Jill Kerby

 

GOODBYE 2014…FINGERS CROSSED FOR AN EVEN BETTER 2015

 

First, huge congratulations to everyone who was able to land a job in 2014, who got their mortgaged home out of negative equity or who was able to secure a better repayment schedule to pay that mortgage.

To all of you who bravely met with your creditors in 2014 (with or without the help of a debt adviser) and reached an insolvency or bankruptcy settlement that allows you to repay what you can but also start a new life free of debt, well done. 

Getting that millstone off your back will, literally, be a life-changer.

To the majority of Irish working people who have managed to keep their jobs on lower or frozen incomes while shelling out more tax – take a bow. You are the unsung heroes of Ireland, supporting not just yourself and your families but helping other families who still rely on state benefits.  

2014 was the year that we acknowledged the importance of supporting our local merchants and communities.

I don’t necessarily share the view that austerity is over, even if national gross domestic product (GDP) is soaring and unemployment is now under 11%. These GDP and unemployment figures are still skewed by the way the foreign export sector records its turnover and profits here, and by high immigration numbers.

But the biggest barrier we face to genuine recovery is the amount of debt the state and individuals are carrying, which is going to take decades to clear.

No country, company or individual can expect real prosperity so long as they borrow and spend more than they earn, and in Ireland’s case have to pay €8bn a year just to service the national debt.

We should thank the ECB’s for its, albeit, desperate attempts to refloat the recession-hit European economy. By reducing its own base interest rate to just 0.15% this year, many mortgage holders here are still in their homes, rather than facing outright insolvency.

Unfortunately low interest returns punish all savers as well as pensioners on fixed incomes. With little or no retail price inflation, these artificially low rates ironically provide little incentive to spend and discourage retail job creation. For 2015 to be a really good year, we have to have more domestic jobs, higher wages and net lower taxes.

The drop on January 1 in the top income rate of 41% to 40% is a good start, as is the raising of the 20% standard rate tax band by €1,000 to €33,800. The lower USC for incomes under €17,000 is also welcome though a new 8% rate for over €70,000 earnings is not.

For there to be meaningful extra disposable income in the domestic economy in 2015, and to incentivise employers to hire and ramp up production for consumers with more money in their pockets, the government should cut its own costs first.

The hundreds of quangos that still suck up billions of euro each year, should go. Reducing their own numbers, their salaries, allowances and expenses would be more millions saved. Sorting out the latest, great billion euro white elephant, Irish Water also needs doing.

The tax and PRSI cuts for lower earners and the €10 a month increase in child benefit by €10 in 2015 will help many families struggling with frozen incomes or benefits, as well as the tax burden and rising cost of education and public transport costs that directly affect their children. Means-testing of all state benefits would, however, target the people who genuinely need such benefits most, and pay them more too.

Meanwhile, we need to accept that there is only so much this State can do, no matter which political faction is in power.

It is upsetting – and unacceptable – that 90,000 people are on housing waiting lists and others can’t afford their rent anymore.  This crisis will take years to work through, but you can personally play your part, and increase your own income, by renting spare rooms in your home and earn up to €12,000 tax-free.

It’s also unacceptable that 27,000 people are waiting a year or more for a public service MRI scan and/or consultant’s visit when there are practically no waiting lists in the private sector and the cost is no more than a few hundred euro.  Personal savings need to be accessed to lower this queue sooner than later and a health contingency fund should be everyone’s saving priority.

We can only hope that practical, pragmatic political solutions are found to these problems in 2015.  That’s a tough ask given the political divisions.

In the meantime, we need to do everything possible to ensure that we our own financial well-being keeps improving and that we bring along the vulnerable members of our family, friends and community.  I’ll be writing again about my favourite topic - Build an Ark – again in the coming week.

Meanwhile, I wish all of you a Happy, Healthy and Prosperous New Year.  We certainly deserve it.

 

If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.

 

 

 

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RENEWING YOUR HEALTH INSURANCE?  FOLLOW THESE EXPERT TIPS

Dermot Goode is the number one health insurance expert in this country and he regularly shares his knowledge and insight of this €2 billion euro plus business on radio programmes, seminars and even by training other insurance brokers – perhaps even your own.

This is the busiest time for renewals and several hundred thousand people have and will be receiving their January 2015 notices from their health insurance companies – the VHI, LayaHealth, Aviva Health and GloHealth. 

With adult policies now costing as much as €1,500 or more (and child policies in the €300 plus range) -  mainly due to the huge health levy (of €399/€125 respectively) and the €800 plus bill for private beds in public hospitals, “the first question that you need to ask yourself,” says Goode, ”is whether you are over-insured?”

 

Chances are, you will be

-       If you haven’t reviewed your cover in the last 2 years;

-       If all the family are on the same level of cover;

-       If you’re paying for a private (as opposed to semi-private) room;

-       If you currently hold any of these “dated” plans, but once very popular plans:  Vhi Health Plus Extra (B Options) at €2,234; Laya Essential Plus at €2,345 or Aviva Level 2 Hospital at €1,957.

 

For families, the most cost effective way to reduce your insurance costs is to split your cover.

“Adults and children have different requirements and you should select a plan for each person reflecting their needs only,” Goode explains.  “You can actually have everyone on the one policy but all on different levels of cover.
 

“For example, a family of two adults and two children on Laya Essential Plus will cost €5,791.  By moving the children to the Laya Control 150 Connect Scheme, this family can save €585 and still have excellent cover in place.”

Even at €5,206, this is a very expensive family policy, so he also recommends that parents keep shopping around. “If you have any children under age 3, they will go free with GloHealth. You then find the appropriate policies for the parents.” From January, GloHeath’s three main plans will go up by c5.5% but none of their equivalent, corporate plans are going up and their prices are already more competitive.

Switching to a corporate plan, even within your existing provider, is a sure-fire way to reduce your bill, often by several hundred euro. These plans are not publicly advertised and you need to know the name of the plan to avail of it. But because of community rating, everyone has access to every plan on the market, regardless of whether you are an individual, part of a group scheme or occupational scheme member.

Corporate plans now often include an ‘excess’ payment – usually from €75-€150 but agreeing to an excess is a way for everyone “to cut their annual premiums by as much as 10% to 35%.”

For example, says Goode, the popular Aviva Health Level 2 Hospital plan costs €1,957 per adult, “but by reducing to the corporate Aviva Health Plan 16 and taking on a €75 per admission excess, you can reduce your costs to €1,248 per adult. This is a savings of €709 or 36%”. Keep in mind however, that two or admissions, depending on the value of the policy, could eat up those savings.

New offers, with sizeable discounts especially or public hospital admissions only are being offered by the insurers for the huge number of people renewing: they want you to either stay with them or switch to them. 

But a number of the headline discounts on existing plans are not particularly good value says Dermot Goode because “those plans were already too expensive and out of date.”

Of the 13 existing plan reductions on offer from Laya, he says that just four of them represent good value with reductions of up to €200 for adults and as much as €100 for children.

All the providers are bringing out new plans in January and the cheapest offers are for public hospital access plans only:  these are for sale at less than €500. The VHI is offering half price deals on 17 existing plans for students (up to and including age 21) and children. It is also bringing out a new corporate plan called PMI 39 14 (with €125 excess) that undercuts the existing PMI 39 13 one by €50.

Shopping around is absolutely necessary for health insurance, ideally hand-in-hand with a good, specialist broker.  (See www.totalhealthcover.ie )

And finally, if you do have to give up your private insurance, at least consider www.HSF.ie , the health cash plan company that, for a single family premium, gives you tax free cash payments for outpatient bills that include GP, dentist, optician visit, consultant’s charges, physio, in-hospital stays at €75 a night and even maternity bonuses.

If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.

 

 

 

 

 

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CLAIM YOUR TAX PRESENTS FROM THE REVENUE SANTA

 

No one would ever mistake the taxman for Santa Claus, but millions of euro a year in unclaimed taxes – cash presents – go unclaimed every year.

With the Minister for Finance recently confirming that the universal social charge, which brings in €4.5 billion to the State, is here to stay, any unclaimed taxes or credits are worth the effort of a personal tax review and then applying to the Revenue for a refund.

Suggestions that Ireland is a low tax economy are simply untrue: income taxation is highly progressive here (based on OECD rankings) and VAT, excise, CAT, CGT and stealth taxes (especially levies on electricity, investments, all kinds of insurance products and especially the confiscatory levy on all private pension savings since 2010) result in disproportionate tax rates on modest PAYE and self-employed incomes.

Notwithstanding the widening of the standard 20% income tax band by €1,000 to €33,800 from January 1, the exempting of income from USC if all you earn is €12,012, and the reduction of the top, marginal rate of income tax to 40% from 41%, every additional euro earned over €33,800 in 2015 will still be subject to a total marginal tax/USC/PRSI of 51% instead of 52%.

If you earn over €70,000 in 2015, your total marginal rate will be 52% because your USC charge will now be to 8%, not 7%.  If you are self-employed or a sole trader with gross earnings/turnover over €100,000, your USC will rise to 11% from 10%, but with the top rate tax drop to 40%, your marginal remains 55%.

The most common, unclaimed tax refunds, which you can still make going back four years to the beginning of 2011 if you act before December 31, include: home carers tax credit, age credits for those over 65, incapacitated child and single parent credits, medical/dental expenses, pension contributions, third level/ training tuition fees, permanent health insurance, service charges in 2011 and rent relief provided you were renting in December 2010.

 

Check the Revenue.ie website and the link to PAYE Anytime for details.

 

Some of the biggest tax “gifts” however are outside this modest tax credit list. My current favourite, and what my son would call “a no-brainer” is the tax-free Rent-a-Room Scheme that has been increased in 2015 to €12,000 a year from €10,000.

 

It won’t suit everyone with a financial need and a room or two to spare to open their home to strangers (you cannot rent to a family member) but with state pensions frozen, higher taxes and prices since 2009 and no sign of a return of home equity release lending (by the likes of Seniors Money, which has suspended its operation), this Scheme is a huge opportunity for retired people to literally double their income next year (if the State pension is their only earnings.) 

 

My other favourite on-going tax “gift” is to couples who decide to formalise their relationship by getting married or become civil partners in 2015.

 

Our tax regime blatantly favours married couples and civil partners (CP) over single people. As a consequence of ‘tax equalisation’, it especially favours working married/civil partnership couples even over married/CP couples with only one earner.

 

Here’s a list of the joint tax benefits for getting hitched:

 

-       Chances are you will enjoy a modest tax refund in your year of marriage.

-       Jointly assessed couples can transfer tax bands and rates; if both are working (and the lower earner earns income of at least €23,800) they can earn up to €65,600 and still only pay 20% tax.

-       If only one partner works, they can earn up to €41,800 at 20% tax compared to just €33,800 if they are unmarried and only one partner is working.

-       A married/CP couple, even if there is only one earner still enjoys €3,300 in married personal tax credit; unmarried couples with only one earner can only claim one €1,650 personal tax credit.

-       There is no inheritance tax (CAT) between married couples/CP and there is no Capital Gains Tax on transfers of assets between them.

-       Capital losses for CGT purposes can be made available to the other spouse/civil partner.

-       Only married/CP couples can expect, as a matter of course, that a widow(er) occupational pension will be paid if the pension holder dies. Even where the surviving co-habiting but not legal partner has been named as the person, the designated pension may not automatically be paid.

-       A legal widow(er)/CP will receive a higher annual personal tax credit than a single person whose partner dies.

 

The inheritance and capital gains transfer exemptions are particularly valuable. A gift or inheritance (say a house they share) that is worth €200,000 will result in zero tax between a married couple and a tax bill of over €61,000 if you co-habit.

 

A good tax adviser may be your best wedding planner of all.

 

If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.

 

 

 

 

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A VERY HAPPY…AND AFFORDABLE CHRISTMAS 2014 TO ONE AND ALL

 

Now that my young fellow is pretty much all grown and nearly ready to fly the nest, my Christmas preparations are a lot more low key than they used to be. I still love Christmas, but I’m also a lot more organised than I once was and I find it easier to stick to my budget, mainly thanks to the internet and the popularity of on-line shopping.

Here are my top 10 spending and savings tips for what I hope is also a happy and affordable Christmas in your home: 

1)    If you still haven’t done so, set a reasonable budget and a comprehensive list. It should include names, gift ideas, a food budget for Christmas Day and the holiday; the cost of Christmas tree/decorations; cards and stamps (at 68c each!); an entertainment budget (panto’s, the cinema, sports events, concerts); extra travel costs (petrol/tolls/buses and trains). Keep in mind too that electricity and gas/oil bills will be much higher.

 

2)    Choose your payment method.  If you are not using income or savings to pay for Christmas, consider a personal bank or credit card loan. These loans (c11%-12%) are much cheaper than using credit cards (c15%-21%) or a moneylender. The latter can legally charge APRs of 23% to 287%!

 

3)     Don’t use more than one payment method per shopping trip:  instead of having cash, a debit card (the best option) or a credit card in your wallet, just use one and limit your spending.

 

4)    Never shop on an empty stomach, or with children or partners in tow unless they are your bag carriers or couriers (back to the car or bus with the shopping bags.) Don’t over-dress – shops are often overheated; always wear comfortable shoes. Carry a secure bag and give yourself a set period of time to shop. If you stay too long, you’ll get tired, grumpy and will be at risk of over-spending and impulse-buying.

 

5)    I’m now big on the idea of shopping on-line. It’s convenient, safe and best of all, with your list beside you at the computer you can shop around for the best price. Best of all, all the popular Irish department stores and many local high street shops offer on-line shopping, most with free delivery. Just be careful not to miss their Christmas delivery deadlines.

 

6)    Don’t forget to use or gift your in-store vouchers and bonus points.  I save up all my grocery bonus points and use them at Christmas, making a big dent on my food and drink bills. This year, SuperValu also gave me a 15% discount card for all my Christmas shopping. The Swedish-owned PriceSpy.ie comparison and shopping site lists hundreds of participating Irish retailers who offer thousands of popular branded products.

 

7)    If you have a large, extended family, consider a budget-friendly Kris Kringle, with everyone picking a name and buying that person/child a nice gift. Make sure an overall limit is set for the Kris Kringle and do your best to stick to it. I know families that insist that only home-made or presents of ‘time’ are given by both the children and adults:  food items or baked goods, home-made sweets and Christmas tree ornaments; time gifts like gardening or babysitting hours, window or car washing (a good choice by teens for grandparents) or magical mystery tour outings are just a few ideas. The list is endless. For ‘time’ gifts, just type or write out what your gift is on a piece of paper or card, pop it into a box and wrap it beautifully with a pretty ribbon for a little “wow” factor.

 

8)    Keep close control on your lists and spending by choosing a Christmas gift theme (it could even be a recycled gift theme.)  You can choose all books or DVDs or CDs for everyone, or lovely homemade chocolates or jams/chutneys or special bottles of wine or spirits.  Christmas craft shows and charity shops are full of great, inexpensive gifts like homemade candles, soaps, ornaments, jewellery and can all be found for under €10.

 

9)    Adult families like mine can also choose to spend unnecessary amounts of money on stuff none of us need… or consider a family gift – something we can all enjoy that we normally wouldn’t buy if we were still buying individual gifts. This year (and I hope my boys don’t read this because Mrs Santa will be making the delivery) we’re getting a really good radio with a top notch sound that picks up long-wave stations (like CBC radio in Canada for me and the Beeb for him.)

 

10)Finally, another Christmas gift for friends or family that reminds us why we still celebrate this holiday is making as generous a donation as you can to your favourite charity, whether at home or overseas.

 

If you have a personal finance question for Jill, please email her at jill@jillkerby.ie or write to her c/o this paper.

 

 

 

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