Jill Kerby

FUNDING YOUR RETIREMENT JUST GOT THAT MUCH HARDER

So much attention is being diverted to the Fiscal Treaty referendum, the ongoing problems with Greece, the instability of banks and the huge and growing mortgage arrears problem that it’s hardly any surprise that pensions – our low coverage numbers, poor contribution levels, high costs, poor performance record - just keeps getting pushed to the sidelines.

Last week, some deeply shocking 2011 census results were published by the CSO… and then quietly disappeared: the number of young adults living in this State has fallen by more than a tenth since 2006.  Half the population is now income dependent on the other half.

There are now 42,517 or 12% fewer 19 to 24 year olds living in Ireland than six years ago while the older population (+65) has risen by 14.4%. There has been a bulge in the number of under 19’s in the population, which is a relief, but until this cohort enters the workforce in a less depressed economic climate we need to reassess the funding of our older population much sooner than the usual 2050 time bomb deadline.

Having a healthy number of 19-24 year old to enter a workforce is extremely important in any country that transfers such a large amount of earnings directly from the productive to the retired generation.  Current social insurance contributions is what pays for the delivery of the €230 a week standard state pension payment every week (or €12,000 a year) to the bulk of the 535,393 pensioners living in Ireland in April 2011. In 2006 there were just 458,519 pensioners in the population.

Sorting out how the state – and private employers – can keep paying pensions to the retirees who have made social insurance and deferred income contributions is a massive challenge given how the state’s own unfunded liabilities amount to over €110 billion.

To give them both some credit, the Minister for Social Protection and the IAPF, the organization that represents private pension funds, are trying to find ways to ensure that everyone in the state ends up with some kind of retirement income when they retire, though I ‘m not sure what will be achieved by the Minister who has commissioned yet another study of our pensions, this time by the OECD.

I doubt very much if they’ll tell her much different from all the other big pensions studies the government has paid for over the past decade.

However, the state retirement age is being advanced to 68 by 2028, and in the case of private pensions, companies are shifting from the promise of a pension based on final income and years of service (defined benefit) to an income based on how much was contributed to it, and its investment growth at retirement (defined contribution). 

DB schemes that are underfunded and cannot fulfill their promises are also engaging with the state to find ways to meet their obligations to retirees, mainly through a state guaranteed annuity that ensures the payment of the pension income for life.

Which leads me to a new private service that has just been launched by a well know and long established private pension consultancy, Moneywise.ie It’s founder, Owen Morton (one of the doyen’s of the pension business, and someone who mentored me about the pension industry 20 years ago) has been has been grappling for over 30 years on behalf of his clients with the task of finding them suitable pension solutions. The new service aims to provide a safe and sound retirement income.

Artificially manipulated low bond rates (by central banks) on which pension annuity incomes are based, have extended the pension nightmare for many self-employed and private company retirees who leave their jobs with a lifetime’s pot of money at age 65 and have the very difficult choice of either annuitizing this money and ending up with a disappointing annual income for life that entirely disappears upon their death (the annuity can revert to the insurance company), or the possibility of further investing their money in an ARF/AMRF.

The Approved Retirement Fund option has become a minefield because of investment and currency volatility/fear on global markets and the way the government keeps arbitrarily changing the terms and conditions.

Morton, by setting up a dedicated fee-based annuity and retirement office at Moneywise is aiming to give anyone who is retiring and doesn’t know what to do with lump sums or their entire fund the most in depth body of knowledge and choice regarding all the options available. The introduction of Canada Life’s hybrid Annuity ARF earlier this year, he says, is one of the most interesting new options to the market (I wrote about it last February) and needs to be considered carefully before the retiree goes to the conventional full annuity or ARF routes.

I think its very interesting – and encouraging – how the best of Ireland’s financial advisors are responding to the most difficult financial climate here by upping their own game: increasing their expertise with more training and education (via the international Certified Financial Planners diploma) and through specialization. (This lifting of standards is also being encouraged by the Central Bank and new legislation.) 

Now into our third year of EU receivership, where the numbers of young productive workers are falling sharply, tackling the pension crisis needs to be brought back to the top of the economic agenda.

Until then, if you are new retiree, you may want to consult an independent, experienced advisor. You may even want a second opinion. Check out the new dedicated Moneywise retirement centre here: www.moneywise.ie/retirement

Bank debt forgiveness will give me fresh start

CD writes from Dublin: I took out a €50,000 loan to start a business in 2005. I further extended this loan to €75,000 to keep the business going in 2007. My sister signed as a guarantor and deposited a sum of money in the bank on which there is a lien to cover my loan.

Unfortunately I had to close the business in 2008 and became unemployed. I was well received by the bank that allowed me a term of grace to pay interest only. I am now on my way back to work through an enterprise back to work scheme and have been managing to pay the bank €1,000 per month and the debt is currently at €57,000. This €1,000 euro is a huge drain on our family as you can imagine.

I have an opportunity to make a settlement with the bank through my sister. What kind of a settlement could I hope to achieve? It would be great if I could get it as close to €40,000 as possible.

You need to convince the bank that it is in their best interest to accept the €40,000 that your sister, as your loan guarantor, is willing to pay over as the full and final settlement of your debt, says financial advisor Karl Deeter of Irish Mortgage Brokers & Advisors.

“Your reader should write to the bank offering the €40,000 as a full and final settlement for this debt and wait for their response,” he says. If the bank declines, says Deeter it might be able to take the amount your sister put up as the guarantee if you defaulted on the €1,000 monthly payment but it would have to seek a court judgment against you for the €17,000 balance. Deeter suggests it would be unlikely to succeed “if it is shown that your reader had made every effort to repay them as much as she could” until your deteriorating personal circumstances forced you to seek a final settlement.

The fact that you have been able to repay €1,000 a month, a total of €18,000 so far, may not facilitate a deal if the bank is happy with this arrangement. Their first concern is to get all their money back, not to take a €17,000 loss.

In case your debt settlement offer is refused, you should prepare a detailed summary of your household finances to support your contention that the €1,000 a month payment is increasingly unsustainable. 

“The final move your reader has,” says Deeter “is to consider personal insolvency or bankruptcy next year when the new legislation is brought in”, though this may not prevent your sister’s guarantee from being called in by the bank.

A fair share

CL writes from Dublin: I am getting married in a few weeks but unfortunately have been made unemployed. I have about €2,000 worth of Elan shares which I bought nine years ago through a stockbroker – BCP – who are now gone out of business. I have the certificate but am told they need to converted into an electronic form. Another broker said I would have to sell them in the States and said, ‘best of luck with them’. Any suggestions?

Elan moved it’s primary stock market listing to the New York Stock Exchange late last year, where the bulk of the trading in its shares is conducted, but it continues to be listed on the Irish Stock Exchange.

There is a lot of paperwork involved in selling shares now and most brokers are not keen to deal with customers with such small stakes. However, Bloxham Stockborkers in Dublin have agreed to sell your Elan shares  - it might cost you €100-€150 in charges – and I have passed on the name of the broker to you who will complete the transaction.

Risk Management

SB writes from Dublin: In the event of Ireland having to write down its national debt in a restructuring deal in the future - would state savings be affected?

State savings products include An Post saving certificates and bonds, PrizeBonds and the national solidarity bonds. Before 2001 these were all denominated in Irish punts and were automatically converted, at a rate of £1 to €0.79 when the euro was introduced. If we leaves the euro, a new, Irish currency will replace it and while the conversion price may be one euro to one punt nua, once it floats on the international currency markets its value will likely devalue quite sharply. Euro denominated savings accounts and instruments like state saving products will all be re-denominated in the new Irish currency.

Healthy options

RP writes from Cork:  I am retiring shortly on my 65th birthday and my company will maintain my health insurance policy (for my wife as well) until the renewal date which is about three months after I leave. First question:  can I just renew this policy without any waiting periods – also, my wife has developed arthritis in recent years? (We have been covered by a VHI corporate plan called Company Plan Extra.) If it proves to be too expensive, can you recommend a good, affordable policy?

You can maintain your existing policy, if you choose, even if it is a corporate one. Under our community rates pricing system every health insurance plan must be available to consumers. In your case, the only thing that will change is who pays the premium.

As for waiting periods, so long as you renew your health insurance, either with your existing company or with Aviva Health or Laya Healthcare within 13 weeks, you will not have to fulfil any waiting periods for existing medical conditions.

The Health Insurance Authority website www.hia.ie has a comparison site for the hundreds of plans on the market, but I think it’s a very hard slog. By all means go onto it to check out various costs and benefits, but given how expensive your current policies are – at €1,160 each with 76 similar policies on the market according to the HIA comparison site – a better solution is to consult a good specialist health insurance broker who will charge you a fee for reviewing plans and recommend a suitable one for your needs and price range. Check out www.healthinsurancesavings.ie and www.lyonsfinancial.ie.

WHAT TO DO WHEN A STUDENT GAP YEAR BECKONS: PART 2

Student jobs will be even more scarce on the ground here this summer and many young people will be hoping to find work abroad. For parents, this is a rite of passage they may have taken themselves back in the 1970s or 80s, with the UK and the US their most popular destinations. For this generation there’s no geographic limit to where they will seek work or take a gap year and global banking services in the form of ATMs and on-line banking facilitate this.

Last week I highlighted some of the health and travel insurance issues that you and your travelling child need to address before they go away.  Ordinary family multi-trip policies are unsuitable a) if you child is over 18, b) if their trip lasts longer than 30 days and c) if they are going to be taking part in what the travel companies describe as “hazardous” activities. These may have to be listed separately at an additional cost. Cash excesses apply for nearly every claim.

On the health insurance side, emergency cover on our domestic policies is also limited to 30-45 days though VHI and Aviva both have separate global policies that can cover longer holidays, but they’re expensive and when your student/child returns to college and wants to rejoin the family plan, any of their pre-existing medical conditions will be taken into account and the five year (typically) exemption period will apply.  (This is why many parents do not drop them from the family plan.)

Health insurance policies only cover emergency events anyway and benefits are only paid if the member is kept overnight at the hospital or clinic. Day treatments – no matter how extensive or serious (like a broken limb) - are not covered by the emergency global cover on your VHI, Aviva or LAYA policy (LAYA is the new brand name for Quinn Healthcare.)

Ideally, speak to a good insurance broker to ensure they are properly covered with the right travel and health insurance policy.

Banking/Money

Meanwhile, on the money front, what should your student/child be doing about their banking or money transactions?

Those going to Europe to work or travel may want or need a bank account where their wages, however irregular, will be deposited, either electronically (by their boss) or manually. 

If they already have an Irish account, their Eurozone employer can IBAN the money into it quickly and cheaply and the young person can seamlessly keep using their existing debit or Laser card to make purchases, ATM withdrawals and deposits.

For kids travelling or working in non-Eurozone countries, where they are less likely to open their own bank account and where it will cost too much for employers to deposit their wages electronically, I think the new money cards are a secure and convenient addition or option.

Issued by the big credit card companies, they act like a credit card in that they can be used wherever Visa or Mastercard are accepted – shops, restaurants, on-line retailers like airlines and other transport authorities and at ATMs. Where they fundamentally differ is that they pre-paid and do not provide any credit or the huge interest costs associated with credit cards.

The security features of the money cards are also important for everyone’s peace of mind: the card can be topped up by the owner (the young person from their own on-line bank account) or by a third party – mum and dad.  (Parents can also check the balance on the card at any time so long as they have the customer code.)

The young person meanwhile can only spend what is on the card at any time – a good incentive to stick to weekly spending budgets, especially if, say, the card is only being topped up once a month.

The initial cost of the O2 Card, which I will be getting for my son who is planning a gap year, is €4.99.The maximum top up amount at any given time is €350 and there is a small charge per top up (based on the amount) of between 80c and €2.99. There is a €1 ATM withdrawal charge in the Eurozone and a 2.75% charge for withdrawals and purchases outside of it, so they do not want to be withdrawing small amounts of cash too frequently.

Lost or stolen moneycards are treated just the same as a Visa card – you contact the company and they suspend the card right away and send a replacement (and new PIN) as quickly as possible. (See www.02online.ie for details or checkout out the list of cards on www.moneyguideireland.com.)

Though your 18-20 somethings will object to your mentioning this, make sure they are fully aware of the security issues around using any kind of plastic card and how they could be held liable for unauthorised withdrawals or payments if they give out their PIN or lend their card to anyone. Also, make sure they are aware of the different card scams.

If your child is using only a debit card while there are away, it isn’t a good idea to leave substantial cash balances in this account (theirs or yours): it’s been known for travelling students to be forced by thieves to withdraw everything in the account over the space of a couple of days. 

Debit cards are still ‘safer’ than credit cards in that only what is in the account can be stolen, but it’s better for them to email or phone you (collect) to put another tranche of money into the account than to leave it all there from the start.

Finally, make sure you have a safe copy of all the appropriate bank and card account numbers (including IBANS) and passwords. Photocopy or scan passports, travel and health insurance documents, flight tickets.  These can also be emailed to your child’s computer or smart-phone so they have immediate access too.

WHAT TO DO WHEN A STUDENT GAP YEAR BECKONS: PART 1

Plans are afoot in our household, and no doubt in many others around the country to launch a young person into summer employment abroad, or even, in our case, a post Leaving Cert, pre-college gap/work year.

Getting any teenager to do some forward planning and systematically address all the issues involved in getting a job abroad, or leaving home for any length of time (whether two or 12 months) is like trying to fill a bucket of water using an eyedropper:  they’ll get around to it…eventually.

I also know that, while a big part of the growing up process is not having your parents doing everything for you, especially once you’ve turned 18, the simple truth is that time waits for no one. If you really want your nest to be emptied over the summer (or for an gap year) then it is in your interest as well as your child’s to help the departure process with some research and priority-setting.

There are some important travel/money/insurance issues that shouldn’t be left to chance or too long.  This week we’ll look at health and travel insurance.  Next week: budgeting and bank/money issues.

Health Insurance:

Many families still have private health insurance cover and nearly every popular VHI, Quinn and Aviva health insurance plan has some level of ‘emergency medical cover while abroad’ or ‘worldwide emergency cover’. 

What you shouldn’t assume, however, is that this overseas health cover is anywhere near adequate enough if your child is going off to work in a foreign country for just a few months or is taking an extended break away from home.

This cover “is not a substitute for travel insurance,” says Dermot Goode of www.healthinsurancesavings.ie, a specialist broker.  “It is exactly what it ‘says on the can’ – emergency cover.”  The amount of cover – between €65,000-€100,000  - “is woefully inadequate for the US or Canada” and it only pays out “if the member is detained overnight in a medical facility. If your treatment is done in a day, you won’t be able to make a claim.”

Also, you (or your child) may not be able to claim any emergency cover benefit, says Goode unless your health insurer has contacted their emergency number before treatment commences in order to activate the cover so that the health provider can manage where you are treated, how much of a payment they will sanction, etc.” (Such pre-clearance is not expected if you’re on your own when knocked down and brought to a hospital by ambulance, but the insurer must still be contacted as soon as possible, says Goode.)

More importantly about the medical cover from private health insurance policies says Goode, “is how long you plan to ‘be abroad’. 

Emergency cover applies to multi-trips in any year, “but not usually for any single trip lasting more than usually 30 days duration.  They are not suitable cover for young people who are continuously away for several months.”

Both VHI and Aviva have separate international health insurance plans that do cover protracted absences from Ireland, says Goode, but they are quite expensive.  The young person can be switched over to such a policy for the duration of their travels, with premiums suspended on their Irish policy, “but parents need to watch out for the fact that when the child returns and is put back onto the domestic plan, exemption times for pre-existing conditions will apply: if you child is an asthmatic that means no cover for that waiting period.”

Meanwhile, the European Health Insurance Card that we are all advised to carry when travelling around Europe will help with securing emergency medical care in the public health service of the EU country your child may be visiting or working in, but it doesn’t necessarily cover all the emergency costs (like an ambulance, or drugs they are prescribed) and it doesn’t cover any day to day, non-emergency medical care.

Travel Insurance:

Proper travel insurance – the kind that covers medical emergencies, accidents, stolen or lost goods, legal expenses, public liability, travel delays, etc – is an absolute must for your travelling young person.

The commonplace, single or multi-travel policies that costs as little as €75-€100 a year for the whole family “are really not adequate if your child is travelling for longer than 30-45 days, the single trip duration for most policies,” says Goode. 

Next, a child who is included in such a policy is no longer covered once they go over age 18, and they’ll need a separate adult policy no matter for how long they are away from home.

Also, even if their stay away is shorter than 30 or 45 days, “these policies can be full of exemptions,” such as for pre-existing conditions, “and there will be excess payments,” says Goode. Adventure sports and ‘hazardous’ activities will make the cost soar. Meanwhile, medical benefits are once again usually only paid if the insured person is kept in overnight.  Day case medical treatment will nearly always have to be paid out of the person’s own pocket.

There are a number of specific back backer/gap year type policies on the market for extended trips abroad. 

The cost of insuring my 18-going-on-19 year old for worldwide, 12 month backpacker cover with Blue Insurances (see www.blueinsurances.ie), including up to €3 million worth of medical cover (with a €95 per claim excess), plus winter sports cover and up to Level 2 ‘hazardous’ sports activities that includes surfing, bungee jumping and white water rafting, will be c€405.50. (Level 4 hazardous activity cover would bring that premium up to €807.) A three month quote would cost c€240.00 and c€345 for six months.

Next week: banking and other money issues.

Will my husbands debt cost me my family home?

AC writes from Dublin: My husband and his father gave a personal guarantee to a bank for a business loan. It's now in default, and with interest ratcheting up is worth nearly €2 million. They have sold a number of properties over the last two years which seemingly put a sizeable dent in the capital owed only to get swallowed whole again by interest due. This happened before we married, and I knew nothing about it until he told me a year later when the worry got too much.

I owned my home, mortgage free, when I met him. After I married, after he told me about his personal guarantee problem, I sold my house and used the money to renovate and extend an old house my parents gave me. This is now our family home. We have two children. This house is in my sole name, it was a gift from my parents, all CAT returns filed etc.

“The devil is always in the detail,” says solicitor John Horgan of Leman Solicitors in Dublin, “but if a) the property is in your reader’s sole name, b) the debt is in her husband’s name and his fathers’ and c) she has not signed any documentation in relation to their loans - mortgages, personal guarantees etc then the bank has no contract with her and no security over her house.”

Your question is sure to trigger other readers’ concerns about what happens to the family home when it is owned by both partners and one of them is in serious personal debt, or has used the family home to secure a separate loan or is perhaps even facing bankruptcy. 

In anticipation of this I suggest such readers familiarise themselves with the Family Home Protection Act 1976 and the Family Law Act 1995. At the core of these acts is legislation that prevents one spouse from selling, mortgaging, leasing or transferring the family/shared home without the consent of the other spouse/civil partner. Where that consent has been given under duress or under false conditions, the family home may not necessarily be lost to creditors.

The money website askaboutmoney.com also has a ‘key post’ (http://www.askaboutmoney.com/showthread.php?t=162672) that discusses a number of family home related debt matters, but it includes the caveat that readers also consult a solicitor. 

Diminishing return

PS writes from Dublin: Recently you replied to a JO'B from Dublin regarding Irish taxes on UK share dividends. You stated that a UK dividend of €1,800 would have resulted in tax of €200 at source and, if the Irish owner was paying tax at 41%, "their liability on the €1,800 would be €738".

Am I correct in assuming what you meant that the tax was €738 less what was already paid to the UK authorities, leaving a balance of €538 payable in Irish tax? Would you mind clarifying this for me?

I’m afraid that you read my answer correctly the first time. The taxing of UK share dividends here is not very generous: first, UK dividends are paid to the Irish shareholder net of a UK withholding tax. The dividend voucher you receive will show a tax credit that is the equivalent of 1/9th of the net dividend, but the withholding tax is not refundable and if you are a top rate 41% taxpayer here, your tax bill on the dividend example I gave of €1,800 (the actual gross dividend being €2,000) is €738, that is, 41% of €1,800.

Paltry pension

S McG writes from Dublin: From 1961 to 1965 I worked on and off in England and made National Insurance contributions for a total of 211 weeks treated as insurance periods. I returned to Ireland in July 1965 to take up employment in the civil service where I remained for 41 years. On reaching age 65 I applied to the International Pension Centre in Newcastle Upon Tyne for payment of a pension on the strength of those years of insurance. I was informed that, as I am in receipt of an Irish civil service pension I am not entitled to a pension from the UK, however, I then received an amount of £0.71 per week that arrives as an annual payment each December.

As my period of employment in the UK had no connection with my later employment in Ireland I fail to see how my Irish pension should in any way affect my UK entitlements. Your comments would be appreciated.

As a retired Irish civil servant, your civil service and state pension entitlements are combined. A spokesperson for the Department of Social Protection told me that your Irish pension is administered by the Irish Paymaster General, not the Department of Social Protection, but she did add that your status as an ex Irish civil servant should have no effect on whether you are entitled to a UK state pension for the years you were employed in the UK.

However, in order to qualify for even a partial UK state pension, men who were born before 6 April 1945 need to have paid at least a quarter of the required 45 years of qualifying national insurance contributions (NICs) for a full pension; and for those born after that date, a quarter of the 30 qualifying years of contributions. With fewer than 25% of the qualifying years worth of contributions, you will not be entitled to any basic State Pension using your NICs record. (See http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/DG_10014671)

Nevertheless, you are receiving a UK pension payment of £0.71p a week, or £36.92 in total every December. 

The Department of Social Protection spokesperson suggests you contact the Paymaster General about your case. Perhaps they can shed some light on the size of your UK state pension. You may then have to re-contact the International Pension Centre at Tyneview Park, Newcastle Upon Tyne to double check the numbers of contributions they attribute to the period in which you worked in the UK. Their telephone number is 0044 191 218 7777.

Follow Aussie rules to move fund down under

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

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

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

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

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

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

Keeping track

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

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

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

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

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

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

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

Joint venture

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

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

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

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

A NURSE GETS A NEW BEGINNING AFTER MORTGAGE DEBT SETTLEMENT

Strike one up for the little guy!  Hurray for the hard-pressed bank customer!  products.

Last week was one of those rare times when it looked like the tables, which have completely favoured the banks over the citizens of this country might have started to turn:  a nurse with an unpayable amount of mortgage debt was relieved of that burden in what some commentators are describing as a ground-breaking debt forgiveness case.

The nurse, 35 year old Laura White bought her house in the north Dublin suburb of Coolock in 2005 for €245,000 but by 2010, after a change of job with reduced earnings, was unable to meet her mortgage payments. She voluntarily surrendered her house at the end of that year, but Bank of Ireland (the parent bank of the lender, ICS), eventually sold the property for just €70,000 and sought the €170,000 shortfall from Ms White.

Three years later when the case appeared before the Court, with the help of the consumer advocacy group, New Beginning, it was finally agreed last week that the bank would write off €150,000 of the debt if Ms White repaid €18,000 over the next six years at €250 a month. (If she defaults at any time a €120,000 judgement will be registered against her.)

On the same day as that announcement, AIB admitted it was reimbursing €3.1 million worth of premiums to 11,500 of its credit card customers for the payment protection and travel insurance policies they mistakenly or inadvertently purchased when they applied for the card.

These customers had either ticked both the ‘accept’ or ‘decline’ boxes on the form for payment protection insurance or travel cover; they provided contradictory information on the form; or, the payment protection policy wasn’t cancelled as they expected when they were informed it would be when the went into arrears on their policies.  None of these mistakes or anomalies were picked up by the bank as the forms were processed by AIB and the customers were subsequently charged the policy premiums.

This €3.1 million back office discrepancy was only discovered when customers came forward and after the bank undertook it’s own review, says AIB, but “We acknowledge that the Central Bank is conducting a review into the sale of PPI which also encompasses part of this issue.”

The Central Bank’s investigation of the sale – and by implication, the misselling of all payment protection insurance (PPI) - began late last year and its findings are expected to end with significant amounts of compensation being paid by the banks to customers (despite the statute of limitation of six years that applies in these cases, though many expect that that will have be addressed separately, so large is the potential scale of this problem.)

The fact that it was Bank of Ireland and not one of the wholly owned Irish banks that came to this mortgage arrears settlement with New Beginning is significant.

The bank has benefitted from recapitalisation by the Irish state and taxpayer, but it is also 80% privately owned with prominent North American investors, who it can be speculated have a more realistic attitude to clearing arrears, writing off debt and giving both the bank and customer the opportunity to move on.

It remains a mystery to everyone why billions of euro that was designated for arrears write-offs have not yet been used for this purpose by the other Irish banks; the White case shows it can be done.

Some suggest that the risk of a stamped of people throwing back their keys is why the banks have to resist widespread debt writedown.  But a significant partp of the White settlement is that she didn’t walk away with €150,000 worth of debt forgiveness AND her house.  She was left with five years of wasted mortgage payments, another six year discharge period in which she must pay another €250 an month, and absolutely no house to show for it.

(Debt write-offs are more likely to trigger the moral hazard lights here if debtors keep their homes as standard practice, as happened in Norway back in the early 1990s after their property boom and bust. Few expect that to happen though tenancy arrangements in the former home are likely.)

New Beginning and McHale Muldoon, a firm of Dublin solicitors, are two legal offices (among many in the case of PPI) that have been representing consumers at risk of losing their homes due or who may believe they have been the victim of PPI misselling.

New Beginning act ‘pro bono’ in cases they take on (they get 80 calls a day from distressed homeowners, says barrister and co-founder Ross Maguire) while solicitors who take on PPI cases take a share of any refund. Given that the Central Bank is preparing a report on PPI and complaints can be made at no cost to the Financial Services Ombudsman, anyone seeking compensation for PPI may wish to deal with the Ombudsman instead.

The New Beginning queue is already pretty long and after last week’s success more of the iceberg that is below the mortgage debt waters will be revealed.

It could be next year before the insolvency and bankruptcy legislation gets up and running.

Until then, your options are limited, and you’ll probably need the help and kindness of strangers (like New Beginning) if you’re to get a settlement like Laura White secure.

But last weeks revelation means that a light has finally appeared at what has been a very dark tunnel for so many.

Call it Hope.