Jill Kerby

FUNERAL COSTS ARE A SHOCK GRIEVING FAMILY CAN BE SPARED

Funerals are not something most of give too much thought to, at least not until you reach more advanced age (than I am now, for instance) or unless you’ve suffered a recent, close bereavement.

Recently the father of a close friend, who happens to be Brazilian, died. He was quite a young man but in keeping with their funeral traditions, he was buried within 24 hours, without a formal funeral.  Family and friends gathered a week later for a memorial service.

This is quite foreign to the way we bury our dead in Ireland.  Our ritual of holding a wake at a funeral home or in the person’s residence, then the removal church ceremony and finally the church service and a gathering for tea or lunch with close family and friends is, for us, at least, a tried and tested way to deal with loss and grief.  When mourners have to travel any distance, as so many of our immigrant family do, the funeral process can be protracted.

It can also amount to quite an expense, as a new survey from Post Insurance (www.postinsurance.ie) a subsidiary of An Post revealed.

The Post Insurance Funeral Price Index shows that while the standard funeral cost in Ireland is €4,052 plus the cost of a burial plot or cremation. The cost of a “standard coffin” can range from a high of € 2,000 in Kerry and Laois to a low of €1,177 in Waterford. A standard coffin in Dublin will cost an average of €1,750.

The burial plot, depending on what part of the country you live in, can add many thousand more euro to the bill, depending on where you live. It explains how cremation has grown in popularity.

Also, while the €4,052 accounts for the cost of Removal and Care of the Deceased, Embalming, Removal to Church / Cemetery, Hearse, Funeral Directors Fee and Coffin, it does not include what are known as ‘disbursements’ – the Church Offering, Priest, Music, Obituary Notice. The three most expensive counties for disbursement costs are Laois  (€1,440), Galway (€1,242) and Dublin (€1,177), while Kerry, (€470) and Limerick (€573) were the least expensive.

The highest quote for a ‘standard’ funeral is in Co Tipperary at €6,310 (which might surprise those of us living in greater Dublin where everything is usually more expensive) and the highest average cost was €5,000 in Co’s Sligo and Clare.  The least expensive standard funeral is available (€3,408) in Co Wexford.

A double sized grave plot can cost €32,000 in Deansgrange Dublin, while the same double plot in Shanganagh, Dublin was quoted at €5,600.

There are three ways to pay for a funeral and all its costs - €10,000 or more is not an atypical price, readers tell me (especially if a grave plot has to be bought or even opened.) You can:

-       Plan ahead and take out an insurance policy (Post Insurance offers one worth up to €30,000 in benefits), use an existing one, or consider a funeral package during your lifetime. Many funeral homes sell the latter and take instalment payments.

-       Your family can pay for it out of their own pockets and reclaim it from your estate, if you have so designated, or from their own bequest left in your will.

-       Or the money can be borrowed from a bank or credit union. Some funeral homes will accept instalment payments.

Today many more Irish people are choosing simpler, ‘humanist’ funeral services, often held in the funeral home or crematorium ‘chapel’. These can also include comparatively eco-friendly cardboard or willow coffins and cremation, cutting out a number of the biggest expenses that Post Insurance itemised.

It certainly makes good sense to either assign apportion of your long-term savings (perhaps in the Post Office) or from a small life insurance policy to pay for the kind of funeral you would like to have. It isn’t an easy subject to face, or to discuss with loved ones, but it does alleviate some of the stress that comes with bereavement, especially the financial concern of how the funeral related expenses will be paid.

Leaving a written instruction – sometimes known as a Letter of Intent – with your closest loved one (a spouse, adult child, best friend or family solicitor) will be an important guide for them (even if it isn’t a legally binding document, like a Will).

If you are going to go to be considerate enough to pre-fund and provide a funeral plan, then you should also write a legal will and make sure your executor knows where to find it too. Older people – and retiring is as good a time as any to do this – should also draw up an Enduring Power of Attorney. This document sets out your care wishes in the event you become mentally unfit to deal with your own affairs prior to your death. As your solicitor will explain, It will prevent you becoming a ward of court.

Do you have a question for Jill?  Please email her directly at jill@jillkerby.ie or write c/o this newspaper.

RETIREMENT PLANNING NEEDS A PROPER FINANCIAL PLANNER

Last week’s Budget may have raised the State pension by €5 a week starting next March, but it did nothing to encourage workers to save more into their existing private pensions or AVCs (Additional Voluntary Contribution top up plans that many public servants have) or to start one. 

The Minister for Finance could have reinstated the 4% PRSI tax relief on pension contributions that was removed in 2011 or declared that the USC refunds he was announcing would have to be directed into funding private pensions. Instead he took the politically expedient route of keeping older voters onside with the extra €5 and the 85% reinstatement of their Christmas bonus.

But that’s going to cut no ice with the fact that today’s younger workers are never going to get the same State pension benefit as their elders. Their PRSI contributions are still not invested; the amount collected right now via taxation is not enough to meet current pension benefits, let alone a bill that is going to double in size by the time they’re ready to retire (unless they start having very large families again.)

It’s a ticking can full of explosives, that is so bent out of shape from all the kicking down the proverbial road, that it would have gone off in 2010 if we hadn’t been saved by the Troika bail-out. 

I doubt if any politician, from any party, will ever be brave enough to push through the tough changes needed to stop it blowing up: later retirement; higher income contributions and lower, means-tested benefits and the phasing out of the tax-based, pay-as-you-go system for a universal, transparent, invested one that includes all public and private workers.

Even if a miracle happened and there was political commitment to reform the doomed state pension (at it’s current benefit level), the private pension system isn’t much better. The system is too complicated, costly and not transparent enough. Worker and employer contributions need to be sizeable and compulsory; costs need to be lower and subject to ongoing review.

The only good thing to say is that younger you are, the better chance you have even now of putting enough money together to avoiding having to work forever, or becoming dependent on family, friends or charity in your retirement.

I may be deeply cynical of politicians and senior civil servants ever addressing the pension system, but the Pay & File deadline coincidentally falls in October, Budget month and may help to raise awarness.

You can reduce your annual tax bill by making contributions into a personal pension or AVC by October 31 (mid-November if you file online.) You can claim a 20% or 40% income tax deduction on the pension contribution, depending on whether you pay standard or marginal rates of income tax.

However, buying a pension fund for the tax break, is a poor substitute for having a proper retirement plan that aims to produce the kind of income you want to live on in your old age.

There is a vast difference in the quality of pension/ retirement advice in this country.  It comes down to partiality and remuneration: pension product salespersons earn their living from the commission they receive from the pension manufacturer. A fee-remunerated financial planner is paid by the client for their advice, whether they buy a ‘product’ or not.

For the most part, commission-paid brokers only sell pension products supplied by popular life and pensions companies. They undergo rudimentary training. Financial planners who are members of the Society of Financial Planners of Ireland undergo a advanced financial and investment training to an international standard. (See www.sfpi.ie)

That said, not all SPFI members are fee-based and some experienced, impartial, fee-based advisers are not members of the SFPI.

But proper financial planning starts, not with a retail pension plan recommended by a manufacturer and their agent, but with your financial expectations. A  financial planner pulls together as much information as they can about your entire financial position, your risk profile and retirement expectations and then, where possible, comes up with a plan to achieve those expectations.

Funding a financially “comfortable” retirement is getting more expensive, not less in a world of zero yield bonds and deposits, the so-called safe assets for pension funds. It’s why dependence on the State pension is growing, not diminishing and why widespread pension reform is so important.

You have a deadline: October 31. Top up your existing pension and claim the tax relief. If you’re a young worker, join the company scheme if there is one, or buy your own.

But don’t just buy an old pension.

Find a proper financial planner/adviser with lots of pension experience and ask them to help you take the first right steps in shaping a long-term affordable, dependable retirement plan.

BE YOUR OWN FINMIN:  CLAIM PERSONAL TAX REFUNDS BEFORE THE PAY & FILE DEADLINE

Budget Day giveaways and clawbacks will be forensically reviewed this week to see who benefits …and who will pick up the tab.

Whatever little shocks may have emerged from the Budget (and it tends to be well leaked) the most shocking thing is how many people fail to avoid overpaying their taxes every year: it is reckoned that perhaps as much as a billion euro lays unclaimed as taxpayers are unaware of, or too indifferent to the fact that they

The annual Revenue October 31 Pay & File deadline for self-assessed taxpayers is just 20 days away (you will get a fortnight extension if you file on-line) is the date when the self-employed and anyone with non-PAYE income must file their preliminary tax return for the year. But it is also the date on which PAYE workers can claim back tax credits, relief and allowances for the past year. 

So what are the common tax credits and reliefs that you might reclaim for the past four previous years?  They include:

- Pension contributions, for which top rate tax of 41% can be claimed, if you pay this higher marginal rate. For every €100 you contribute to your personal pension, you’ll be able to reduce your annual income tax bill by €41. Standard rate taxpayers will reduce their tax bill by €20 for every €100 pension contribution.  A €5,000 contribution will reduce your 41% income tax bill by €2,050.

- Medical and dental expenses for the entire family. (These can be claimed anytime during the year under PAYE Anytime service at www.revenue.ie You can’t collect for expenses covered by private medical insurance or routine dental or opthalmic care.)

Doctors and consultants fees are covered, as are prescribed drugs and medicines and medical/surgical appliances including prescribed exercise bikes, wheelchairs, wigs, false eye, etc; prescribed physio-type treatments; specialised dental treatment; specialised speech and language treatment; in vitro fertilisation treatment; ambulance transportation, prescribed special food for diabetics, coeliacs, etc. Ancillary costs for home dialysis (a portion of electricity, laundry, telephone costs) and longer travel expenses associated with prescribed/required medical treatments, such as weekly dialysis or cancer treatments.  Nearly all tax relief is at the standard rate of 20%.

- Guide Dog flat rate relief of €825.

- Nursing home expenditure at top tax rate of 41%. This is available to either the patient or anyone paying all or part of their nursing home costs.

-  Rent tax credit. The credit is only available to people who have been renting a property since December 7, 2010 and will be phased out by 2017. Different credit rates apply to over 55s who are Single, Widowed or Surviving Civil Partner, Married or in a Civil Partnership and under 55s in these categories. Single people, under or over age 55, for example will only receive a tax credit of €80 this year, but if they have no claimed the credit for the previous four years, they could also collect €120 for 2015, €160 for 2014, €200 for 2013 and €240 for 2012. (Double the amount for married couples/widowers.)

- Private Health Insurance tax relief at 20%: This relief is usually credited to individual holders of health insurance at source, but not if your employer pays the premium, which is also liable to Benefit in Kind tax. In the case of a top family plan, worth c€3,000, the total tax relief for four previous unclaimed years could be worth €2,400 according to Dermot Goode, of www.TotalHealthCare.ie, a specialist broker.

- Home Renovation Tax Relief of 13.5% VAT over two tax years. To claim this relief you need to ensure that your builder is both registered as tax compliant with Revenue and has completed their submission.

It isn’t as complicated as you might think to file your own tax return, if you have non PAYE income to report. Check out the Revenue On-line Services site, www.ros.ie  and follow the registration and filing instructions. It takes a couple of days for passwords to be issued, so don’t leave it to the last minute.

If you are uncertain or nervous about filing your return by yourself – or, if, say, you have a rental property but are not sure what deductions you can claim – then make an appointment to see a good tax adviser or accountant.  Establish their fee or charges from the start. 

If you want to set up a pension, or top up an existing one consult a pension expert or, ideally, a trained, experienced, fee-based financial planner. The former usually involves a sales process that rewards the manufacturer and sales intermediary first; the former is a holistic process that takes into consideration your wider financial position in the effort to find a cost-effective, appropriate and realistic retirement solution.

INCOME TAX FAIRNESS FOR ALL SHOULD BE BUDGET GOAL

Tax policy in this country just gets more bizarre by the day.

With the Budget approaching, every private and public agency, charity, opposition party and, it would seem junior minister, has been busy preparing and submitting their budget claims to whatever surplus amount – about €1 billion is the latest reckoning – that the Minister for Finance has to dish out for 2016-17.

So long as their group of constituents, beneficiaries or clients come away with something these interest groups will declare victory. The long picture…is Michael Noonan’s problem.

That said, the most bizarre tax ‘reform’ proposal, from the Minister’s own colleagues, Richard Bruton (back in October 2015) and Mary Mitchell O’Connor (last week) is for a separate 30% flat income tax rate that will also include PRSI and USC, aimed at highly skilled Irish workers earning more than €75,000, who have been away for at least five years.  It would last five years.

The 2015 proposal, with a salary floor of €60,000 was described prior to the 2016 Budget, “as likely to infuriate Irish workers”. It never saw the light of day.

But junior minister Mitchell O’Connor clearly saw some merit in it, and while it looks pretty dead in the water this week, was lauded by employers in the high tech sector in particular who claim they are involved in an ‘international war of talent’ which has been hindered by Ireland’s highly progressive and punitive personal tax rate that claims 51% of tax, PRSI and USC on every euro earned over €33,800.  (52& on earning over €70,045.)

If native Irish talent is reluctant to come back to Ireland after five years of emigration, the income tax situation is certainly one reason. But let’s not overlook all the other less overt taxes that contribute to their trepidation, as well as the acute shortage of affordable housing (especially in the capital) and huge child-care costs.

In addition to a 41% top rate income tax, 4% PRSI (on all income), c6% USC (and an additional 3% on all income over €100,000) Ireland has amongst the highest VAT (23%) in the world, high rates of excise and VRT on cars, alcohol, tobacco; a compulsory annual €399 levy (€135 for children) on health insurance plans; annual 5% levies on general insurance policy premiums and 1% on all life insurance, investment and pension policies. We also pay separate property tax, car tax, bin charges and a suspended water charge. CGT rates are comparatively high at 33% given how low the individual annual CGT free allowance of just €1,270. (It is over £11,000 in the UK.)

Would a two tier flat tax rate of 30% foster a tax revolt by the PAYE workers paying that higher rate of 51%? It could, if the home-based worker earning that €75,000 discovers that the returnee next door – doing exactly the same job as he/she - now pays several thousand euro less tax than they do.

The Irish Taxation Institute reckons that a single, Irish PAYE earner on €75,000 will pay €26,482 in tax here, compared to €18,482 in the United States and €21,920 in the UK. The disparity between countries exists, but in those places, everyone on the same tax level pays the same tax. One group of workers on the same pay is not favoured over another.

High taxes encourage the creation of loopholes and tax avoidance opportunities to those who can afford professional advice.So perhaps a better way, tax-wise, to attract home wary émigrés, is to improve the tax situation for everyone, starting  by setting a higher income entry point (from the existing €33,800) on the tax bands.  Even in France, one of the highest taxed economies in Europe, you only pay their marginal rate of 55% when you earn €152,000. In Portugal it is €80,000.

Shifting tax from labour to capital assets (like property) would also take some pressure off the high income tax burden in this country. But this is highly unlikely as it also requires the phasing out of tax reliefs, special capital allowances and other tax avoidance measures.

Not all tax reliefs are a bad thing in the absence of a fairer tax system.

One that bears watching, pre-Budget, is the proposal that first time buyers receive tax relief worth €10,000 to assist in the purchase of new homes. The only way this can be considered ‘fair’ is if hard-pressed renters in private accommodation see the re-introduction of rent tax relief.

A long standing personal tax break, with the over 55 married couple tenant tax credit worth as much as €1,600 a year (€800 aged under 55) and as much as €400 for a single person aged under 55 it has been phased out since 2011 for and will disappear entirely by 2017. It can only be claimed by those renting privately since December 7, 2010.

This year – and you have until the October 31 Pay & File deadline to claim up to four years of the backdated relief - tax credit is only worth €80 this year for a single person under age 55; €80 for over single over 55s; €160 for a married person under age 55 (or a widow/er) and €320 for partners (widow/ers) aged over 55.

Solve the housing crisis (and child-care) in Budget 2017 and the income tax burden might just get a great deal lighter by itself.