. You lodge it into your account in your own bank, on Monday, Day 1.  On Tuesday, Day 2, the cheque arrives at your friends’ bank. By Tuesday your bank will start paying interest on that cheque if it has been deposited in an interest bearing account. On the Wednesday and Thursday, Days 3 and 4, your friend’s bank has the right to withdraw the cheque he wrote if they are not happy to verify it.  If they do verify the cheque, on Friday, Day 5, you can start spending it. All this assumes there are no glitches and that the weekend doesn’t intervene.

By the way, on top of clearing delays, cheques cost 80 cent each,including a 50cent government stamp duty.



Ditch the dirt



PW writes from Waterford:  My mother died leaving my two children, aged 11 and 14, €10,000 euro each. I was told there was no inheritance tax to pay.

We decided to use your Best Buys list to find a good fixed rate account for the money and decided to go with the PTSB account where the interest in paid upfront for one year. However, I then found out that 27% DIRT is payable on this account, even though neither of the children have any income of their own. Is this correct?  Also, is it correct that no DIRT would be payable in a credit union account? (I know Post Office savings are tax free.)


It is indeed correct that children pay DIRT on interest earned even if it is their only earnings.  Only pensioners with earnings below the income tax threshold, disabled people or their trustees, charities and non-residents are exempt from DIRT. Certain longer term credit union accounts, called special share accounts, that only earn up to €480 or €635 of dividend interest are DIRT free.  Over those amounts and the interest is subject to DIRT and will be deducted by the credit union.  If they open an ordinary regular share account the DIRT on any dividends must be declared to the Revenue in an annual tax return.  Post Office three year bonds and five year certificates pay all returns tax-free.




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The Sunday Times - A Question of Money - 24 July

Posted by Jill Kerby on July 24 2011 @ 09:00

Who is liable when joint asset is at risk?


CD writes from Dublin: My sister and her husband jointly own an apartment in the south of France that was bought with her family inheritance. However at the moment her husband has a number of other large property loans worth about €1.5 million to pay back that he bought with two other men and he is negotiating with the bank to alter and reduce the repayments. He is self employed and the repayments are unsustainable for him and he has knowingly begun to skip payments. There is a possibility that the husband and wife's foreign property may be at risk of going to the bank in the future as they do not know how things are going to work out.

Should my sister put the property in her own name to protect it from the bank seizing it if things were to reach that point?   

John Hogan of Leman Solicitors in Dublin has suggested that any attempt by the husband to shift his portion of the French property to his wife in order to prevent it from being part of his assets that are taken into account for the settling of debts is unlikely to be successful. Such an action contravenes, he suggested, Section 74 of the 2009 Land & Conveyancing Reform Act which sets out to prevent any action that could be considered a way to defraud a “sub-purchaser or creditor” from the kind of transfer you describe.  


That said, your sister’s portion of the French property could not be claimed by the bank though she might have to buy out her husband’s share of the value that he owes the bank if she wants to keep the property.


There have been some very high profile cases of developers transferring property to their wives in the last few years. Your sister may wish to consult a solicitor to establish exactly what her property rights are in this case.


Right or wrong?


TB writes from Cavan: I was wondering what your thoughts were on the forthcoming rights issue from Bank of Ireland. Do you think taking up the rights is throwing good money after bad or do you think that in the long term Bank of Ireland will survive? I know you will probably recommend talking to a advisor but any help would be gratefully appreciated.


I wouldn’t recommend that you seek the advice of a stockbroker about this rights issue – they will be keen for you to buy the shares so they can collect their commission.  They are hardly impartial.


As I have written before, unlike so many stockbrokers who make endless, usually incorrect predictions about stock movements, I don’t have a crystal ball on my desk, so I have no idea if Bank of Ireland will survive as one of the ‘pillar’ banks the government is so keen to see established.  However, I think it’s a good guess that if it does survive, it could be some time before the bank rewards its shareholders with attractive, sustainable profits. That will only happen when the Irish economy recovers and that will only happen when the Irish state is taken off EU/ECB/IMF fiscal life support. Even without a crystal ball that doesn’t look very imminent either.


Since you have spare money to invest, you might want to first secure its integrity by not leaving it all in euro, let alone using it to buy more Bank of Ireland shares.  You might want to consider converting some of it into gold and silver which is finally being acknowledged as a store of value in these uncertain times. A proper, fee-based advisor can also help identify other defensive options like index-linked bonds, and strong, income yielding shares and funds that are undervalued right now. 


Many genuine speculators (as opposed to gamblers) have bought bank shares that have been propped up by governments or central banks on the grounds that it makes sense to follow the money, but even they usually do so on the condition that the government or central bank involved isn’t about to go bust. That’s the additional risk you take putting your money in this latest rights issue.


Pension fears

AOC writes from Dublin: I have approx €700,000 in my company defined contribution scheme. I am aged 55 and can retire at any time. Three questions: 1) In the event of Ireland defaulting, leaving the euro, returning to the punt and the resulting inevitable devaluation, will pension funds retain their euro value or be devalued pro rata to the national currency. Will my €700,000 become €350,000 if the new punt is devalued by 50%?

2) In the event of the above, would funds held in Ireland, in foreign owned/guaranteed accounts also be devalued and 3) If I convert my DC fund to an ARF, at what stage must I draw down the annual 5%?


Let me answer question 3 first. The 5% annual, taxed, ‘imputed distribution’ from an approved retirement fund (ARF), only begins at age 60. Nor does it attract the 0.6% pension levy, which is why taking early retirement, 25% of your fund tax-free and ARFing the balance might be an attractive option for you.


As for questions 1 and 2, no one knows for sure what exactly would happen if Ireland were to leave the euro, including whether euro held in non-Irish banks would be devalued. To be on the safe side, you might want to assume that it would be and act accordingly.  


Meanwhile, assets in pension funds that are not held in euro – say, American shares, British property, Canadian government bonds, even Perth Mint gold certificates which qualify for Irish pension and ARF investments, would presumably remain outside the euro until retirement when they would be liquidated in order to purchase an annuity in the new currency or be transferred into a new Irish currency denominated ARF. 


If your entire pension fund was invested only in Irish shares, bonds, property or (Irish) euro, and we went off the euro, then the devaluation of your pension assets would immediately coincide with the devalued new currency.

For this reason, you may wish to have your pension fund assets reviewed sooner rather than later.




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The Sunday Times - A Question of Money - 17 July

Posted by Jill Kerby on July 17 2011 @ 09:00

Private health insurance viewed as luxury abroad

AMcC writes from Dublin: Like many parents of 24 year olds, our daughter has gone to work in England and we are wondering about private health insurance for her. She has been insured in Ireland since birth. We have been advised if you spend more than 180 days outside of Ireland you are not covered by Irish health insurance and if you stop paying here there is a waiting period for re-entry, but this may only be relevant if the person already has a medical condition and needs immediate treatment. With so many young people moving abroad at the moment, who were previously insured in private health insurance by their parents in Ireland, I am surprised there has never been a discussion on the subject.


The Irish middle classes – all two million of us, nearly half the population - have become so accustomed to private health insurance membership and the way it facilitates the jumping of long waiting times for both urgent and elective medical treatment, that it has become a ‘necessity’ and not a luxury as it is in the UK.

Your healthy (I presume) 24 year old daughter, however, is moving to a country with far more comprehensive and free access to medical care and treatment, including general practitioner services once she registers with one. Yes, waiting lists can be quite long in the NHS, but it appears to deliver most of its promised services to the vast majority of UK residents. 


Unlike here, private ‘medical’ insurance  or PMI as it is known in the UK, is not community rated, so the price of premiums is based on age and health and the choice of benefits. Plans include exclusions as well as no-claims bonus and excess payments that will also influence the price you pay. As a result it isn’t very easy to establish how much a similar plan to the one your daughter may have here. Bupa UK, for example, told me that “we do not have any set or rough prices” and “the individual would need to contact us directly as the quotations are tailor made, so we would need to know things like her address, weight, height, occupation, lifestyle and past medical history going back at least 7 years.”


When your daughter gets to London she should contact a number of providers or specialist health insurance brokers for quotes for the sort of coverage she wants.  There are dozens of providers ranging from big insurance firms to smaller, specialist insurers as well as providers of simple, cash-based plans.


To get started, she should download Are you buying private medical insurance?’- a 2008 guide produced by the Association of British Insurers, which you can find on their website www.abi.org.uk.



Transfer Loss


JD from Galway: On Tuesday 5th July I sent €55,000 to my 90 year old mother’s account in Lloyds TSB in the UK via electronic money transfer, from my account in Ulster Bank.
The sterling/euro market rate on the computer that day was 90.35 cent and I paid €44.44 for a quick transfer before the rate dropped. On Wednesday 6th July my mother rang to say that her account was only credited with £48,192 approximately £1,500 less than the rate before bank charges, which raises the question of "how much do the banks actually charge"?
What is the cheapest way to transfer money besides carrying it on the plane, which in my case, would have saved over £1,000?




There is no simple answer to your query, which is frequently discussed on websites like www.askaboutmoney.com and www.boards.ie .  Most of these suggest electronic transfer with some banks charging less than others; using private currency exchange dealers, especially for larger sums, though you must also shop around for a best price since they too vary their charges; converting the money by way of simple bank drafts and then using a courier or registered post to deliver the money to the end recipient.


I spoke to Ulster Bank on your behalf and they told me that the best value way to transfer euro into sterling, which automatically costs more than transferring money inside the eurozone, is to ….     The cost of sending the money, once converted, via a simple bank draft in your mother’s name is ….


Growing Concern


CL writes from Dublin: I invested in the 2nd Irish Forestry Fund in 2001 and every year received their positive investment statements and new investment opportunities.


In December 2010 I received an end of year report valuing the shares at €1,250. This June I was informed that the Second Irish Forestry Fund had been sold, with a per share maturity value of €1,027, an 18% drop in value.  I was subsequently told by one of the directors that ‘the price they received was the price they received’ when they tendered the company.  The Second Forestry Fund was sold to their sister companies.


I understand from their 2010 report that Forestry Investment experienced slightly lower prices in 2010 based on both land values and sales values due to lower construction activity, but that this would have been captured in the 2010 share value I received last December. I am still awaiting an explanation as to what caused such a dramatic fall in the share value in the five months from when I received the dividend.


Trevor McHugh, a Forestry Investment director, who said that last December’s statement was only a projection of the share value, not its actual market value of your shares.

The formulas used to determine a projected share value and an actual market value, which is what buyers use to determine the price they will bid when the Fund term matures and it is put up for sale, are not the same, he said. The market value takes into account real-time factors on that particular day, and these can – as with any commodity or asset – affect the sale price.

The Forestry Funds are not regulated investment products like life assurance investment or private pension funds and so can make share value projections that would not be permitted for the likes of life assurance funds.

This is only the second of the Forestry Funds to be sold, but my understanding is that the First Fund, which matured in 2010, did not deliver earlier share projections either, though it did achieve an 8.3% annual return for its investors.

All Forestry Fund investors are invited to contact the company, at any time, to discuss their shareholdings, or any investment statements they receive, Mr McHugh said.

You should arrange a meeting with the directors to discuss your disappointment in the return you received.




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The Sunday Times - A Question of Money - 10 July

Posted by Jill Kerby on July 10 2011 @ 09:00

Think twice before you give up funds tax relief

SK writes from Dublin: I am a public servant with 26 years service. I am due to retire this summer and am wondering about converting my AVC’s Pension Fund into an ARF. My reservation is that over the past 26 years my pension fund hasn’t delivered any real returns. Fearing the same with the ARF (with annual management charges around 1.5% and the annual government tax on a notional 5% of the fund) I wonder can I purchase a basket of ETF’s, with much lower managements charges, as an ARF? If not, after the raid by the government on the pension fund, I am considering cashing the AVC’s in, paying the taxes (which means a loss on my 30 years of pension saving) and investing the net cash myself.



Data provided by Rubicon Investment Consulting shows that Irish group ‘managed’ pension funds have produced an average 7.2% return over 20 years,  returns that certainly exceed consumer price inflation over the same period.  AVCs – Additional Voluntary Contributions – would have typically been invested in very similar managed assets, usually a combination of equities, bonds, cash and property. 



You would have been very unlucky for your AVC to make no return over a similarly long period, though high costs and commissions, especially charged by the firm of brokers favoured by public sector unions, would certainly have contributed to the low returns.



There are strict funding conditions attached to investing your AVC in an Approved Retirement Fund or ARF. You must now have a guaranteed pension income of at least €18,000 a year or set aside €127,000 or the remaining fund if it is less that must then be used to buy you an annuity or in an AMRF, an Approved Management Retirement Fund.



If you do decide to buy an ARF or AMRF, there is nothing to stop you from buying into low cost exchange traded funds (ETFs), but given that you haven’t been very successful with your AVC choice, make sure you get proper, fee-based advice about suitable assets or funds with good income or growth prospects. Make sure you also fully understand the tax, inflation and capital risk implications of encashing your AVC. Giving up the tax relief you have received seems unwise because with the right advice, you have almost as much investment freedom in an ARF as you would by investing yourself.



Going global

PW writes from Wexford: As a precaution against an Irish debt default I have thought about either putting €100,000 in an Australian dollar account at 5% with PTSB or with Nationwide International sterling account in the Isle of Man at 3.4%.  Would either of these steps seem reasonable?


To earn a decent return, you must be willing to commit large amounts to foreign currency deposits. Permanent TSB does not offer annual interest rates of 5% on any of their deposit accounts; the highest actual earned rate of return or AER is 4.22% gross for sums of €10,000 or more from their two year, ‘Interest First’ fixed account.  This account pays the interest upfront period. However, a bank spokesperson told me that it will pay you this interest whether you save in euros or a foreign currency like Australian dollars, sterling, US dollars, Canadian dollars, Australian dollar and Swiss franc.



As I have written before, no one in the banks seems to know – or is able to categorically say, what will happen to your savings in the even that there is an Irish sovereign debt default or we go off the euro. Putting your money on deposit in the Isle of Man means it is not held in this jurisdiction or in the eurozone.  There is a currency exchange risk if you hold any non-euro currency and there are costs associated with transferring non-euro currency back into euro.




Golden opportunity


TT writes from Dublin: I read your column with great interest every Sunday and especially now that I am retired and must take even greater care of the 'few bob' that I have. I have been taking careful note of any advice you have given about investing, especially about not having all one's money in one currency i.e. euro.

 I was recently left a small bequest and I was thinking of putting some money into sterling or dollars. I was also thinking of buying some gold or silver. The price of both is quite high at present so I do wonder about the wisdom of investing in them. I know that you have given the name and address of some reputable sellers of gold and silver but I have misplaced them and I was wondering if you could let me know, whenever you get time, either in your column or by email, the names once again.


Gold and silver has doubled in price over the last five years. One cause of this is that the expansion of Americas money supply has shot u in recent years as the American government attempts to repay its massive debts and interest repayments by printing money out of thin air. This lack of confidence in the US dollar, as well as sterling and the euro and the soaring debts in the US in particular means that gold and silver are a safe haven asset that cannot be debased at whim, like paper currencies can be, even if the market price goes up and down. 


Precious metals are not as cheap as they were, and the price can be very volatile. For example, on 25 May gold was selling for an all-time high in euro of €1,083.47 an ounce, but at time of writing had fallen back €40 an ounce to €1,043.56 and it will undoubtedly be up or down today. Nevertheless, gold and silver act as a safeguard – a form of insurance - against both outright devaluation of currencies and inflation. You can purchase gold in both physical and certificate from the Dublin gold bullion dealers, Goldcore.com or other international bullion dealers. You can track the live price of gold and silver at www.goldprice.org.


Meanwhile, if you decide to also transfer euro into other currencies, be aware that you will take a currency exchange risk and that the US dollar in particular is extremely volatile, but that like sterling is being intentionally devalued by their respective central banks to keep pace with their huge national debt repayments – the US debt expands at the rate of $40,000 per second - and are considered to be amongst the weaker fiat currencies.


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The Sunday Times - A Question of Money - 3 July

Posted by Jill Kerby on July 03 2011 @ 09:00

Is switch to earlier flight a case for compensation 



FM writes from Meath:  I booked flights for myself, my wife and two teenage daughters with Aer Lingus onJune 7th to Lake Garda, arriving in Linate/Milan airport, and returning from Malpensa/Milan airport on June 15th at 9.20pm.  


On the 10th of June I received a text from Aer Lingus to say my Malpensa departure flight had been cancelled and we would be re-accommodated on a flight from Linate the same departure day of June 15th, but at 11.25am. Full details were supposed to be in my email inbox which I was unable to access in Italy. We took the amended Linate flight. 


We had chosen the later Malpensa return flight on the 15th because it gave us nearly a full day’s extra holiday, even though it cost more, by approximately €70 per person than the earlier Linate departure flight.  


My problem is that we lost a day’s holiday and extra day car hire by having to take the earlier flight. Meanwhile, I still have NOT received any e-mail from Aer Lingus with the change of flight details even though they said it had been sent.


Where do I go from here? Do I just accept it and put it down to luck or lack thereof?


Nowhere in the Rules for Compensation and Assistance (see section IV) does it state that compensation is paid for loss of either car hire or a higher flight charge where an alternative flight is offered on the same departure day as the original scheduled flight or within the number of hours that pertained in your case. (Compensation claims are time sensitive.)

If you wish to pursue this claim for costs against Aer Lingus you need to send the company your complaint in writing. If you are not happy with their response you can refer your complaint to the Commission for Aviation Regulation at Alexander House, Earsfort Terrace, Dublin 2, quoting Regulation EC261/2004.

Finally, before you go to all that trouble, make sure you also check your travel insurance policy to see if it provides any compensation for the loss of the extra day’s car rental charge, or the extra cost of the original flights because you had to return home sooner.





Wealth and safety


MC writes from Dublin: I have some money on deposit at 3.6% interest in one of the Irish banks. I have been told that it is unsafe there. I have been further advised to invest in German bonds. My query is where can I see German bonds quoted, how can I buy them, what do they cost and what is the advantage in having them?


You can buy German government bonds from a stockbroker directly or with the assistance of a financial advisor. The Bloomberg website provides up to date prices for them.


German government bonds are considered to be very safe because Germany has the strongest economy in Europe and the least likely to default.


The safety of deposits in Irish banks is under question despite the €100,000 deposit guarantee because this guarantee has been made by the Irish state, which is clearly not as good a bet to repay its debts as Germany.  However, like deposits, bonds are also vulnerable to the risk of inflation – that is, the cost of living rising above the interest/coupon that bonds pay. You should ask your advisor or broker about the merits of buying an inflation linked version of German bonds, especially if you aim for more than a short term investment term.




Dollar deals

PH writes from Dublin: You said that financial advisors not recommend exchanging our euro savings into sterling. They suggested other currencies but did not mention the Australian Dollar.

Why was this and how could I go about opening an Australian currency



The Australian dollar, like the Canadian dollar are often included in commentary about  ‘safer’ currencies, especially when compared to the US dollar and the UK pound which have been devalued by their governments in recent years against other countries and especially when valued against the price of gold.


If there is any concern about the Australian and Canadian dollars it is because they are considered to be commodity backed currencies with huge exposure to the economies of China and the United States and could be affected by negative economic events in both those countries. That said, the fact that Australia and Canada have such vast natural resources to fall back upon is one of the reasons why their currencies and economies have so far weathered the global recession as well as they have.


Your Irish retail bank should be able to offer you an Australian currency account (or other convertible currencies). Australia allows non-residents to open deposit accounts, but there is a 10% withholding tax on any return.



Picking the strongest or ‘safest’ currency isn’t easy as they are volatile at the best of times. There is a risk that your Australian dollars (or any other currency) may lose value against the euro and there is no guarantee that your Irish non-euro deposit account would be exempt from any dictat of the Irish Central Bank or government in the event that we went off the euro and reverted to a new Irish pound.   The only way you can avoid that risk is to open a deposit account outside Ireland and some say, even outside the eurozone.




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Sunday times - Question of Money - June 26

Posted by Jill Kerby on June 26 2011 @ 09:00

Debt managment firms lack state oversight 

NM writes from Dublin: My wife was made redundant last week – third time in five years - and we have over €100k from personal loans and credit cards. Our credit rating is not good. The majority of the personal loans arose from a property investment that went badly wrong a few years ago. Yesterday, I met with a debt management company, MoneyVillage that said in most cases they can achieve a 60% write off of unsecured debt.

My concern is that they did not disclose what the downside would be if we used the services of Money Village, apart from not being able to raise any form of finance for 5 years.


The biggest downside is that debt management companies are not regulated. MoneyVillage, Whose website says that it might achieve a 50% debt write-off for clients, has formed a trade body, the Debt Management Association of Ireland with a voluntary code of conduct and practice for its members.

MoneyVillage wants to be regulated, like other financial advisors, but there’s no sign of it yet from the Financial Regulator.


Debt managers often charge an initial fee and on-going monthly fees based on the number of credit institutions with which they will deal on your behalf. This is how MoneyVillage operates. However, you also pay over a sum of money each month to them which they then disperse to your creditors. Without any recourse to the Regulator if things go wrong, this must be an act of faith on your part.


The money advice and budgeting service MABS also provide a debt management service for clients in trouble with creditors and they do it for free. MABS’ resources are stretched, but you should still contact your local office and explain your situation to them. Good luck.


Digging in the dirt


 KM writes from Swords: Is there a limit on the amount of interest that the over 65s can earn on their savings above which they lose their exemption from deposit interest retention tax? Are there other conditions, hidden or otherwise?


If you are over 65 you will be exempt from paying 27% DIRT on the interest paid only if your annual income does not exceed the tax exempt threshold of €18,000 for an individual or €36,000 for a couple. Your bank can help you fill out the DIRT exemption form to the Revenue Commissioners. If your income exceeds these thresholds, your account will be automatically be deducted the 27% tax.


Adviser Advice


RH writes from Dublin:  Is there a list of "good, independent, fee-based advisors to help make the right choices" regarding investing a lump sum? I would appreciate some help in this matter.


 Getting good, professional, impartial saving and investment advice has never been more important. The Financial Regulator requires all advisors – fee-based, commission paid or hybrids – to meet certain basic standards before they are licensed. Recently, however, a new qualification –the Graduate Diploma in Financial Planning, facilitated by UCD in conjunction with the Life Insurance Association, the Institute of Bankers and the Institute of Taxation, with professional examination set by the independent Financial Planning Standards Board in America has been created and is open to any financial advisors, including tied agents of life assurance companies as well as fee or commission remunerated independent ones.


In July between 30 and 50 of the people who participated in the programme will be awarded the title of Certified Financial Planners by the Irish Financial Planning Standards Board. It is the highest standard of financial competence available here. It isn’t known whether their names will be published by the IFPSB but it should be.


Achieving this new international qualification doesn’t mean the holder is fee-based, just that they have achieved a high level of competency. You will need to still determine for yourself if they are independent agents (or a life company) and their level of experience.  A group of the graduates who are fee-based and with a certain number of years experience, led by the advisors at Goldcore Wealth Managers, where I am a client, are forming an association this summer and will be publishing their register.  They intend to provide as much information as possible about each member, their investment philosophy, products and services and their fees.


They say the register should be available later this summer.  Meanwhile, if you need an advisor do you own enquiries. You can start by asking friends and family for their recommendations.


Gift Rub


YM writes from Dublin. I have a daughter living and working in London, I was thinking of getting her to deposit some of my savings in her bank account in London, is there any reason why I could not do this?


If your daughter is willing to allow you to use her account, there is nothing to stop you transferring your money to her, though she may have to satisfy her bank’s anti money laundering conditions. As her parent you can make her tax free gifts of money up to €3,000 here in Ireland and £3000 in the UK.  There is no tax implication if you gift her up to €332,084 under Irish Capital Acquisition Tax regulations – which is effectively what you would be doing by shifting up to that amount to her account. (Over that threshold and a 25% tax is payable on the balance.) If she is a UK tax resident she will have to declare her inheritance in the UK, but the double tax arrangement between the UK and here means she is unlikely to have to pay tax in the UK. (check with Sandra)


There will be a currency exchange and small transaction cost in shifting your money to your daughter’s sterling account. 

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Sunday Times - A Question of Money - June 12

Posted by Jill Kerby on June 12 2011 @ 09:00

Persuade your son to save up for your inherited home

JM writes from Kerry: An aunt in England left me a small bungalow in which my son and his girlfriend now live. He pays me some money, though I don’t collect rent. He wants to buy it but doesn’t have the deposit. His solicitor says he can get a 5% mortgage if my husband and I guarantee the loan. My husband is on disability and we have only €10,000 left on our mortgage and a €3,000 loan with the credit union. What do you suggest?

It sounds as if the sale of this property would be a welcome windfall for you and your husband. I suggest you encourage your son to keep saving the money he doesn’t pay you in rent and to make as large a downpayment as possible towards the market value of this property.


Prize protection

TBM writes from Dublin:  I have €10,000 in Prize Bonds. Am I correct in assuming that if the Irish government is deemed bankrupt my prize-bonds worthless?


Savings from An Post form part of the national debt and are managed by the National Treasury Management Agency, as is the rest of the national debt.

It is impossible to predict what would happen in the event of a default. Savers with An Post accounts would hopefully be spared the haircuts that would probably be inflicted on investors in Irish sovereign bonds. These bondholders would challenge any attempt to shield prize bondholders from similar pain.

Investors in Irish sovereign bonds are being rewarded for the risk of default, with benchmark 10 year bonds yielding more than 10% last week. The NTMA appears to be short changing An Post savers though, by paying 4.14% a year before tax on the ten year national solidarity bond, which would appear to carry an identical level of risk


An Post Anxiety

LM writes from Kilkenny:  We have a lump sum of around €35,000 to put in trust for our 16 year old for about three years. We were thinking of An Post saving bonds as it seems to be one of the safest. There might be better rates elsewhere but it has no dirt tax. How safe is An Post if the country was to default? Is there something else we should look at?



This is a substantial enough sum of money and could be diversified into more than just a fixed interest, fixed term deposit product. Leaving all that money on deposit in Ireland leaves it open to not just a capital risk from higher taxation, confiscation or default, but also from inflation.


However, three years is not a very long time to invest this money in conventional funds because of potentially high set up costs and on going management charges, so any non-deposit option needs to be done on a low cost basis, such as those associated with direct share purchase or ETFs - exchange traded funds that comprise a group of shares that can trade like a single share directly on a stock exchange. Profits from shares and ETFs are taxed as capital gains, but these can be offset by the annual CGT allowance of €1,270.


Your €35,000 is at risk of both taxation and direct confiscation if it is left here in Ireland as well as possible currency debasement and inflation. Short-term government or corporate bonds that produce an annual yield and the return of the capital might be worth considering, though again, the annual coupon – dividend - is subject to tax.  Indexing the bonds to consumer price inflation will help mitigate any effects of inflation.  So would exchanging a portion of the €35,000 for ‘real money’ like gold or silver which can act as a form of insurance against the risk of currency debasement, devaluation and inflation.   


Many commentators believe stocks are overvalued and/or very difficult to accurately price because of they way governments and central banks have inflated the money supply and created so much new credit and debt since the global financial crisis began. Investing €35,000 – or €350,000 – safely, is not easy and many advisors are focussing on wealth protection over wealth creation.


Hire a good, independent, fee-based advisor to help you make the right choices.


 Foreign Pension


JH writes from Co Limerick: During the 1970s I spent over three years working in Germany before returning to Ireland in 1980 when I took up a teaching position. Is it possible to claim a pension on the basis of the contributions I paid during this period or can I have the money refunded or is the money just lost?


If you worked and paid social insurance contributions in an EU member state like Germany then you may qualify for what is known as a pro-rata pension. This means that the state pension you receive from age 66 will combine your Irish and German social insurance records. 


To find out if you qualify for the German pension contribution, contact the Pensions Division of the Department of Social Protection in Sligo at least six months before you reach your retirement age: State Pension (Contributory) Section, Social Welfare Services, Department of Social Protection, College Road

Sligo.  www.welfare.ie  

You will need to fill out a form EUP 65 which you can download here: http://www.welfare.ie/EN/Forms/Documents/EUP65.pdf



Northern Banks

MC writes from Dublin: Can you advise on a bank in Enniskillen, Northern Ireland in which I could open a deposit account?   

Enniskillen banks include First Trust Bank, which is owned by AIB; Northern Bank which is owned by Danske Bank and is a sister bank of NIB; Bank of Ireland and Ulster Bank, which is owned by Royal Bank of Scotland, part of the Lloyds banking group. There are three building society branches in Enniskillen, Abbey National, Nationwide and the Progressive building society, but according to Nationwide UK Ireland, under building society rules, you must be a UK resident to open a building society account in the UK. 

Before travelling you should contact the bank branches to see if they will facilitate your opening an account.  You can find the contact numbers for all the above on this business website: http://www.ufindus.com/banks/enniskillen



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