Jill Kerby

IS PEER TO PEER LENDING THE REAL THING…OR JUST A GLITCH IN A FIXED MARKET?

My son can’t understand why I don’t bother to use apps that he insists will make my life easier. He is flabbergasted that I sometimes forget to juice up my mobile phone. Or that I sometimes ignore it completely.

His eyes roll when I tell him I was an Amstrad user who had second thoughts to switching to a Windows driven PC. (I eventually opted for a Windows-friendlier Apple.)  I even I thought Twitter was a nonsense the first year it came out. Now I am utterly hooked @jillkerby.

But I’m no Luddite. I’ve just been a little slow at times to acknowledge and adopt technological changes that have improved the way I’ve plied my trade: from manual to electric typewriter; from word processor to desktop, laptop and tablet via telex, fax, internet-enabled Facebook, Twitter and yes, apps.

Like millions of others – including other worried print-based journalists – I read more papers on-line than I buy.  I seldom watch network television anymore. News and entertainment programmes stream to my tablet via the RTE and BBC Players, Netflix and Amazon.

I can’t remember the last time I was in a bank branch – all my banking is done on-line and I know that medical software programmes, apps and simple over the counter home diagnostic tools exist now that can diagnose ailments more efficiently, accurately and quickly than my family doctor or even an experienced consultant. The same programmes will then identify the appropriate treatment centre, book you in for treatment and even pre-clear the cost with a private insurer.

Try and beat that service, Doc Martin.

Industry after industry has been transformed by technology during my son’s short lifetime, let alone mine. Who ever imagined the swift demise not just of the great Kodak corporation but the very nature of camera’s and video technology? let

(The ubiquitous mobile phone alone has replaced any number of pieces of technology that we once “couldn’t live without” – cameras, watches, calculators, land-lines, fax machines, PCs, TVs…)

And now it’s the turn of the retail banking.

In the space of just a few years, virtual currencies, crowd-sourcing and peer to peer lending (P2P) are threatening the powerful, global finance industry as they harness the power of mobile technology and social media and grow exponentially.

The power of direct, on-line capital sourcing is revolutionary. Everyone in business should be investigating how it could advance their business, no matter how small. 

In an economy like ours that is still starved of capital, where profit margins (outside of tracker mortgages) are high and where thanks to the ECB’s promise to support the euro “at whatever cost”, they can borrow from each other at 10-12 times less than they charge their own business customers, is it any wonder that hard-pressed borrowers are increasingly tempted to by-pass them?

Business crowd-funding and P2P lending are the children of the noughties tech boom, but have come into their own since the great crash of 2008.

Nature abhors a vacuum. When bank lending came to a shuddering stop in 2009 it didn’t take long for word – on-line - to circulate that enterprising middlemen with banking and high-tech skills were setting up companies that would help everyone from charities and co-ops, dreamers and entrepreneurs, high risk start-ups and established, cash-starved small businesses, to by-pass the banks and instead find willing, private lenders directly.

Late partygoers

Ireland has come a bit later to the party, compared to the UK and America where crowd funding and P2P lending – which is still not permitted in America - has raised billions. 

Kickstarter, one of the best-known crowd-funders has raised over a billion dollars of finance in the US and UK from nearly 70,000 people for over 65,000 businesses and intends to set up an Irish operation.

So far crowd funding operations (like Fund It) has focussed mainly on charitable and social projects in which money (usually not more than six figures) are raised from hundreds or even thousands of small individual donations. It also raises repayable seed capital for start-ups but the downside risk is high and the survival rate (and repayment) rate is low. 

Peer to peer lending, meanwhile, is the commercial flip side of crowd-sourcing. The largest player, Linked Finance set up 18 months ago and by last summer, had raised about €4 million for borrowers. The average sized loan has been in the region of €28,000, is repayable over a three year term and most borrower repay as 190 small lenders.

The winning lenders, who cannot stake more than €2,000 per loan, (an important risk control measure say Linked Finance) receive average gross interest payments of 8.9% or 7.7% once Linked Finance deduct their fee of 1.2%. (Borrowers also pay the intermediary a small percentage of their loan.) 

Peer to peer lending can be a win-win for both parties – so long as the borrowers, who must be the owner of a small business, a sole trader or in a partnership, honour their 36 annual repayments. 

Not only does P2P result in cheaper loans (the typical unsecured bankloan rate ranges from 9.5% and 13%) borrowers report that the process is much faster and more transparent. Since they often borrow from their own communities and customers, some admit that they feel a greater moral obligation to repay not just the money but also the trust of that community.

For lenders, the loan auction means a higher return on their bank deposit or savings. They face a lower tax bill too – all bank yields automatically deduct 41-44% annually. 

Their downside is the higher risk they take. Someone who has lent €10,000 to five or ten different borrowers is still facing ‘concentration’ risk as well as the default risk that comes with unsecured lending. No Linked Finance loans have failed yet says the company, “but they will” and small lenders have to exercise caution.

Peer to peer lenders like Linked Finance undertake credit and directors checks and post as much information about the borrower as is available. But they don’t provide risk rankings; that final assessment is the responsibility of the lender before they enter the auction and in determining the interest rate they want.

Lenders who set their target interest too high will not win the debt and will lose the auction to someone who is prepared to accept a lower rate from the borrower.

The Wild West

Peer to peer lending has been described as the ‘Wild West of banking’ – new, brash, unregulated: capitalism at its purest as it links willing borrowers and lenders sellers in an unfettered marketplace.

Back in the heavily regulated banking market, where interest rates and the supply of money is constantly manipulated by politicians, central bankers and the parallel investment banking sector, P2P lending is causing some panic.

In the United States regulators have so far protected the vested interests of conventional banks by determining that no such direct lending is possible without regulation…which is not forthcoming.

In the UK, the intermediaries themselves are subject to regulation (a good thing) but P2P lending remains unrestricted. Is it any wonder it has caught the eye of hedge fund, private equity managers and even investment banks which see opportunities to profit from a market that the conventional banks have stopped servicing?

Technology will keep lowering the cost of crowd-funding and P2P lending. It will widen access to more players.  But will these savings be enough if States step over-regulate, over-tax and overburden the players?

Who knows? But with vultures and vampires already soaring overhead, early birds might want to check out that P2P worm …while it’s still wriggling and for the taking. 

RAISE YOUR INCOME…AND BEAT THE BUDGET

Is the message getting through - that high personal taxes discourage people to work harder, or to work overtime?  That they can encourage emigration, especially of the most mobile cohort – the 15 to 24 year olds who have the least financial obligations or ties?

We’ll know next October 14 what the Minister for Finance really thinks about high personal taxes: he’s either going to reduce them, increase them or leave them alone.

Given the Peter-versus-Paul nature of fiscal decisions at the best of times (a tax break for one group often merits more tax being taken from another) I will be very surprised if every taxpayer gets away entirely unscathed once the Minister finishes his speech.

With an election looming he’ll do his best not to antagonise pensioners, whose state pension incomes have already been frozen for six years and a number of smaller value benefits (like heating allowances, funeral allowance, etc) reduced or clawed back. Nor will he likely raise taxes directly from the squeezed middle.

That leaves juggling top rate income tax rates, the tax bands and hated USC against other existing levies and stealth taxes – things like the 0.75% pension levy that isn’t paid by you directly, but by your pension administrator, or the insurance levies (including the €399 health levy added to every adult health insurance policy).

With most of everything we earn going to the state in the form of direct and indirect taxes (especially 23% VAT on the bulk of purchases except fresh food produce) and now our homes and water consumption, it’s understandable that people are jaded about working even more hours than they do already for a limited return.

But just as I looked at ways to save thousands of euro a year last week (assuming you haven’t already switched to cheaper insurance, utilities, healthcare, fuel; cut back or given up on alcohol and tobacco, two of the already most heavily taxes goods and been more careful about your discretionary spending) this week I’m going to list some of the most obvious – and less obvious – ways to make money. 

There’s no reward without effort and all these ideas require some extra effort and sacrifice (of time and perhaps personal space) but at least two suggestions are entirely tax-free. 

If you are a pensioner and these extra income sources don’t push you over the tax-free income threshold of €18,000 for a single person (over 65) or €36,000 for a couple, you also won’t pay any income tax (or PRSI).

1)    The Rent-a-Room Scheme. The single most generous tax break available anyone with a spare room(s) can rent it out and earn up to €10,000 a year tax free.

2)    €3,000 per annum gift tax. This is ideal for a parent/grandparent willing and able to distribute intended inheritances as tax free gifts during their lifetime. Any number of such cash gifts can be received from different benefactors, entirely tax free.

3)    Review your cash holdings and switch into higher yielding accounts. If you are over 65 and tax exempt, make sure your bank arranges that your account is 41% DIRT exempt. Consider shifting some cash into lower tax yielding share funds/dividend yielding stocks. An independent adviser can explain the potential capital risks – and income rewards. Well-informed tax advice is essential.

4)    Consider upskilling and acquiring higher degrees/diploma’s if they result in higher pay in your current employment or a better chance of a higher paying job.

5)    Downsize. Selling a larger, more expensive house for a smaller, cheaper one is a guaranteed way to save on home expenses (and property tax) while creating an income stream from the remaining income. Then consider Rent-a-Room.

6)    Host foreign students. Typical remuneration is between €175-€200 a week. (HomeStayIreland.com)

7)    Shift yourself and your pension fund – before retirement – to a country that does not tax pension income: Portugal, Malta, Australia. State pensions can also be claimed tax free in these countries.

8)    Use your talent, hobbies and “passions” to boost earnings:  play music for cash; give lessons or grinds (typically at up to €35 an hour); sell your art, homemade food/ baking, DIY skills.

9)    Older experienced women are ideal evening babysitters and in demand; so are dog-minders and both earn c€10 an hour. Reliable house-minders can earn hundreds of euro per week. (Trustedhousesitters.com)

10) Beautiful babies can earn between €200-€1,000 for modelling photoshoots/TV commercials; older children can earn even more. Film extra’s can earn €77 to €84 a day and €13.50 an hour for overtime. (MovieExtras.ie) Successfully offer your home to a film company and it typically will earn between €750 - €1000 a day. (ifb.ie, Photolocations.ie)

11) Become a mystery shopper and earn between €15-€50 per survey. (PanResearch.ie)

12) Sell stuff on eBay, DoneDeal.ie, BuyandSell.ie. Sell other people’s stuff for them and take a cut of the proceeds.

A GIVEAWAY BUDGET IS NOT GUARANTEED: THESE SAVINGS ARE

The 65,000 new jobs created in the past 18 months are a mixture of full-time, self-employed and job scheme places.  The 4.5% surge in growth in GDP and GNP announced last week for the second quarter of the year is the mainly due to the continuing strength of the export sectors (including agri-business and FDI - foreign direct investment companies), but is very welcome nevertheless. It certainly bodes well for more jobs, investment and spending in the domestic economy.  

Until then, however, we may all want to keep our expectations of next month’s Budget, which is primarily a domestic economy event, in check.

Even the smallest adjustment in our high (52%) marginal income tax rate, in widening the income tax bands to take people out of the top rate, or in reducing the hated USC tax will quickly eat up the c€500m - €1 billion that many commentators believe Michael Noonan can afford to refund on October 14.

The question is: would getting an extra €5, say, in your paycheque every week send you out on a spending spree, especially if the €260 windfall was then absorbed by the new water charge in January?

I think the best way to approach the next Budget is to expect it to be the first cost neutral one of the great downturn.  No more taxes, no more levies, no more sneaky charges. We could call it “The Great Sigh of Relief Budget 2015” that would prepare us for proper ‘recovery’ budget in subsequent years.

And the best way to welcome it, is to make sure that your own finances are in the best shape you can get them.  If you are still employed, but have experienced an income reduction or salary freeze since 2008 (and that goes for pensioners too) then you’ve probably already implemented a number of the following savings and income suggestions.

They’re still worth reviewing and are certainly worth adopting if you’ve just secured one of those new jobs: cutting out wasteful expenditure, shopping around for high value goods and services, claiming tax relief and staying out of debt is a must if you want to avoid personal finance problems…for life.

Jill’s Top Saving Tips:

-       Pay off expensive debt first and with low yielding savings (or spare income.)  There is no point in sitting on a 23% credit card balance if you have -2% yield on savings in the bank or post office.  Nor should you pay off a 13% overdraft, a 10% personal loan and certainly not a 1% tracker loan if you have 23% interest bearing credit card debt.

-       If you haven’t done so already, SWITCH:  Amarach Research recently found that the average household that has not switched contracts before now can save €2,000 by shifting to cheaper electricity, broadband, mobile phone, car insurance and bank current account. Check out www.bonkers.ie  and www.nca.ie 

-       Save over €1,000 by switching long-standing, high cost health insurance contracts (like VHI Plan B, Laya Essential Plus, HealthManager) to corporate equivalents or new providers’. See www.totalhealthcover.ie .  If you have added family members to your company health insurance plan you must reclaim the 20% tax relief yourself (ie. €200) from the Revenue (up to a maximum of €1,000 worth of premiums.) 

-       Open a pension, save 41% of the contribution in top rate tax relief. If you earn €50,000 and save 10% towards you pension you will receive €2,050 a year in income tax relief. Consult a good financial adviser.  Save another 41% on life insurance (@€300 a year = €123) buying it via your pension.

-       Give up smoking (save €3,467.50 @ €9.50 a pack), reduce your drinking in half to the price equivalent of half a pint of beer a day (€16 p/w), and one bottle of wine (€10 p/w) and save €1,352 a year.

-       Buy a thermos cup and take your own coffee to work (5 days a week x 48 weeks) and save the equivalent of €10 a week or €520 a year.

-       Stop buying that €1 bottle or water, bag of crisps or chocolate bar and save another €240.

-       Claim your 20% health and dental tax relief. A family with €1,000 worth of dental and medical bills not covered by private insurance can save €200.

-       Claim your DIRT relief:  If you are over age 65 and your income is under €18,000 (€36,000 per couple) make sure you ask your bank to claim your DIRT exemption from the Revenue.  €100,000 worth of savings earning 2% gross means a savings of €820.

-       Join a holiday home exchange company and save thousands on annual holiday accommodation costs. Check out www.homeexchange.com;  www.homelink.org and others

-       Download on-line money saving shopping offers from www.livingsocial.com and www.groupon.com and comparison shopping apps like www.pricespy.ie 

THOSE WATER CHARGE BILLS ARE COMING – HAVE YOU GOT A CONSERVATION OR HARVESTING PLAN?

As we get closer to October 1, I’ve noticed that most people I know are finally beginning to talk about the upcoming water charges they will have to start paying and how much their bill might be from next January.

None of my neighbours have yet received their letter from Irish Water, inviting them to “apply” for the pleasure of having to pay for their water and supply the company with everyone’s PPS number and confirm the numbers of people living in the house. 

No doubt it is on its way.

We’re not metered yet either, so, as one neighbour said acidly, “We haven’t yet joined the rest of the frogs in Irish Water’s pot, waiting for the heat to be gradually turned up.”

But we will. Only households who are entirely off the mains system and have their own wells and septic tanks will escape Irish Water.

Those who use only one or the other service (mains water, or mains sewerage) will initially pay half the flat rate of €176 for the first adult and €102 for every other adult until metering plus a six months grace period.  Once their inflow of water is metered, they will pay half the new water rate of €4.88 per every 1000 litres consumed.

Every metered household will be getting a six month grace period before the initial €176/€102 adult flat charge ends. (Children under 18 will not be charged during the transition period.)

But once you’ve been on the Irish Water metered supply for six months, all water consumption in your household, less 30,000 annual free usage will be charged at a rate of €4.88 per 1000 litre.  Households with children under 18 will get 21,000 litres free, the amount children are estimated to use annually, though originally it was estimated at 38,000 litres. All these charges/free allocations will be reviewed in 2016.

If, like me, your household comprises of three adults, our unmetered bill will be €380, that is, €176 for the first adult and €102 for every other adult.  If post-metering, we end up using the estimated 140 litres of water per day, per adult that the government expects we will, our annual water bill, less the 30,000 free litres, will jump to just over €600 a year.

This set rate transition period, and the six months after the meter is installed, is supposed to give us time to see how much water we are consuming so that we can change bad habits and learn to conserve. This means repairing leaks, turning off the taps when brushing our teeth; avoiding baths; taking shorter, non-power showers (or showering at the gym); using conservation friendly appliances; using waste water and water butts for watering the garden, washing the car and animals, etc.

As I’ve written here before, it might also be a good time to consider ways to use less mains water altogether and perhaps to capture and recycle the rain water that pours off our roofs.

There are companies in the market that offer to install systems to owners of public buildings (like schools and nursing homes, sports clubs, etc) as well as to private homes.

Tank and pump-based, the cost of rain harvesting will depend on the size of the system you need (tanks are either put underground or attached to the side of buildings) and whether you are only trying to substitute the water used in your toilet and washing machines, or for drinking, bathing and in the kitchen; a filtration system is then also installed.

The big question that needs to be answered is whether rain harvesting isn’t just possible (the bigger the roof size the more water that will be captured) but also whether it will be cost effective. The price for a typical 3-bed semi-detached house, can range from €1,200 - €2,000 to harvest about half the (non drinkable) water used and perhaps half as much again to provide purified water. Payback time can be as short as three to seven years. 

Installation costs for rainwater capture all qualify for the Home Renovation Incentive Scheme which lasts until the end of December 2015, and from which you can claim tax credits for the 13.5% VAT you would otherwise pay in full.

Builders I’ve spoken to recently – regarding another new, radical cost cutting energy process called ‘daylight energy harvesting’ to replace electricity, oil and gas to fuel existing heating devices (and to which I will return soon) – suggest that the most cost effective and efficient way to install these substitute systems, is with new build houses.  Anyone reading this who is buying or building a brand new home may want to have a special word with their contractor.

Meanwhile, we all still have time between now and next January to try and cut our increasingly expensive water and utility bills.  Time is the one resource we can still control…so don’t waste it.

NEW HOMEBUYERS NEED TO CALCULATE “FAIR VALUE”

It was certainly a déjà vu moment:  the sight of half a dozen 20 something’s last week camping outside a newly finished estate of 60 semi-detached and terraced houses on the outskirts of Swords, Co Dublin for five days in an effort to be the first buyers.

The houses -  two, three and four bedroom properties - will undoubtedly be snapped up for their respective asking prices of €239,950k, €279,950-€289,950 and €399,950 respectively.

This isn’t a bubble, say the (delighted) property experts, it is a sign of recovery off a very low level of sales and prices and the big demand for family homes in the greater Dublin area. 

The rise in sales and prices is also happening in other parts of the country.

Unemployment rolls are finally dropping and the people who have secured the best paying full time jobs are stoking that demand. Others, already in work, who luckily missed the last boom and bust have accumulated jumbo downpayments to impress the cautious mortgage lenders.

A recovery in property prices is a good – and inevitable – event after a financial collapse. Even in our debt burdened economy, there is no stopping the desire of people to pair off, start families and have a home of their own.  When the collapse was as great as ours, it is also inevitable that there will be a construction lag and shortages.

What is worrying is the age of the people exhibiting such desperation to get on the property ladder again; buying a millstone, er, house, at such an early age sharply reduces your employment flexibility and immediately limits your ability to save and invest.

Judging from the media reports, they also seem, in their haste to sign up for hundreds of thousands of euro of debt that they will also be sharing the Miller’s Glen estate not just with other eager young buyers, but with a large number of renters, such has also been the interest in these properties by cash-buyers.

The rents haven’t been revealed yet, but based on current rents in Swords, the three-bed semi-d’s in this estate are unlikely to go for more than €1,350 fully furnished.  

And that is bad news for these buyers.

Professional landlords, regular readers of this column will recall, work out net yields before they buy property.

Before the great era of credit creation (from thin air), landlords would assume a return of capital from the rent charged within a 12-14 year period.  Using this formula in which monthly rent is multiplied by 12 months, then multiplied by a factor of 12 to 14 (the lower the factor the more attractive the location) the prospective investor would come up with a “fair value” price.

I’m told the factor used today has risen to 15 (years) as it takes better account of the generally poor economic conditions – stagnant wages, high unemployment and debt.

So let us do the landlord “fair value” formula for the new owner occupiers in Swords.

The 3-bed purchase price is just under €300,000. For the rent to repay that capital outlay in 15 years, it needs to achieve just under €1,670 or about €20,000 per annum.  (€1,670 x 12 x 15)  The top price of c€400,000 for the four bed detached houses should command a rent of €2,200 or €26,400.

Given that three bedroom houses in Swords are mostly renting for €1,300-€1,400 a month, buying these new houses for €300,000 suggests that the “investor” will experience a shortfall of about €400 a month to recoup their capital within 15 years.

Aside from all the other costs of home ownership (insurance, utilities, security systems, bin and water charges, etc) the other big cost issue for owner-occupiers or landlords is property tax.

Just 0.18% of the market value until 2016, the annual tax on a €300,000 house is currently €540, or €720 for a €400,000 one.  

But with typical property taxes in most major western cities closer to 1%, new buyers in 2014 should expect a much bigger tax outlay over their period of ownership. At 1%, even if the price of these three bed semi’s never rise, a 1% property bill would amount to €3,000. (€4,000 for the four bedroom house.)

Landlords might be willing to overpay for property this year because they will avail of the seven year capital gains tax exemption on house purchases up to December 31, 2014. The gamble is that prices will rise over the next seven years and they’ll recoup their losses.

The danger for owner occupiers (and amateur landlords) is that they seldom get their timing right.

So the question every new buyer in our still struggling property market needs to answer before they sign away their financial independence, is the one credited to John Maynard Keynes during the Great Depression: 

“How long can I remain solvent while the market remains irrational?”

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

LOOK PAST THE HEADLINES: YOUR WATER CHARGE COULD BE EVEN HIGHER IN 2016

The Commission for Energy Regulation has published its proposed water charges. A four week consultation process has begun though Irish Water say they are confident that its proposals will be implemented.

Here are the main proposals that will affect most households.  

Every household will receive 30,000 litres of free water annually.

Children under 18 (if still in full education, otherwise to age 16) will not be charged for water until 2016. The average amount of water children use, says the Regulator is 21,000 litres per annum.

All households, whether metered already or not, will be charged an “average, assessed” charge of €176 for a single adult and in multi-person households, €176 for the first adult and €102 for every extra adult. This average, assessed charge will last  for six months after the household’s meter is installed.

If your household has already been metered, you will be charged the average assessed rate(above) for six months from next October, or until March 2015.

Once the six months period after your meter has been installed is over – for some, that will be from next March, consumption will be charged at €4.88 per every 1000 litres of water used over and above the free household allocation of 30,000 litres.

People with septic tanks and only use incoming water (and not wastewater) will pay half the above average, assessed rates. The half rate will also apply to households that have their own wells but do not have a septic tank.)

No free allocation is expected to apply to holiday homes.

THE BILLS

So what bills can households of varying sizes expect to pay?

For at least six months after the installation of a meter households with a single occupant will pay €176 (€88 if they only use water or wastewater) for a 12 month period.

A household with two adults will pay €278, three will pay €380, four, €482 and five, €584, etc. (Divide by two if the household only uses water or just has wastewater.)

 (Those households that are metered will enjoy their six months at the above capped rates starting next October when the system goes live.)

Once the six months, post-meter grace period is over (at the average, assessed rates of €176 and €102 per 1,000 litres rate) the €4.88 for every 1000 litres of water consumed by adults begins.

The Regulator estimates that the average adult consumes 52,000 litres of water per year.  If this is correct, a single householder, will only be charged for 22,000 litres (every household gets 30,000 litres of free water). At €4.88 per thousand litres (€4.88 x 22) the single adult will pay €107.36.

A two person household that uses 52,000 litres each (104,000 litres), will pay €361 when their 30,000 free litres is discounted. (€4.88 x 74) Using the same formual, a household with three adults, will pay €615; a household of four, €868; a household of five; €1,122, etc.

Given these potentially large bills, all households should be highly incentivised to  make sure that every adult uses a lot less than this estimated average 52,000 litres of water.  If the free allocation for children is revoked from 2016, annual costs could rise further if adult consumption doesn’t fall.

At the moment, with the real cost of water - €4.88 per 1000 litres – not kicking in until six months after a household is metered, is it clearly in a person’s interest to hope that their property is at the end of the installation queue as the lower flat charges will apply until then or until 2016, whichever comes first.

Meanwhile, Irish Water claims that all properties will be metered by then, presumably even those housing estates that have so far refused entry to the to meter installers.

The other problem with the flat rate charge system, however temporary, is that it does nothing to encourage households to change their water usage habits right now.

The six month, post-meter grace period of average assessed charges was brought in to “ease” people into eventually paying the full €4.88 per 1000 litre cost of water, said the Regulator. But it means until that date, it won’t matter if the household adults use 4,333 litres of water every month (ie 52,000 per annum) or 433 litres. The same charge will apply.

Finally, if you are the head of a large household of adults (or near adults) you may want to at least check out suggestions on how to cut consumption usage and even capture free rainwater. (See MoneyTimes January 21)

It’s a topic to which we’ll return.

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

From the Postbag:  Starting a pension, home equity release, selling shares AND MORE

Ms DO’F writes: I’m a 26, with a PhD and just started my first job as a product manager in a small company. I’d like to start a pension fund but not sure about my options or how much the company would be willing to contribute.

Since you’ve already started work, it sounds as if your company does not have its own pension scheme – or you would have been informed and encouraged to join. Your boss isn’t obliged to contribute, but he must offer access to a PRSA – a personal retirement savings account.

Pensions still offer decent tax relief: for every €100 you invest, you will only pay €59. Meanwhile, you will also be contributing to the state pension scheme via your mandatory 4% PRSI contributions, but it can only be collected from age 68 (in your case.)

You should start investing at least 10% of your gross salary every year into this PRSA or an individual one if you so choose. Time and patience is the best strategy for any pension fund.  Check out – www.pensionsboard.ie - for details on how PRSA’s operate.

Mr DMcM writes: My wife and I are in our late sixties, on a limited income and would welcome some thoughts on how best to borrow against our mortgage free home.

Unfortunately, none of the Irish banks offer an equity release loan product (Bank of Ireland gave theirs up even before the 2008 crash.) Seniors Money, (www.seniorsmoney.ie, 1890 73 64 67) has been the main provider of equity release loans. They have not accepted any new applications since late 2012, but will put your name on a waiting list.  Meanwhile you can check out how the loans work. (Interest accrues from day one, but the capital and interest does not have to be repaid until after the borrower dies or the property has to be sold, say because the owner needs institutional care, etc.)

The huge demand for housing in big cities, especially from students, hospital staff, etc means that if you have a spare room in your home you could earn up to €10,000 a year tax free from the Rent-a-Room scheme.

http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html

Mr JS writes: In 2008 I purchased 2,696 Bank of Ireland ordinary shares at €1.065 at a total cost of €3,000 including commission and transfer stamp duty through Davy Stockbrokers. I have no other share investments. In addition to the drop in share value since 2008 I am paying Davy an annual fee of €55. I can see my investment dwindling all the time and wonder what is the best, cheapest way to sell them?

Irish banks are still very poor investment prospects whether for dividend income or growth. The only people who’ve made ‘real’ money on them are the vulture capitalists like Wilbur Ross. Your €3,000 would have been better spent buying a good, highly diversified exchange traded fund (ETF).

If you have decided to cut your loss, the cheapest way to do so is with Sommerville Advisory Markets, (see www.sam.ie) a discount stockbroker that charges as little as €15 for a simple buy or sell transaction.

Mr DD Long writes: I am a retired pensioner living permanently in Cork, Ireland. I have a bank account in Montreal, Canada. As an Irish citizen, could you please advise as to what the obligations in terms of death duties and/or tax would be payable by my family after my death to the Quebec and/or Canadian government.

There is no inheritance tax payable in Canada. The value of the deceased person’s estate is instead determined just before death and any tax payable as part of their final tax return. However, the Irish Revenue may have some interest if you leave your children or heirs this Canadian money as part of your wider estate and it exceeds their lifetime tax-free threshold: €225,000 per child, €30,150 for siblings or nieces/nephews and just €15,075 for ‘strangers’.  Inheritance tax is 33% on the balance. 

There is no tax on transfers/inheritances between spouses. A good solicitor should be able to help you prepare your will in order to take into all your assets and inheritance tax regulations.

Mrs EC writes: We are a married couple nearing our 60’s with no mortgage and a sum of €200,000 in a fixed AIB account getting 2.1% interest. Can you recommend any other financial institution with better rates and lower risk? We can put it away for three to five years. We already have An Post savings.

Websites like www.bonkers.ie and www.nca.ie (National Consumer Agency) provide up to date comparison sites for deposits. Unfortunately, 2% per annum is about the best you are going to get from a lump sum deposit. All returns are subject to 41% DIRT unless you are over 65 with total income of less than €36,000 for a married couple.  As for lower risk, be sure to keep your individual holding at no more than €100,000 per institution (€200,000 per couple). RaboDirect and Nationwide UK (Ireland) are both higher rated banks than any of the Irish deposit takers.

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