Jill Kerby

HEALTH CARE TROUBLE AHEAD…STARTING WITH GP’S

By Jill Kerby

If you think trouble is brewing over implementation of free GP care for the under sixes, just wait until the Department of Health tries to roll out the same ‘free’ care for adults and, by 2019, compulsory health insurance for everyone.

With expectations as low as they are about the success of the ‘consultation’ process between the HSE and general practitioners on the revised contract they are expected to implement this summer, it’s hard to imagine that under-resourced GPs will be very keen on extending free treatment to the rest of us.

Existing child and adult medical card holders, they claim, are losing their entitlement to free care at the expense of mostly healthy children. The volume of extra work involved in treating all 420,000 children under six will be impossible based on current resources, they say, and certainly not for c€74 per child, per annum.

I have a lot of sympathy for primary care doctors and other practitioners who run their own businesses. I’m also a lifelong supporter of health insurance, especially the bonkers community rated kind that used to be cheap but was always unsustainable without a steady stream of health, young customers.

Now that both models are disappearing, we all need to come to the realisation that healthcare is only going to become more expensive…a lot more expensive.

Wonderful care

The two GPs who have taken care of me and my family for 20 years (one was a GP paediatrician who I took The Child to when he was little) have provided wonderful care for just €50 a visit.  I can’t remember the last time surgery fees went up, but it hasn’t been since the Celtic Tiger suffered its massive heart attack.  Meanwhile, health insurance prices, mainly dictated by state imposed costs, have doubled.

One thing is apparent at most GP practises:  they don’t employ the same number of ancillary staff as they once did, such as a part or full-time doctor and practice and staff nurses. Since my GP is just down the road I can only assume that his light and heat bill and his bin charge has gone up, just like mine.  I also presume he has to pay rates on his (albeit residential-type) premises on top of equipping his practice, paying liability insurance and corporate tax, all on a budget that has seen an HSE payment reduction of 38% in the past four years.

As one Galway GP recently wrote in her blog, the Government wouldn’t deign to treat private sector hairdressers the way they do private sector GPs, who under the new, revised primary GP contract must now absorb another 240,000 children aged under six for a single, annual payment, regardless of whether they are equipped or able to do so.

If the GP’s do not sign the revised contract, they’ll lose their existing GMS (general medical service) child patients, warn the government. All this will do, say their representative organisations, will be to encourage older doctors to retire sooner, encourage younger ones to immigrate and force the struggling ones to go out of business. (About 100 are already insolvent, said National Association of General Practitioners last spring when they conducted their town hall meetings around the country.)

I’d like to think a reasonable solution could be found. But if the worst happens – and remember this is just a rehearsal for the real fireworks show if and when universal GP care and universal health insurance is rolled out in 2019 – every parent of a child attending a GP (with or without a medical card) who has refused to sign will have to pay up. And that fee is likely to be higher for every patient, and may even have to be a different fee, warn some GPs, depending on your age and state of health.

Is there time to pull everyone back from the brink? Is there time to convince the government to re-think the way it intends to deliver health services in the future?

I’m guessing, no.

The Department of Health has convinced the cabinet that the introduction of ‘free’ GP care is necessary for all children and adults in the run-up to the 2019 when under Universal Health Insurance, the payment of that cover switches from direct subvention by the HSE to private insurance companies under the regulation and supervision of seven new health quangos. 

This makes so sense:  between now and 2019 the government intends that everyone will have primary care paid for by the state, even those among the two million health insurance members whose GP fee is covered in part or full by insurance plan.  Then, from 2019, everyone who had their GP treatment paid directly by the state from 2014 will have to buy a private health insurance plan… that will pay for their GP care. Previous medical card holders will receive a subsidised or free policy.

What would make more sense, of course, is for the government to encourage greater voluntary take-up of private health insurance now, by re-instating full tax relief on premiums; lowering the health insurance levy-cum-subsidy to its wholly-owned and unregulated, undercapitalised insurer VHI; ending the arbitrary pricing of public hospital beds for private health insurance customers (which now costs €830 a night instead of the standard €75) and by privatising the VHI in order to encourage more health insurers in the market.

The Canadian model

If primary care, like hospital treatment based entirely on need is the goal of this government, perhaps we should be adopting the Canadian Medicare model and not the Dutch insured one.

The Canadian system recognises that GP’s are self-employed professionals. Each province’s Medicare system pays them per visit and treatment, not by single per capital fee per annum. GP’s mainly work in clinic-based teams that manage patients based on need and by appointment, but the system is efficient because it shares costs and bills a single paymaster. It by-passes insurers.

Private health insurance in Canada, mainly an occupational benefit that mainly purchased a semi-private or private room in a Medicare hospital but never allowed anyone to jump queues in acute hospitals, now covers elective treatments in wholly private specialist clinics, a consequence of growing waiting lists for elective treatment.

Under the draft UHI plan here, we are told there will be no queue jumping at all since all hospitals (public and private) will be required to treat every patient based on need.  The rich man with the more serious hernia or wonky hip (who could get treatment via insurance in Canada) will in Ireland be treated before the poor man, with the less worse-off hernia.

That’s a funny kind of equal access.

I once said I’d sell my car before I got rid of my health insurance. I may have to yet.

Universal health insurance, plus the risk rated (not community rated) supplementary insurance to cover all the benefits I currently receive from my private insurance is going to cost a lot more money.

Get used to it.  Start saving.  Equality doesn’t come cheap.

WHERE THERE’S A WILL THERE’S A RELATIVE:  GOOD PLANNING WILL HELP KEEP EVERYONE HAPPY

Leaving part of one’s estate to loved ones is a very Irish trait and is rooted in both our love for the land – even if it is only a little patch of city garden and bungalow -– and our close family ties.

The Celtic Tiger years prompted many early an inheritance.  Parents and grandparents gifted down payments to the next generation or went guarantor on high-end mortgages that were otherwise unaffordable, and unfortunately proved to be so a few years later. 

For many older people these early inheritance gifts turned out to be a seriously expensive mistake: not only was the homebuyer left with negative equity but the giver’s personal balance sheet became seriously eroded as their own property value dropped sharply.

Despite the mistakes of the boom years, the issue of inheritance remains one that still needs to be addressed.

And the first step is to write a legal Will.  Without a Will, the deceased is deemed to have died “intestate”, and their estate is distributed according to the terms of the Succession Act 1965: 

-       Where there is a surviving spouse but no children, the spouse inherits everything and the transfer is entirely tax free.

-       Where there is a surviving spouse and children, the spouse inherits (tax-free) two thirds of the estate and the children, the remaining one third in equal portions. The children’s inheritance is subject to the tax threshold of the day, currently €225,000 per child. The balance is subject to the current capital acquisition tax (CAT) of 33%.

-       Where there is no surviving spouse or children the deceased person’s estate is distributed first to surviving parents, then siblings, then nieces and nephews. The tax-free threshold between siblings and nieces and nephews is just €30,500.

-       Where there is no lineal descendent, the estate becomes the property of the Irish state.

Writing a Will means that you have full control over who you leave your money, assets and goods and in whatever order and amount you wish.

That said, it should be noted that you cannot disinherit a lawful spouse and while you can do so to your children, such Wills have been successfully challenged by children in the courts. 

Meanwhile, adopted children are treated exactly the same as all birth children (regardless of whether their parents have been legally married) and, subject to certain time/residence conditions, foster children are also treated the same.

TAX EXEMPTION

If you leave someone who is not a lineal relative an inheritance, the tax free amount they can receive will be just €15,075. The balance is taxed at 33%.

However, a person who has shared your family home for three continuous years, say, a child, sibling or other relation, a same sex partner (who is not already a civil partner) or just a friend, can inherit the property tax-free if they are not the owner or part owner of a property already and they do not sell the property for at least six years after receiving the inheritance.

Certain business and agricultural land transfers are also subject to some CAT relief.

The complications that can arise from these CAT rules is another reason why it’s important to get legal advice when making anything other than a straightforward Will. This is especially the case for separated and divorced couples, though inheritance is usually addressed during the separation or divorce proceeding and may also be part of a judge’s ruling.

Avoiding inheritance tax is difficult but possible if the person decides to dispose of part of their money and assets during their lifetime. 

The easiest way to do this is to take advantage of the tax-free €3,000 annual gift provision which allows anyone to gift that amount to another person each year, regardless of their relationship.

In other words, a parent can gift each child and grandchild – or anyone else – up to €3,000 every year, tax free. 

For example, if you have three children, three daughter’s or son’s in law (or equivalent partners) and six grandchildren, as was the case for my own in-laws, a total sum of €36,000 a year could have been gifted, with no tax liability for anyone and no effect on the beneficiary’s lifetime tax-free threshold.

The money can then be used to help pay for education fees, health costs, mortgage debt (or a mortgage downpayment) or other purposes.  Multiply this tax-free endowment by 10 years and €360,000 can be gifted to family members during the parents’ lifetime. Upon their death, their remaining estate can be distributed within the current tax-free thresholds. (See above)

A substantial, tax-free gift dispersal like this is possible only for the wealthy, so a word of caution:  no matter how generous you are, you need to ensure that you keep sufficient savings or assets intact for your own immediate and long term needs before giving them away in the form of early inheritances.

Special life insurance  – known as a Section 72 policy – can be purchased to offset large inheritance tax bills on your estate – but these are expensive and require good, independent financial advice.

We’ll look at the costs of – and the need to pre-fund – long term health and nursing care in a future article.

STOCKBROKER CHARGES ARE ONE RISK YOU CAN CONTROL

When it comes to investment performance, only a few people seem to have informed, realistic expectations.  Many have none at all and certainly even the better informed don’t usually have a clue of the total costs of buying individual shares, either by signing up with a stockbroker, making single buy or sell orders or opening a comparatively cheap on-line, execution-only account.

I’ve written before about the risks you take buying Irish bank shares. They are thinly traded, they are still considered “penny shares” for good reason: banks make money lending. Heavily indebted Irish banks are still not lending to any significant degree.

But no matter if it is a rubbish Irish bank share or a profitable, global, household name ‘blue chip’ share that pay decent dividends, there is always a risk in putting your hard earned money or savings into just a few shares. No one can predict the future and the fortunes of individual companies and sectors ebb and flow. (Look at the once giant camera industry, US motor manufacturers, computer hardware and software companies (IBM and Blackberry two of the most famous casualties). Picking a single winner from tens or thousands of public companies is is nearly impossible.

Which is why pools of investment funds and investment trusts, which represent many companies and other asset classes (bonds, property, cash deposits and currencies, commodities, etc) spread your risk and give your investments some balance.

That said, some people are determined to buy individual shares believing that their share will come good some day.

Unless you are an experienced stock market investor, at least read up on how the markets perform. Come up with a plan.

Rory Gillen, an ex-stockbroker who now offers stock market courses and share investment advice at Gillen Markets (see www.gillenmarkets.ie) has written a very good book called “3 Steps to Investment Success”. Buy it, read it. Take the course. (I did. I no longer punt on individual shares.)

Next, be very careful about how you buy your shares and the charges, commissions and fees you pay for them.

There are a number of stockbrokers operating mostly in Dublin, Cork and on-line. They all charge certain commissions and fees to buy shares and operate accounts with the most expensive offering discretionary trading and advisory services to mainly higher net worth clients with larger sums to invest. 

Accounts like these can attract large annual management fees that are a percentage (say 0.75-1%) of the value of your portfolio; execution fees per trade (ranging from 1.65% up to €15,000 value down; 1% for the next €30,000 value, reducing to 0.5% on trade values over €30,000. Minimum trades range from as low as €40 to €100, depending on the stockbroker.  You want to have at least €50,000 at hand to justify these charges.

Even accounts that don’t include discretionary management require annual maintenance fees, (including on-line execution only trades, that is requiring no advice or contact with a broker) usually amount to between €60 and €100 a year.

Charges also include extra fees for buying or selling non-Irish shares, mainly in UK or American markets. These are usually an extra percentage commission on top of the existing 1.65% - 0.5% and something called a “custody transaction charge”, again usually a flat cash sum of about €25.  If you buy an ETF from a broker, (the very good value exchange traded fund that includes many stocks but trades as just one share on the market) they will most likely add their own management fee on top of the very low ETF fee, which is usually less than 0.5%, even though there is no management on their part.

When government stamp duty (1% for Irish shares, 0.5% for UK ones) and sundry other little charges – say, for operating a CREST account - the impact can be significant. Your shares had better perform, because these charges are imposed whether you make a penny or not.

Sommerville Advisory Markets, a relatively new player in the Irish stockbroking community seriously undercuts all the others with a single, flat trading commission of just 0.15% and government stamp duties. 

It is worth checking out (www.SAM.ie) but this broker is targeting active traders of CFDs – contracts for difference vehicles in which you either speculate on how the price will move (as in spread bets) or entering into a contract that you buy at one price and sell at another, paying out the difference (CFDs).

Both are traded on a margin of cash, not the entire purchase price and can result in huge losses – CFDs are how Sean Quinn lost his billion euro business empire.

A wise old bird once said, “The stock market is the most efficient place to separate a man (or woman) and his money.” 

The least you should know is exactly how much they’ll charge you to do so.

If you have a personal finance question you would like answered, write to Jill at jill@jillkerby.ie

IT’S NEVER TOO LATE TO MAKE A WILL…EVEN AFTER 30 YEARS

Some couples choose not to marry.  They may have had previous unhappy marriages or long term relationships.  Their parents may have had an unhappy marriage that broke up (or should have.)  They may still be married but do not wish to divorce their previous partner.

They may not believe in lifetime, monogamous arrangements or each partner may be financially independent and doesn’t feel a legal arrangement is necessary, (even if there are children.) 

Some couples decline to marry because the one who has greater value assets that they bring to is afraid that they will be financially disadvantaged in the event of a legal separation or divorce.

And some couples just never get around to formalising their relationship…until it’s too late.

A reader who contacted me recently is at just such a risk: “My partner and I have been together over 30 years and are in our early 60s. We both work but have no children. We own property in Ireland and France that is worth at least €500,000 and is mortgage-free.

“He earns twice what I do, we are not taxed jointly, and still don’t have any wills. We manage our household bills and purchases jointly and amicably but I really don’t know exactly what he earns, his investments, whether he has any death in service insurance, the size of his pension, etc.  The years have passed without there being much need to know this as I am financially independent and we have no children

“I know this sounds ridiculous, but we have never discussed our finances in any serious way, but I am increasingly concerned about what happens to us if either partner dies, tax and inheritance-wise.”

This reader has good reason to be concerned. There is a provision under Capital Acquisition Tax rules that allows someone who is not legally married or a civil partner to inherit a shared family home on condition that the beneficiary has lived for at least three continuous years with the owner, owns no share of another property and keeps the property for at least six years after the owner’s death.

It means that children (or a sibling, other relative or friend) can inherit the home they share with the parent (or other disponer) entirely tax-free. In this reader’s case, however, she (and he) would not be able to inherit their partner’s property tax-free because they each have an interest in another property – in France.

With two properties, jointly owned and worth €250,000 each (for the sake of argument) this means that should one or the other died, and they were willed the other partner’s half share, the survivor would face end a tax bill of €77,527.  This is worked out by taking €250,000 (€125,000 x 2 properties), subtracting the tax-free threshold of just €15,075 between “strangers” and applying the current 33% CAT tax to the balance of €234,925. The net inheritance is €157,400.

If a will is not made, the surviving partner is not entitled to their partner’s half share of the properties and the Succession Act 1965 directs that the deceased person’s estate be distributed, first, to surviving parents and they are not alive, to siblings and then to their children (if there are no surviving brothers or sisters.)

The current tax-free threshold between a child and parent is currently €225,000 and is just €30,150 between siblings/nieces/nephews.

Since this is a well-off pensionable couple and perhaps own other assets like cash deposits, investment funds or shares, cars, valuable furniture or art, it isn’t unreasonable to assume the rest of their estate could be worth €100,000 or more, depending on the value of their pension funds. 

Pension fund trustees (and the state itself) usually award widow(er) pensions only to named, legal spouses/civil partner or dependents. The balance of assets, if they are left in a will to the person who is not a legal spouse or civil partner would be subject to full CAT at 33%, presuming that the value of the family home and other property has already absorbed the €15,075 worth of their tax-free threshold.

It is not unusual, in my experience, to come across for couples – married or not – to have never formally discussed how much they earn, the value of their separate assets or pensions. Marriage and civil partnerships protect them against their own inertia or negligence. The Succession Act protects them against being disinherited. (A spouse inherits everything where there are no children and 2/3rds where there are. Even if you write a will a spouse must receive half your estate – tax free, of course.)

It’s never too late – hopefully – for this couple to sit down and discuss their marital status, if only on financial grounds. Contesting a will (or the fact there is no will) can only be more distressing.

If you have a personal finance question you would like answered, please write to Jill at jill@jillkerby.ie

PEER TO PEER LENDING – WHERE RISK AND REWARD MAKES S€NSE

When will interest rates go up?  No time soon is the consensus view of EU economists and money-brokers who are think the ECB 0.15% interest rate could even drop to zero. 

This column has already looked at the consequences of such a lot rate: tracker mortgage holders end up at the top of the feeding chains as their loans fall in value with the ECB rate while at the bottom are savers who see their deposit returns collapse, and the ‘real return’ on their money depreciate after DIRT and inflation is taken into account.

Borrowers are also disadvantaged:  the banks, still trying to get their own balance sheets into positive territory, further tighten their lending conditions and hike up fees and charges.

Is it any wonder that savers, pensioners, unlucky variable rate home-owners and people running small businesses are finding so little solace in this “recovery”?

Last week I met Peter O’Mahony, the founder of Linked Finance (see www.linkedfinance.com) a company that has identified a market gap between the shortage of affordable lending to small business and the need of savers for an acceptable, risk-rated return on their savings.

Based on the eBay model that brings willing sellers and buyers together to an auction that determines the price of the good – a loan, in this case. The loans last for three years and the borrowers must be owners of small limited liability companies, sole traders or in partnerships. Their firms include the proverbial butcher, baker and candlemaker, all sorts of other, high tech and medical device companies, breweries and financial service providers.

About €4m of finance has been arranged so far, said O’Mahony and the average borrower has secured about €28,000 from an average of 189 lenders, each of them investing about €150. Each lender (6000 are registered, only 1000 are active) has lent to nine different borrowers.

“No single loan can be more than €2,000 – which means that lenders with larger sums must spread their risk.”

The on-line auction determines the interest rate at which the borrower secures his/her loan, with the lowest rate, the winning bid. “The average interest rate is 8.9% per annum.” he explained. “The equivalent unsecured loan from a bank – and all our loans are unsecured – would cost the borrower between 9.5% and 13%.” 

That 8.9% gross annual return (7.7% after Linked Finance take their fee) is far more than any saver will earn from a deposit account. But P2P lending comes with a very real risk that you could lose your capital if the company you’ve lent to defaults on their repayments or goes bust. 

It is early days, “but not a single borrower has missed a payment” claims O’Mahony.  “That will change,” he says, “but that’s why we have a €2,000 per loan limit and why lenders are encouraged to spread their loans.”

Peer to peer lending is coming into its own here and in the UK because of the shortage of lending from the banks, and the lengthy, tiresome hoops that they make small borrowers jump through “for relatively small amounts. Many of our owners tell us that given how much easier [Linked Finance] is they will never go back to the banks if they can avoid it.”

Linked Finance provides borrowers and lenders with both the on-line auction platform and the lender with a segregated account “into which they receive 36 monthly, amortised, direct debit payments of capital and interest”. They can either withdraw their monthly return or leave it there to compound, or lend on to another borrower, O’Mahony explains.

And while Linked Finance vet borrowers and post this information on the web-site and do credit checks, they don’t rank the borrowing companies performance or prospects – that risk determination has to be the lenders’ alone, says O’Mahony. 

But their experience is that many loans come from the borrower’s own community and they are encouraged to keep up that goodwill by offering their lenders product vouchers and discounts.

Peer to peer lending is not for anyone who is so risk averse that they need a capital guarantee (albeit one that will be eaten away by inflation.)  You should never invest any money that you have to live on.

Peer-to-peer lending is a remarkably simple, transparent concept. It hasn’t been hit - yet - by intrusive government regulation or levies yet that add layers of costs and complexity. The conventional banks don’t see it – yet – as a threat.

Until then, it may be worth checking it out for what it is:  a great idea that rewards a manageable level of risk.

If you have a personal finance question you would like answered, please write to Jill at jill@jillkerby.ie

PRICESPY IS COMING TO AN IRISH SHOP NEAR (AND FAR) FROM YOU

 Aside from Volvo cars, dark crime fiction and ‘telly noir’ police procedurals like The Killing, the best known Swedish consumer brand is IKEA. It’s the place where you set out to buy cheap summer garden furniture and come home with a bookcase, new bedroom lamps, a bathroom cabinet and a couple of bags of frozen meatballs.  And the garden chairs.

The Swedes pay some of the highest taxes in the world and in return receive some of the most advanced cradle-to-grave social services, but this doesn’t leave its citizens with a lot of disposable income, hence the pricing genius of IKEA.

Which might have been why, about 14 years ago, a very clever Swede called Jonas Bonde set up a company called Prisjakt or PriceSpy, a price comparison website that would help Swedes find the right consumer products at the right prices. 

Last week PriceSpy was launched here in Ireland (it already operates in the UK, Norway, New Zealand) with 400 Irish on-line retail operators, and 111,000 products to compare as well as thousands of UK and other international retailers. (There are nearly 675,000 products and 2,000 retailers in the UK.)

The site aims to compare branded products between all the participating retailers, reducing the drudgery out of searching for the best price. 

PriceSpy.ie (www.pricespy.ie) supplies not just the price of the item you wish to compare, with the cheapest price at the top, but supplies comprehensive filtering tools as well:  in the case of a laptop, for example, you simply key in or tick the size, weight, colour and other specifications, and then just those laptops appear.

Aside from the different retailer’s prices, shipping costs are also automatically included in the search result and you can also check user product reviews that may be helpful in making your choice.  

For mobile phone and device users, the PriceSpy app means that you can scan the barcode of an item in a shop and then do an immediate price comparison with other listed retailers.  This gives you the choice of buying the product right there or ordering it on-line.  (Savvy shoppers will ask the shop owner if they are willing to match the PriceSpy price you’ve found elsewhere.)

Another impressive feature on the PriceSpy App is that you can set a price alert option that keeps your search active even if you can’t afford the normal retail price. Once the product you want goes on sale, you receive an automatic alert from PriceSpy that a certain retailer(s) has discounted the price.

The Irish operation currently has eight main product categories - Computers & Components, Lifestyle & Beauty, Audio & Video, Home & Garden, Phones & GPS, Games & Consoles, Sports & Outdoor, Photo & Video but more are to be added.  During my demonstration I asked PriceSpy to show me price comparisons for a 32 inch high definition television set and an expensive but not very popular perfume.

I was surprised not just by the huge difference in price for similar specifications between different TV brands and retailers around the country. The cheapest in one brand category, was from a shop called Hegarty’s in Donegal (including shipping).  And while the eau de toilette I wanted – Joy, by Jean Patou – was only available at one Irish retailer for €101.87, including shipping when we checked UK suppliers, the cost fell to €53.42 plus €12.75 postage (which seemed excessive for a 50ml bottle).

This item isn’t widely stocked anymore and the last bottle I received cost about €100, so the €35.70 savings – is significant. However, comparing more popular perfume brands brought up many more retailers here in Ireland with similarly significant discounting.

Computers and electronics goods like mobile phones are the most popular product lines with many price choices, explained the company, because demand is so large. Ditto for large ‘white goods’ – washing machines, refrigerators and other appliances in which you should be careful to check out all the different features and specifications. This site makes that very easy once you get the hang of it.

Ordinary clothing is not listed yet. Nor are books or DVDs, though the latter is under development. It could give Amazon a run for their money when it is. While mainly a branded good comparison site, it does include huge numbers of branded sports footwear.

The volume of on-line shopping in Ireland is growing exponentially as customers watch their pennies. For smaller retailers, PriceSpy is an opportunity to compete on price and delivery costs with bigger stores here and in the UK. Positive reviews will let them compete on service grounds as well.

Yet not all Irish retailers have proper websites or offer a delivery service.  PriceSpy – and its barcode scanner - is going to change all that – hopefully for the better of both customer and shopkeeper.

If you have a personal finance question you would like answered, please write to Jill at jill@jillkerby.ie

YOUR QUESTIONS – FROM DIRT TO DEPOSITS, TRACKER MORTGAGES TO WRITING A WILL

BC writes: I have become a bit confused in regard to DIRT/deposits. You recently mentioned a 41%-45% rate. Which is it? Apart from those exempt from DIRT because of low income, are other over-65s exempt at this new rate? And while heretofore DIRT having been deducted, one had no further obligations tax-wise, has this situation changed?

The higher DIRT rate of 45% applies to returns held by deposit holders who have total “unearned” annual income of more than €3,174, say from rental income, or share dividends or life assurance based income.  In that case, and so long as you are not a pensioner, you will pay 4% PRSI on top of the 41% DIRT tax on your deposit interest and the other “unearned” income.

As for the DIRT itself, it is not a charge if you are over age 65 and your total annual income as an individual does not exceed €18,000 or €36,000 for a couple. You must ask your bank to apply to the Revenue to ensure, in that case, that your deposit interest is paid tax-free.

DEPOSIT GUARANTEE

MC writes: My mother is almost 83 and is worried about keeping her savings in the bank. She has over €200,000 in this account and after reading that you wouldn’t advise keeping over €100,000 in any bank account she would like some options.

In the event that any Irish bank needs financial assistance again – and new stress tests of EU banks are now underway – the European finance ministers have made it clear that depositors, along with shareholders and bond holders, will have to participate in the “bail-in”. This means that a portion of money in deposit accounts in excess of the €100,000 guarantee scheme limit will be confiscated, just like they were in Cyprus in March 2013.  Your mother needs to take the amount over €100,000 that she has in the single bank and put in another bank (or two to ensure interest payments don’t tip the total over €100,000.) If her total annual income is less €18,000 any interest payments will be DIRT free. If not, she should consider An Post state savings products which are not subject to DIRT.  Returns are very poor at the moment and she is unlikely to get net interest of much more than 2%-2.25% gross from any bank account, although Nationwide UK Ireland is offering a 4% gross variable return on a 15 month regular savings account in which up to €1,000 a month can be deposited.

OVERPAYING A TRACKER

VB writes: My tracker mortgage has 10 years to run and the balance is almost €130,000. I have €90,000 locked away in a long term deposit account with Permanent TSB. I have more than €15,000 available to me and I’m not sure if I should put a lump sum off the mortgage or do as you said on radio recently and start making overpayments. I have been advised that paying off the mortgage in full would not have been a good idea as my interest rate is 0.85% percent.

If you can confidently meet your current monthly repayments, that is, if your job/income are secure and you don't have other expensive debts then there is no urgency in clearing your loan, certainly not with all your savings.

As Karl Deeter and I explained on our new Money Talking slot on RTE Drivetime, (Mondays, 6:15pm) by overpaying your loan by even €100 a month you can knock months (or even years) off the repayment term and saving thousands of euro in future interest.  Pay off a mortgage early and those repayments are now all yours with which to spend, save or invest again.

A tracker loan is a real boon - you won't see that rate again. Some of the banks will let you move your low, 0.85% tracker to a new property, but only for five years after which you revert to the much higher variable rate, currently 4.5%. If you are planning to move in the near future, you may not want to dispose of your tracker mortgage too soon.

DISTRIBUTING AN ESTATE

BG writes: I live in the UK but recently visited an aunt in Co. Sligo who is very elderly, still living alone on her little farm. She hasn’t made a will but I am advised that she should. I assume that like English law, if no Will is made before a person becomes deceased, their assets/property goes to the State?

If your aunt does not write a will, that is, she dies intestate, her estate will be distributed according to the 1965 Succession Act.  Siblings inherit first or their children if the sibling is deceased. If there are no siblings still alive then nieces and nephews inherit in equal shares. The tax-free inheritance for siblings/nieces and nephews is currently just €30,150. The balance is taxed at 33%.

If you have a personal finance question you would like answered, please write to Jill at jill@jillkerby.ie