Jill Kerby

RENT A ROOM SCHEME ONLY APPLIES FOR OWNER OCCUPIERS

PMcC writes from Dublin:  I am being transferred to the United States for at least two years.  Our two children no longer live at home and we now have two foreign students living here under the Rent-a Room scheme.  The younger of our children is also in college, doing post-graduate studies but is in rooms. I am wondering if we can maintain our Rent-a-Room scheme if we no longer live here, even temporarily. If our daughter moved back in, would that mean that we still qualify?

The Rent-a-Room relief scheme, which requires you to register with the Revenue, is designed for owner-occupiers, that is, it must be occupied by you as your principal private residence. If you and your wife own the property, and she remained in Ireland as a full-time occupant of the house, she could still collect half the rent, tax-free.  The maximum tax-free amount that can be earned in any year is €10,000 so she could collect €5,000 under the Scheme.

 
SHOULD I CASH IN MY BUY OUT BOND at JUST 55?

DD writes from Galway: I cannot seem to get a clear explanation from my pension provider regarding my personal retirement bond (PRB) options.  Its value today is €33,000 and I am 55 years of age. It will only provide me with a tiny pension at retirement. I can cash it in anytime now as the original employer is no longer in business. I have no other policy or pension and am unemployed. When is the best time to cash it in? If I leave it until my retirement, will it affect my pension entitlements? How much tax will I pay?

Your private retirement bond (PRB – also commonly known as a buy out bond is either purchased as an option you exercise if you leave your employer’s service and do not want to leave your pension fund with it until retirement, or, by your occupational pension trustees on your behalf if the company scheme is being wound up. 

The current value of your Buy Out bond at just €33,000 is very low. I suspect it is less than one and half times what your final salary was with your ex-employer, that being the multiple of salary that everyone in an occupational pension can claim, tax free from their pension fund (or buy out bond in your case) when they retire.

With bond rates so low – and these rates determine the size of the pension income you would receive – annuitising just €33,000 right now would produce a pretty insignificant annual income stream – perhaps no more than €100 a month. Inflation will eat relentlessly away at its spending power.

Even if your bond was worth €50,000 in 12 years time when you reach the official state retirement age of 67 in your case, it would still only produce an income of about €200 a month at today’s bond rates. We don’t know what the state pension will be worth when you retire, but such a tiny private pension income is unlikely to have much of an impact on the tax you will pay (if any) if your only other source of income comes from the state pension.

Finally, I hope you can get some good, impartial advice to about what to do with the €33,000 to help supplement your existing income until find new employment.  It could possibly have an impact on future social welfare benefits if it is included as a means-testing exercise. Your local Citizens Advice Centre or credit union should be of assistance.

TOUGH INVESTMENT CHOICES FOR A WELL OFF WIDOW

IM writes from Dublin: I am 61, receive the widow’s pension, do some freelance work and hope to shortly obtain my half of my late husband’s pension, the other 50% of which is to go to our children. It is a considerable sum and why concern is how to invest it wisely fro one going income and sort of reserve fund. I still have a mortgage and monthly repayments of about €1,200 but after doing some research I was thinking of putting perhaps a third into a managed commercial property fund for income; tax free prize bonds for a small amount of income, a woodland scheme, perhaps a rental property in the UK, where some of my children live and some precious metal coins.

You have some big decisions to make, which can’t be easy after a bereavement, but I’m not sure that the different options you’ve mentioned would be considered very suitable, or diversified by any of the good, fee based advisers that I know. For one thing, your list is heavily weighted towards property and commodities (timber and precious metals) but there is no mention of well-priced equities or lower risk bonds. (You might want to consider paying off your family home before buying any more property.)

Meanwhile, the tax-free Prize Bonds are a form of gambling that pay no interest or dividends of any kind and are highly vulnerable to inflation. The number and value of Prize Savings has been slashed in recent years by NTMA and nationally produce an average ‘yield’ for holders of no more than 2%.

A good, independent, experienced and fee-based adviser will take the time to explain what a properly diversified and balanced portfolio might look like, relative to your needs, expectations and risk profile.  To get the best out of such a consultation, make sure you go prepared with a proper schedule of

all your income, assets, taxes and household expenditure. List all your existing financial contracts, investments, debt and give some thought to both your short, medium and long term expectations. Be sure to ask in advance about the advisers fee. 

And keep in mind that you are under no obligation to the adviser to act on any of his/her recommendations. Take your time. This is your money, and you are the one, not the adviser, who will have to live with how it is finally invested.

GP TALKS ON UNDER-SIXES GET OFF TO A SICKLY START

As the row heats up between the government and general practitioners about the provision of free GP care for the under-sixes, parents will be forgiven for wondering exactly how much they will have to pay if their child needs medical attention from this summer.

The Health (General Practitioners Service) Bill will be passed in the next couple of months by the Oireachtas, the government has said, and free-GP care will then be available to the nation’s 420,000 under-sixes. Meanwhile, surveys by the family doctor’s professional organisations claim they will not accept the revised draft contract. 

Those who do not sign, warned Minister of State for Primary Care, Alex White recently, could lose their existing general medical service (GMS) roll of under six patients.

If that happens, all parents will have to find €50 - €60 to pay for their child’s GP visit.

This isn’t a good start for the ‘talks about talks’ expected to get underway shortly between the minister and doctors, though all sides seem to agree that free primary care for this mainly healthy age group is a good idea and should be affordable since most children are healthy and shouldn’t be a drain on current HSE finances. 

Out of an annual HSE budget in excess of €13 billion, just 3% of it now goes to family doctors. Existing child medical card-holders account for just €28m of that vast budget and the Department of Health estimates that just €37 million is required to fund acute and chronic care for all under-sixes.

However, it is this definition of care that is behind much of the GP protest about the revised contract.

The €43 per child per annum fee that GP’s currently receive from the HSE is supposed to cover the cost of acute care only, that is, visits and treatment for more serious illnesses or condition, not the usual seasonal colds and flu viruses, bumps, bruises and cuts. Family doctors say that single fee covers every visit, no matter how frequent or trivial.

The irony is that while 97% of the members of the National Association of General Practitioners have voted against this draft contract (in which a higher annual fee of c€70-€75 has been suggested) they say they would support caring for all under-sixes under a free medical card system if they had the proper resources.

Too many parents, they say, postpone bringing children who are genuinely unwell and need urgent treatment to their surgery until the last minute because of the cost of the fee.

The revised contract addresses the cost disincentive but will result in too many extra consultations that the average practice will not be able to handle. The result will be less time to treat patients who really need their attention, like the chronically ill and especially the elderly.

GP’s have already seen a 38% reduction from their share of the HSE budget in recent years amounting to €160 million, yet they conduct 95% of all medical consultations with no delay.  In Northern Ireland and the UK, where GP consultations are free, they see about a third more patients. (GPs get 8% of the NHS budget in Britain, which they say is also “woefully” inadequate.)

Last week the HSE figures on how long patients are waiting to see specialist consultants showed that children are faring particularly badly: by the end of January 2014, 1,464 had been in the queue for a year, up from 1,282 in December.

The new under-sixes payment to GP’s is expected to be approximately €74 per child per annum.  Some surveys in places like Northern Ireland and the UK where all family doctor visits are free, but access is usually by appointment, except for emergencies, the average number of child consultations increases by about a third.

Meanwhile, here in Ireland, the over-70s with gross retirement incomes of €500 per week or €26,000 per annum or €900 per week for a pensioner couple. Or €46,800 per annum still automatically qualify for a full medical card.

Before parents condemn the GP’s for resisting this new contract, they should know that there is already a shortage of family doctors. One in eight are aged 64 and emigration by newly qualified doctors and general practitioners is the highest for decades, according to the Irish Medical Organisation, which is holding its annual conference this weekend.

If the resource problems are not addressed, it said, the revised contract will hasten the retirement of many older GP’s and discourage young doctors from taking their places.

Caught in the firing line between the state and doctors are children and parents who may have to a new, participating GP if a deal can’t be worked out and their own doctor leaves the GMS scheme. 

Meanwhile, parents to may have to keep doling out €50 or €60 fee a visit should review the outpatient benefits offered by their private health insurance policy, if they still have one.

Families that have already dropped their cover might want to investigate cash health plans like HSF.ie (Hospital Saturday Fund) in which cash payments are made towards GP and other out-patient visits in exchange for a single family premium.

Working parents without any insurance cover or medical card should always keep their receipts and claim back the standard rate tax relief from the Revenue for their healthcare expenses.

With compulsory universal health insurance payments to be introduced from 2019, in which primary care will be a pillar benefit, this funding row could be just the first of many such confrontations.

Ends

Sidebar

Free healthcare for children is standard practice in Britain and many other European countries. It was also the starting point for the creation of Canada’s Medicare system back in the 1940s.

Today, all Canadians receive free primary care from family doctors who increasingly work within teams of practitioners in neighbourhood clinics.  Once they fulfil their time and residency qualifications, the 10,000 young Irish who are now setting off for Canada with their two year working visas will no longer have to pay to see the GP, or receive other primary care services.

Even when I was a child in Canada in the 1960s and ‘70s, the Canadian family doctor was paid per patient visit by the provincial health authority. 

All GP’s operate as private practitioners and run their own individual practices or health clinics as private businesses. They bill the province for a range of qualifying treatments and services, which are subject to regular contractual negotiation.

It can sometimes be difficult to find a GP that will add you to their patient lists, and in poorer maritime provinces like Newfoundland, but also in some deprived urban areas in richer provinces, waiting lists can be long and patients sometimes have no choice but to resort to hospital accident and emergency departments for treatment.

Unless it is an emergency, often determined over the phone by the practice nurse, Canadians have to make appointments to see their GP. Family members who live Montreal, Ottawa and Toronto tell me that you can usually expect to be seen within 48 hours if you are sick. (By then, a nephew with young children told me, “you might have already resorted to visiting the pharmacist for his opinion.” Non-hospital prescriptions are not covered by the Medicare system.)

Appointments for non-acute consultations like check-ups, dermatological treatments, general aches and pains can take weeks or even months.

An ageing Canadian population, especially amongst the more affluent baby boomer, means that queues for elective procedures like hip and other joint replacements, and common optical and dental procedures have grown very large.

Those who can afford to buy supplementary risk-rated private health insurance to bypass the Medicare system and even to secure semi-private and private accommodation in public hospitals, once you get in.

Many more private clinics and hospitals have also sprung up across Canada in the last 20 years, but there is no public funding available and only cash buyers or the well-insured have access. There is no queue jumping over the public hospital waiting lists.

The Canadian public health system is under considerable pressure from its ageing population and rich provinces like Alberta and British Columbia object to the Medicare transfer payments they make to the poorer ones’ schemes.

Yet most Canadians claim to be satisfied with how the free primary care system.  Family doctors (and consultants), who are self-employed are also mainly satisfied with their status and have no desire to be directly employed by the state.

The primary Medicare system in Canada, they say, is relatively efficient and relatively cost effective because it avoids using insurance companies as middle-men.

Which, ironically, is exactly what is being proposed for currently private, but contracted Irish family doctor’s services from 2019 when the new risk-rated universal health insurance system is supposed to begin.

GUARANTEEING A DAUGHTER’S MORTGAGE IS NOT CHILD’S PLAY

JB writes from Cork: In 2006 my daughter was approved for a mortgage of €200,000 to purchase an apartment for €245,000.The shortfall of €45,000 was being provided by me by way of a cash gift.  Her mortgage provider, made the loan subject to me and her father signing their document, confirming that I had made a gift of €45,000 and that I had no interests in the property or in the proceeds of its sale etc. They also required me to sign a “Continuing Guarantee” for the amount of the mortgage.

 Legal advice was along the lines that the bank was just requiring another piece of paper and that the loan would not be disbursed unless we signed. I am not mentioned on any title documents, and have never received nor been advised by the Bank of my liability. No financial statements were requested from me and as far as I know, my credit rating was checked, even though I was unemployed.

 My daughter has not defaulted in her payments and has over the years reduced the outstanding principal. While I am not concerned, I have recently decided to get my affairs in order and would like to resolve this issue and have the guarantee released. Perhaps you can comment on this and advise what action I need to follow.

Your legal advice back in 2006 sounds like it was very cursory, but that doesn’t surprise me – that’s often how the mortgage approval process was undertaken. What you and your husband appear to have signed was a guarantee for the payment of the mortgage to the end of its term, and from what you say, the solicitor failed to outline all the implications and consequences of this commitment.  You now need to have the contract reviewed by a new solicitor whom you trust will be more conscientious and thorough. If it is full guarantee, said a solicitor I consulted, you will remain on the hook for the balance of the mortgage until it is paid off.

“The fact that your reader was unemployed in 2006 is irrelevant if the bank was satisfied that as a couple they had sufficient resources other than income to pay the mortgage if the daughter defaulted,” the solicitor said. “This would include having to raise a loan on, or even to sell their share of the family home.”

 You can always ask the lender to release your from this guarantee, based on your daughter’s payment track record and her current income and employment.  Or you can repay the loan yourself, if you have the means. If you want your daughter to repay that debt, she will have to raise another mortgage/loan, so finding out if that is possible should also be part of your financial plan.  Speak to a good financial/mortgage adviser.

REVENUE DOESN’T CARE WHERE YOU SPEND YOUR €€ SO LONG AS YOU PAY YOUR TAXES

MS writes from Dublin: I am looking at buying a commercial property in the UK through a UK Registered company.  As I am domiciled in Ireland, will Revenue allow me to buy a UK property through a UK registered company? This would mean that it will not affect my personal allowances and I could avoid paying tax on rents at the higher rate of tax in Ireland as well as USC charge. I don’t have enough money to buy it through my pension.

The Irish Revenue have absolutely no authority to prevent you from spending your money wherever you wish. However, as an Irish tax resident if you remit any income or profits from your UK company back to Ireland you will have to declare that income on your Irish tax return and pay the appropriate tax.  You also need to check with a good accountant or tax adviser about any corporate tax liability you may have in the UK before you proceed with the purchase and how double tax agreement treaty with the UK might apply. Just make sure your tax advice is comprehensive: for example, from next year capital gains tax will be liable on the sale of UK property held by foreign non-residents, and tax-free thresholds that usually apply between married couples for inheritance tax purposes do not apply to non-resident asset holders in every case.

B.I.K. TAKES SOME OF THE GLOSS OFF GREAT EMPLOYMENT BENEFITS

CN writes from Dublin: I am 21 and have been offered a graduate entry job with US multinational that begins in July. The salary is €32,000. On top of that I will get paid health and dental insurance, an annual travel insurance policy, life insurance and income protection insurance. Do you know if I would be taxed on all these benefits as benefit in kind and how much tax will I have to pay. I’m not overly knowledgeable on tax and am finding it hard to read between the lines on the Revenue website.

First, many congratulations on getting such a great job and with a company so committed to providing important benefits to its employees.

The life insurance and income protection insurance you will receive is not subject to benefit-in-kind (BIK) liability. It is most likely part of the company’s occupational pension scheme, of which you are no doubt automatically a part. Find out more about the pension, as it will be the most valuable benefit of all and remains one of the best tax deductions available. Anyone starting a pension at your age (and maintaining annual contributions of at least 10%-15% of gross pay) will have no retirement income worries at retirement, all due to the magical combination of time and money.

The health, dental and travel insurance benefits are all subject to BIK, says tax expert Sandra Gannon at TAB Taxation Services in Dublin (www.tab.ie)  “The annual cost of these benefits will be added to your reader’s annual salary and be taxed normally. If they push him over the €32,800 standard rate tax threshold he will have to pay 41% income tax, 7% USC and 4% PRSI.  In the case of the health insurance, your reader will have to claim the 20% tax relief directly from the Revenue, as he is not purchasing the policy himself. The BIK, meanwhile, is deducted and administered by his company accounts office, so he doesn’t have to take any other action.”

 The 52% tax on these BIK benefits takes some of the pleasure out of receiving them, but nevertheless you are getting valuable insurance cover at a very enviable (nearly) half-price discount. Long may it last.

ENDA LOOKS INTO HIS CRYSTAL BALL … HEY PRESTO…SEES A €248 WATER CHARGE

You really have to wonder what kind of PR advice the government is getting these days. 

A political coalition is always a tough gig, especially when the minor partner, which once claimed (in a different century) to the champion the workingman and the poor is being hammered in the polls.

But this FG/Labour coalition keeps scoring one own goal after another, the latest being the lack of cabinet consensus over the new water tax…er, charge.

As ex-Green ministers, Sinn Fein and Fianna Fail deputies and various independents keep reminding us, the primary purpose of introducing water charges was to encourage conservation and the efficient delivery of clean water.

From October, when the ‘charge’ begins and then from January when the first quarterly bills must be paid, only about a quarter of our 1.6 million households will have metered bills. Everyone else will get an estimated one, based on the property size, numbers in the household and which end of a subsidy you are on.

So much for a ‘free’ water allocation for all.

The Troika informed the government(s) soon after its arrival in 2010 that as the last remaining EU country with no water charge, we had to introduce one, or else.

The paymasters didn’t outline how this had to be done, which is too bad because one of them should have pointed out that plugging the leaks – about 40% of clean, treated water never makes it to our respective taps – might be a good place to start.  The simultaneous installation of meters as the repair work was being done would also make sense after which accurate, representative bills could then be delivered.

Personally, I wouldn’t even have minded paying an estimate if I could see that real progress in upgrading the system was being undertaken.

We now know that the set up costs of Irish Water, with its legionary numbers of consultants, a payroll packed with thousands of existing, unionised local authority water workers, every one of whom will keep their employment contracts for another 12 years, and the installation of meters (which will cost €570 million alone) is going to make the cost of water here just as expensive as electricity and gas - that is, more expensive than in nearly every other EU country.

After a very acrimonious cabinet meeting and a quick glance at his trusty crystal ball, the Taoiseach said that we won’t pay more than €248 a year on average. (That figure is closer to half the average charge paid by most EU households.)

The math doesn’t add up, of course: when you multiply 1.6 million households by €248 you come up with €397 million.  Irish Water needs €720 million a year in operation costs and €500 million a year to refurbish the system. (Another €500 million plus has been loaned by the Pension Reserve Fund to install the meters.)

Since so much water thunders down from the skies onto my roof every other day and then courses through the gutters back into the ground (and fills my garden water butt in about three minutes) I’m looking into ways to not just to conserve water but to bypass Irish Water.

I’ve come across a company called Waterways Environmental in Balbriggan (waterwaysenvironmental.com) that will harvest your rainwater by installing an underground tank in your garden (or attach it to your house), then pump it back in for non-drinking uses like washing machines and toilets.  It claims to reduce mains dependences by 50%.

For a higher price – and full domestic packages for a typical three-bed semi-d, the water will cost under €1,500 I was told – they’ll install filters so that you can also drink and shower with the harvested rainwater.  This represents about 3-4 years of the more likely Irish Water annual charge.

As this latest state ‘service’ fiasco gains ground, I expect we’ll see all sorts of helpful new, private sector water service companies spring up. And if they don’t deliver what they claim… they’ll go out of business.  

Meanwhile, just in case there’s any confusion outside the Cabinet, Irish Water is a monopoly… with a great future ahead of it.

WHAT ANOTHER FINE MESS

It is a lending requirement that if you have a mortgage, you must have a mortgage protection policy so that in the event of your untimely death, the bank gets its money.

If you stop paying your mortgage, as a terminally ill woman, an AIB customer discovered recently, and you also stopped paying the separate mortgage protection policy, the bank will come after your heirs to pay off the mortgage balance.

That particularly sad case, which involved insurance premium arrears of just €260, which is probably about a year’s worth of premiums, was highlighted by an MEP candidate, FG senator Deirdre Clune.

After the intervention of the Irish Mortgage Holders Organisation, a charity, which is contracted by AIB to process their tough mortgage arrears cases, “an arrangement” have been agreed and the mortgage is expected to be cleared.

Every debt and insolvency manager has clients who have stopped paying this insurance. Every one of their dependents is vulnerable to a substantial mortgage debt if the policyholder dies uninsured. 

The IMHO can’t fire fight every sad case, nor should they. Why would anyone (let alone an indebted mortgage holder) bother to pay this insurance if the banks took the hit every time a family man or woman died?

The word needs to get out that whatever about being able to pay your mortgage, you need to keep paying the mortgage protection insurance otherwise this terrible debt will be paid from the forced sale of the property or from another life insurance benefit (if you have one).

What another fine (property) mess. What a way to run an historic debt crisis.

PUNTING ON 'CHEAP' BANK SHARES IS NEVER A SURE THING

PD writes from Cork: Could you please advise if buying AIB or BOI shares is a good idea at this time?

The best time to buy shares – or any asset – is when they are cheap recommend astute investment advisers.  AIB and Bank or Ireland certainly fall into that category if you are comparing their current prices of c13 cent and c28 cent respectively to their peaks of c€23 and c€18 back in 2007. 

However, these penny shares represent banks that are still loaded with bad debts and mortgages assets of dubious value. They continue to report annual losses in the hundreds of millions of euro. Let us not forget that they operate in one of the most indebted countries in the world. State-owned AIB, and BOI are both still a long way from lending at anything resembling normal levels (which is how banks make profits) or from paying decent dividends to shareholders. The ordinary retail shareholders who were wiped out between 2007-2010 can probably never realistically expect to recover their losses.

Meanwhile, Wilbur Ross, one of the prominent American vulture capitalists who invested in Bank of Ireland has already sold off a part of his holdings: the nature of these corporate bottom feeders is such that we probably shouldn’t expect them to stick around for the long term.

The same investment advisers that remind clients to buy really good quality shares at low prices, inevitably suggest that you also spread your money and investment risk in a large collection of good priced assets. Aside from equities, these also include properly weighted bonds, cash, property, commodities, etc and that they include wide geographical areas.  Picking a single stock or two out of the tens of thousands on public markets, they would suggest, is just another form of gambling.  Even Warren Buffett, one of the world’s greatest stock pickers warns that ordinary folk who don’t have his expertise (or capacity to absorb stock market losses) should stick with diversified, low-cost indexed funds.

Finally, and this is probably the best advice of all, never gamble with money you can’t afford to lose. (Just ask Sean Quinn.)

REST ASSURED, PENSION SAVINGS ARE NOT MEANS TESTED

MP writes from Co Carlow: My husband is reaching old age pension age. He will be getting a Contributory Old Age Pension. I do not work outside the home, and am 55. I will be means tested as his dependant. The only savings I have of my own are a PRSA with a current surrender value of €11,000 and another pension policy worth €31,000. Neither of these can be cashed until 2019-2020. How can the Department of Social Protection count these as capitol for means testing as I have no access to them until 2019-2020.It would seem that no woman who does not work outside the home should bother having pension funds in her own right.

 Your pension funds are safe from means testing. All spouses, civil partners or cohabitants of recipients of contributory state pensions, who apply for the qualified dependent’s allowance will be means tested, for both income and capital assets, like savings, investments and property (though not the family home.)   However, the value of a pension fund, states the Department of Social Protection, “is only accessible for means when a person has access to the pension fund. The rules of a pension scheme will determine what and when benefits are payable from the scheme.” 

From what you’ve written, your pension income becomes available in five years time, after you turn 60. Then, says the DSP, your “pension payments will be treated as income for means purposes. The value of any cash otherwise available from a pension fund will be assessed on the basis of the capital valuation of that fund.”  Until then, presuming you continue to own no other assets and don’t earn more than €100 a week, which is disregarded, you will qualify for the full dependent’s allowance of €153.50 a week.

€50,000 WEDDING GIFTS TO CHILDREN ARE TAX-FREE WITHIN LIFETIME THRESHOLDS

MH writes from Dublin: My husband and I have given each of our three children €3,000 this year. My son was married last July. Is it possible to give him another €50,000 tsx-free within one year of his marriage? 

The €3,000 gift is tax-free and can be given to your son (or anyone else you wish) every year and it doesn’t have to be reported to the Revenue by either party. This is a very tax efficient way to distribute funds to your loved ones during your lifetime.

You can certainly give your son another €50,000 as it is well within the current, €225,000 lifetime tax free threshold between parents and children and the €3,000 gift will have no impact on the threshold. The fact that the gift would be given during his first year of marriage is irrelevant, but his lifetime tax-free threshold will now to reduced to €175k. In the event that either of you leave him an inheritance in your wills, he will have to pay capital acquisition tax or CAT, currently 33%, over that aggregate total of €225,000. A good tax adviser or your family solicitor can take you through all the details.

Ends

WHY GP'S ARE MAD AS HELL AND WON'T TAKE IT ANYMORE

If you were on the verge of a heart attack or just needed a prescription filled last Wednesday night, the Double Tree Hilton in Dublin (aka the Burlington) was the best place to be.

Nearly 500 Dublin GPs were gathered to make their feelings known about the draft GP contract that junior minister Alex White claims will be amended and introduced this summer and will introduce free GP care to all children under age six.

Either the minister has found hundreds of millions of euro to solve all the problems related to their primary care service, or he just hasn’t been listening to why they insist the system he is proposing is unfair, unworkable and even immoral.  (Healthy children will take resources from the sick and chronically ill.)

First, some background. 

The NAGP have been holding their town hall-style meetings all around the country since the start of the year…to packed houses. TDs and local representatives are finally paying attention to their complaints about the existing system.  They’ve even found support from the establishment, College of General Practitioners and Irish Medical Organisation (IMO).

Every meeting has set out the fundamental issues that make the idea of extended “free” GP visits to the under-sixes – which the HSE insist will only cost the taxpayer another €37 million – so untenable.  Until these issues are addressed, they say that the introduction of universal health insurance (under which GP care will be a minimum benefit is also impossible:

-       Primary care services have seen cuts of €160 million in the last four years – up to 38% of the original budget - despite becoming a ‘priority’ for the health system. Another €70 million in cuts is earmarked for GP services.

-       Up to100 GP practices are reportedly insolvent as a result in these cuts, including one of the biggest primary care clinics in Dublin, that were set up by GPs prior to the start of the cuts.

-       GPs see 95% of all consultations/referrals as front-line practitioners, but get just 3% of the HSE budget. (This compares to 8% in the UK, where ‘free’ GP care is universal but even that percentage is considered inadequate, according to the UK College of General Practice.)

-       There are 24 million GP consultations in Ireland every year.

-       The percentage of GPs in practice here is 50% of the international norm. (The number of consultants is 40% of the norm.)  Places in the College of General Practitioners are now failing to be filled and young qualified GPs are emigrating in large numbers.

-       It takes over 10 years of study to become a General Practitioner.

-       When the GMS/medical card contract was first set up 40 years ago it was designed for acute care only; 23% of the population had cards. Today, 44% of the population have full or GP only medical cards, including over-70s with individual gross income of up to €500 per week (€26,000 per annum) or €900 per week per pensioner couple. (€46,800 per annum.)

-       The OECD recently ranked Ireland’s health service as one of the most inefficient in the world.

-       The HSE employs 110,000 people, greater than the population of the city of Galway. Over 2,000 of them are employed in the HR department.

-       The GPs challenge a HSE report that 1,000 GPs have received €250,000 per annum in GMS payments. They claim that a GP practice with an average panel of 880 patients receive €59,000 gross per annum after practice expenses such as rent/mortgages, hiring receptionists, practice nurses, locums and equipment, utilities and insurance.

-       41% of GPs have been unable to replace equipment, 56% were unable to afford locum cover.

-       New equipment grants stopped nearly 15 years ago.

-       The proposed average GMS payment per under six will be worth c€75 per annum, regardless of the number of visits. Treatment is expected to include annual health checks per child which include taking blood pressure and noting weight and height changes, which they describe as “entirely unnecessary” for all under sixes. Unhealthy children already receive this monitoring.

DOGGED PUSH

The high headline cost of GP visits, especially in the main cities for non-medical card holders is driving much of the Ministers’ doggedness in pushing ahead with this new GP contract and free cover for the under-sixes. 

Middle income families have been hit hard by all the additional taxes, levies and obvious and hidden price increases since the economic crash and in which the state has played such a direct and indirect part in driving up: I refer to health care and insurance, energy, transport, education, banking and legal services. 

These angry GP patients will be voting again soon in local, European and general elections and they are mad as hell.

The dysfunctional, wasteful HSE and Department of Health and their political masters need as many scapegoats as they can get and GPs and their private fees (and the private health insurance companies) are chained to the stake, just waiting to be devoured.

The problem for the GPs, is that they are caught in a deeply dysfunctional system that was not their doing, but in which they are now trapped.

In our two tier health delivery system they are both employee and self-employed.

They are the recipients of a medical education in Ireland at a relatively low financial cost (to them), yet are not required to repay the state for that cost with a compulsory term contract. Once in practice, they collectively receive over €400 million in fees but as that pool of fees falls are still required to run their own practices as private businesses and for profit.

Meanwhile, though they object to cutbacks in previous contract terms they still want (and still receive) a private pension from our bankrupt State for their GMS service.

The angry, disillusioned GPs who have been attending the NAGP town hall meetings – as well as the politicians – have run out road. 

Either they agree to a mutually agreeable and affordable new contract soon or they don’t.  A contract of some sort looks like it will be introduced, with or without the GP’s consent.

They can opt in and tighten their binds to the state, or opt out and treat all their patients as private customers.

But if they opt out they’ll need to adjust their own earnings and lifestyle expectations drastically since this time, the real market of ordinary Irish people, and not the overpaid, out of touch political bureaucracy will dictate what they can afford to pay for their services.

Meanwhile, the younger GPs can always emigrate. Some older, solvent ones can retire to those golf courses where so many people seem to think they idle away every other afternoon.

But if they can’t and join the ranks of the unemployed, they can always ask Joan Burton if she can find them a re-training course …or maybe a JobsBridge place.

HOW CAN I STOP MY BANK UNFAIRLY RUINING MY CREDIT RATING?

 TA writes from Co Mayo:  I work as an office manager and my husband is a self-employed contractor whose company showed a loss of just under €2,500 last. We are both in our 30s and have two young children.  He also works on his father’s farm part-time but together we take home about €2,300. We have 10 years remaining on a 20 year mortgage with Bank of Ireland and are now on a variable rate of 4.5% after coming off a slightly lower fixed rate. The repayments are in the region of €895 a month.

 We approached the bank for a five year extension to our mortgage. We completed a Standard Financial Statement and it showed that our outgoings are nearly €3,000. The bank refused and instead offered us an 18 month repayment of €654. Our issue is that their offer states  “The Lender may record the alternative payment arrangement set out in this form with the Irish Credit Bureau (ICB).” We have never been in arrears and I am not happy with this because I am afraid our credit rating could be affected. Any advice would be welcome.

The insolvency and bankruptcy expert, Paul Carroll of Neo Financial (www.neofinancial.ie) told me that your request to extend the term of your mortgage “is not unreasonable” in light of the difficulties that small business contractors have experienced in recent years.  A note from the bank to the ICB about this forbearance offer, said Carroll is not as serious as one that notes a customer has missed mortgage payments “but it would alert other lenders that your readers have had difficulty paying their loan.” The effect could be the same – you could be refused new credit, or the interest you are charged could be higher.

 According to Carroll, you could try and call the bank’s bluff by telling them that you will consider applying to join the ‘pre-arrears’ Mortgage Arrears Resolution Process (MARP) if you believe you are at risk of going into arrears in the future and so need some forbearance. (See http://www.keepingyourhome.ie/mortgage_arrears_resolution.html )  They may prefer not to have you join that long list of customers.

 If it comes to that, once in MARP, you can try to formally negotiate what you believe is a more sustainable solution with the bank, says Carroll. You must still try to keep paying your mortgage to the best of your ability and communicate in writing with the bank, keep all email messages and log all telephone calls. You might also want to contact your local MABS office for advice, or seek the help of financial adviser who may be able to intervene with the bank on your behalf. Unfortunately, the bank may still report - a more favourable - forbearance measure to the ICB.

Good luck.

WILL I HAVE TO PAY US AND IRISH TAX ON MY AMERICAN PENSIONS?

 EC writes from Dublin: I worked legally in the US for 14 years as a member of a construction union and for the required 10 years to receive a pension. I receive a statement every year here in Ireland from the union stating my entitlement. I also have an annuity fund that I also receive a statement for. As I am not an American citizen, will that affect my payments in any way when I look for them? My wife and kids are all American citizens and we have lived outside the US for 12 years now. I have no legal status there anymore.

Since you are a tax resident here (and, I presume domiciled here, which is usually based on where you/your father were born and where you consider your home) if you revert your US pension income back to Ireland it will be subject to Irish income tax. Normally, foreign private or occupational pensions are paid gross to Irish resident recipients. (Government pensions are usually taxed in the original country.) If for some reason your US pension was already taxed before you received it, under the double tax treaty with the US, you would be able to claim a tax credit here for any US tax you pay.

Irish pensioner couples today are not liable to income tax if their annual joint income does not exceed €36,000, so assuming this rule still applies when you retire, you may not be liable to any Irish income tax if your joint income does not exceed the tax-free threshold that year.  However, if your US pensions are taxed before your receive them, you will not be able to claim any Irish tax credit as you will have paid no tax here.

You should contact your old union, or an accountant or financial adviser who is familiar with the way in which private pensions are taxed in the US for a definitive answer. Finally, the adviser can also double check to ensure that your wife and any adult children are tax compliant with the IRS. The 2010 FATCA legislation (regarding the tax position of foreign assets) means that Irish banks have an obligation to report the names of American customers to the US tax authorities.

MY SON ISN’T SURE IF HE SHOULD STILL BE PAYING TAX HERE

EO’B writes from Dublin: My son is working for a financial institution in the UK since 2010. He has his property here rented out and has paid property tax and he also paid tax on the rental income. My question is, should the rental income be taxed as he is no longer resident here for tax purposes?

Since your son owns an Irish property, despite living in the UK and being tax resident there, he is still liable to pay Irish income tax on his rental income. If he remits the income he earns from his Irish property to the UK, he is also obliged to file a UK income tax return. However, the double taxation treaty between Ireland and the UK means that he should be able to claim a tax credit in the UK for his Irish income tax payment.  He should speak a good tax adviser (or a company like Taxback.com) to make sure he hasn’t been paying tax twice or to help him seek a refund if he has overpaid. 

Do you have a personal finance question that needs answering? Write to me @ jill@jillkerby.ie

Negative Equity Mortgage?  No thank you.

The property market is doing as Professor Morgan Kelly predicted it would: it is taking back between 75%-80% of the spectacular prices it achieved at the peak of the bubble.

Just on cue, the government and banking industry that did everything it could to inflate that bubble, is still trying to manipulate the correction, in an effort – they say - to ‘break the logjam’ of sales.  This time it will permit heavily indebted owners in negative equity to carry their debt with them to yet another property, which will also continue to fall in price until the correction is over.

The problem is well documented: tens of thousands of mostly younger buyers purchased overvalued houses with artificially low credit. Their affordability levels - their income – was grossly overestimated if property prices fell, interest rates went up or their incomes dropped.

All three happened. The economic collapse revealed how uncompetitive the country had become and how necessary it was to freeze or reduce income (but paradoxically increase taxation to protect ‘key’ spending levels by the state - its own paybill and politically sensitive social welfare payments.)

The mother and father of all negative equity conditions now exist in this country – and will get much, much worse if and when interest rates go up.  Yet the government think letting heavily indebted owners trade up (or ideally, down) while the conditions that created the negative equity and the rising arrears risk still exist – is some kind of solution.

It is not.

The tens of thousands of first time buyers (in particular) caught by the boom need an immediate and fulsome recovery of the economy and a surge in their incomes…or they need substantial debt forgiveness.

Instead, they’re being offered another debt cul-de-sac that will give the perception that the property market can be stimulated back to life.

It can’t.

The property market will recover – naturally - when normal lending is resumed; when interest rates are not being so grossly manipulated by central banks; when the overhang of empty properties is cleared (which is happening in Dublin but not the rest of the country) and unemployment starts reversing.

Those neg-equity mortgage holders who are facilitated to abandon their distant suburbs for the homes they had wanted to buy that were closer to their jobs and parents in the city, will now end up even more indebted as the new property they buy also falls in value.

Good luck to them.

Meanwhile, the suburbs they leave will be even less attractive to live in than they are right now.

God help the poor sods they leave behind and strike up another victory for witless politicians and their creatures in central banks who endlessly subscribe to the Law of Unintended Consequences.

Misery loves company: Financial companies to be ‘named and shamed’

The decision to introduce legislation that will allow the Office of the Financial Services Ombudsman to name and shame financial institutions that it finds against has taken 20 years longer than it should have.

Better late than never.

When the first ombudsman’s offices were set up back in the early 1990s by the banking and life assurance industries, there was never any question that their members would be named and shamed.

Everyone maintained that the ombudsmen would be wholly independent of their paymasters, but there were just too many categories of complaints that were excluded or beyond their remit. The penalties were not onerous or high enough.

That isn’t to say that a good job wasn’t done within those limitations. 

Many complainants, in the years before the statutory IFSRA (Irish Financial Services Regulatory Authority) ombudsmen were set up in the early 2000s told me they were very satisfied with the investigation and settlement of their complaints and the published judgments appeared to be measured and fair.

But everyone also knew (the way everyone ‘knew’ that Charlie Haughey was on the take) that there were certain institutions – usually banks and their life assurance subsidiaries – that were chronic abusers of their own industry’s voluntary codes of conduct. But self-regulation has a funny habit of stacking the deck in favour of those who are being regulated, no matter how honourable and hard-working the ombudsmen and their staff doing the investigating.

When you pay that piper, he plays your tune.

All the same mealy-mouthed excuses were used by the State authorities when the two financial ombudsmen’s offices were taken over by the new Financial Regulator (now the Central Bank) a decade ago: that the complainants would also have to be named (to what purpose?); the firms would resist cooperating with the inspectors if there was a chance they’d see their names in lights or, worse still, as a case-study in the Ombudsman’s quarterly report (all the more reason!).

It hasn’t been determined how far the new legislation will go in the naming and shaming process, but no one gives a toss about the sensibilities of financial services companies anymore.  

The previous regulatory regime was incompetent and clearly in awe of the industry and allowed them too much influence in setting the rules and limitations of the ombudsman’s offices, especially regarding the historic mis-selling of investment products, which still needs to be addressed.

Banks, life assurance companies, insurers AND their agents always knew that ordinary folk and especially the vulnerable (like the elderly who are sold long term stock market investments) needed more protection than they ever got.

The Central Bank has been slowly but surely working its way through the banking mire that was left behind by the previous bunch, but now it is coming under scrutiny for its handling – mishandling? – of Custom House Capital. The mostly pension investors, who have lost €90 million, continued to be at risk even after the regulator discovered evidence of malpractice in 2009.

They say that misery likes company. 

The banks and insurance industry better get used to owning up to their own malfeasance, accept that the old days when they could keep repeating the same infractions year after year is finally be coming to an end, and accept that what’s left of their reputations will be lost forever, if they keep screwing their customers.

Having their ‘good’ names dragged through the mud might be just what they need to clean up their collective acts.

Has the Anti-Household Charge Revealed the Power of the People?

Yesterday, a small, but good natured group of local people – with a smartly turned out Jack Russell terrier at their head - marched down the part of Dublin’s South Circular Road where I live to join the protest rally at the National Stadium.

It was a glorious day for a demo (and for gardening) and the boxing stadium attracted over 3,000 similarly inclined people from all across the country who had decided to take a stand over the €100 household charge.

But the real test of this national protest will be next Saturday, March 31stdeadline.

Will the bulk of the households of Ireland capitulate as the Minister for the Environment expect them to, cowed by his threats of unleashing other agencies of the state on them, including the courts if they fail to pay, or will the ‘We are the 80%’ hold firm and defy the minister?

First let me say that Phil Hogan seems to be is a nasty sort. Just another jumped up power monger who was elected by a miniscule number of local supporters but is utterly disdainful of the wider citizenry who continue to pay his inflated salary, pension and expenses.

He reminds me of Dick Cheney.  Enough said.

But his recent, brutish, threatening behaviour and that of the Fine Gael minions who were shoved in front of microphones after he was yanked off the national airwaves, seems to have put a little more steel in the backbones of the protest groups and many other folk (who may have been about to pay up) who dislike such blatant intimidation.

So will the majority register and pay the household charge by next Saturday?

Maybe.

It has been my experience that most people in this country are far more afraid of the State and its agents, like tax collectors and the courts, than the State is afraid of them. (Hasn’t it always been thus, even in so-called democracies?)

But this little protest has at least provided a tiny glimpse of what happens when folk are emboldened, if only for a brief moment, to threaten to cut off the state’s source of power – taxes.The politicians, whose very own livelihoods and source of power are personally threatened by this act of resistance, end up panicking.  They say the most extraordinary things (“you WILL pay, or else”) in the most menacing of tones. 

The ‘servant of the people’ mask slips and they reveal their true nature.

Since this economic depression began, the Phil Hogan’s in all the ruling parties have of course, been lucky. The USC (Universal Social Charge), a far more blunt and non-progressive tax instrument than the household charge has had a devastating impact on personal spending power and the domestic economy.  The higher VAT is further destabilising the retail trade.

Yet the USC (and 23% VAT rate) was passed, implemented and is being collected with barely a whimper because every employer also felt compelled, under fear of retribution, to hand over this money.

Self-assessment tax collections, by contrast, only work when the taxpayer themselves decide it is in their self-interest to do so. We’ll see next Saturday how many people collectively decide it is no longer in their interest or that of their families to pay this charge and instead to defy the will of the state.

I’m guessing that a large number of people who paid directly from the government payroll or whose income is mainly derived from the exchequer and therefore ripe for a little ‘withholding’ action, will pay the household charge by March 31st.

They and many others, despite their deep unhappiness with austerity and the repayment of private bank debts will also pay because they also reckon €100 isn’t worth fighting over and they always pay their bills at the last minute anyway.

That will leave the diehards. 

The property tax

But the entire chambolic event doesn’t auger well for the introduction of the property/site water usage taxed from next year, when real money is at stake.

If the state can’t convince the bulk of the private property owning citizenry to cheerfully and promptly pay a small charge that is clearly needed in 2012, at a time of desperate economic need by local authorities, how can it possibly imagine that the same people will agree to pay a multiple of €100 next year? 

Many people are not convinced any new money raised will improve services in their community; some believe the income tax and all the other levies allocated for local authorities is already being wasted.  

Saturday’s protest was organised by parties who are not just against bailing out the banks, but who also oppose any tax that is not progressive enough to exempt their followers as well as the unwaged/poor (who are already exempt.)

The bulk of all taxes, say the anti-household charge leaders, should always be paid for by “the rich” though they are divided on whether a property tax is ever justified, except for “the rich”. (Property tax is a tax on wealth, not labour.)

If a site tax is introduced there is certainly a risk that many anti-household tax supporters, living in modest dwellings but on valuable sites, will be required to pay more than than someone who owns a fine house on a low value site. Cue demands for average industrial wage income exemptions if that happens.

Ironically, the dwellers of the high moral ground share also share the same attributes with the Phil Hogan’s.

If they were in power they too would use threats and force to make whoever they deemed rich enough to pay for the services and entitlements they believe should be free to their followers.

If Ireland is ever going to get out of this deepening economic quagmire, the part of the anti-household charge campaign that has revealed that the people do have the ability to curb the rampant power of the government - needs to grow.

But the other side of the picture, the redrawing of the function and power of the state and its servants, in accordance of the real desire of the people, how much funding it requires (as opposed to how much it wants) and whether those funds are collected voluntarily or by force, hasn’t even begun.

Until then, we’re just a bunch of debt serfs who will be led by trumped up little dictators from either the left or right.

Ends

Sunday MoneyComment – March 18, 2012

Universal Health Insurance? Only if there’s a true – government-free - market

I was stopped by a man in my local supermarket yesterday who told me that he couldn’t afford private health insurance anymore for his family. It’s just got too expensive, he said, and he insisted he knew why.

“Let me tell you a story. I met a friend recently who told me how he’d had to go to Germany for specialist treatment for prostate cancer. The cost of the surgery and treatment was all picked up by VHI – though not the flight – and for the four nights and five days it cost €10,000.

“Two years ago,” he continued, “my young son had to have a relatively minor heart condition treated in Crumlin – it was done by keyhole surgery but he was also in hospital for four nights and five days and Aviva covered the bill, which cost nearly €30,000.

“That’s why I can’t afford private health insurance anymore for my family and why 60,000 people have dropped their cover.  My friend said his surgeon said that his bill in Ireland would have been two or three times more than was charged at the German hospital. Irish doctors and Irish hospitals are killing the golden goose.”  

He’s right at least about the health service now being caught in a nasty inflationary/deflationary spiral: the more people drop private health care, the more the insurers raise their premiums and the higher the cost to the state which increases its charges to the insurers… ad nauseum.

This man’s son and his friend, like the vast majority of the other two million people with private insurance here are mainly only treated by private consultants in public hospitals and their insurance plan covers the billing of both the operation/consultant and their semi-private or private room bed (or just an ordinary bed in the children’s ward) in the public hospitals. The cost has been going up sharply in recent years since it was decided that the true price of the use of the public hospital services hadn’t been passed on.

Meanwhile, only a minority pay for expensive plans that cover them entirely in the private hospitals.

It isn’t private health care that is to blame for the huge disparity between the cost of health treatments in Ireland and Germany. So what is doing so?

How about the fact that nearly 80% of the Irish health budget is spent on salaries and pensions, and these are set by the government and the public sector unions. The other 20% of the running costs – drugs, equipment, fittings, utilities, food,– are also the responsibility of government paid administrators, and with no personal ‘skin the game’ they’ve few qualms about spending taxpayer’s money either.

Is it any wonder then that the price, both public and private, to over two million health insurance members has been soaring for years?

James O’Reilly, the Health Minister seems to think that once universal health insurance is rolled out (starting with “free” GP care by 2016) we’ll have one, wonderful health care system that is fair, and accessible and world class.

There is only one way this will happen, regardless of how many golden eggs can be squeezed out of the poor, shrinking Irish goose:  the Department of Health and the Government must be reduced to a supervisory and regulatory role only and the health care market – patients, practitioners, hospitals, insurers – must be allowed to work out a genuine service that is affordable and deliverable, based on our available resources.

Let me put it another way:  if the Department of Agriculture had also been allowed to run the provision and delivery of food in this country, we’d have all starved long before anyone would have needed medical assistance.

This lack of empathy gets you nowhere

The Central Bank Governor Patrick Honohan must think it is helpful whenever he lobs another little hand grenade into the public debate about the dire state of our banking system.

He’s wrong. It just annoys ‘the little people’.   

You know, people not like him, not on a big fat Irish government salary of c€300,000, pension and perks, who didn’t get sucked into buying a huge mortgage on an overpriced property (for their own use or as an investment) during the biggest property boom in the western world that happened partly because the central bankers of the day were incompetent and asleep on the job.

Last week, Mr Honohan said it was high time the banks start putting the boot into owners of investment properties who cannot meet their repayments and are in arrears.

Why?

Because these defaulting loans are a threat to the survival of the banks – as are the c100,000 or so homeloans in arrears – but the investment ones are not subject to the same consumer protection codes and forbearance measures. He knows that if the entire problem is left to fester, it could bring down the Irish banks once and for all. By tackling the smaller c30,000 buy-to-let problem first, he must think it will give the banks a little breathing space before they’re forced to cope with the more lenient treatment that is expected to be afforded to distressed home owners when the new insolvency and bankruptcy law comes into force next year.

What the head of the Central Bank isn’t taking into account is that a lot of those 30,000 investment loans are backed by the equity in the borrower’s principal private residence. If one goes, they both go.

Or maybe the Governor does know this, but figures it’s going to be ugly whatever the outcome and the banks have to start somewhere.

It’s their survival, let us never forget, and not yours, that isn’t making this well-remunerated government servant lose any sleep.