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Money Times - November 28, 2017

Posted by Jill Kerby on November 28 2017 @ 09:00

THE SELF EMPLOYED GET AN EARLY CHRISTMAS PRESENT

 

Are you self-employed? Thinking about it? Your timing couldn’t be better now that some valuable social welfare benefits have been finally extended to the self-employed, including sickness and disability benefit.

There are about 326,000 self-employed income-tax paying workers in Ireland, according to the Revenue (450,000, say the Department of Social Protection), quite low numbers compared to many other EU countries.  Ireland also does poorly in the number of new companies created each year and one reason often cited is that the self-employed and new entrepreneurs have a relatively small social safety net compared to people in other EU and OECD countries.

Here, the self-employed/sole trader and small business owners pays the same 4% social insurance contribution as every other worker, yet have been unable to claim the same benefits, like basic dental or optical treatments, sickness, disability or Jobseeker’s Benefit if their work dried up. The reason for the anomaly was the absence of the employer’s 10.75% PRSI contribution.

The great crash of 2008 highlighted how tiny that net has been for the Class S, self-employed. Employees were not the only ones to lose their jobs; so did the contractors and freelances who depended on those same companies for their livelihoods. Everyone’s fees dropped after the crash; our spending on artisan goods and services fell sharply while everyone’s taxes went up.

By 2016 the government could finally afford to make some reforms.

On the tax front, it introduced a €550 earned income tax credit for the self-employed, farmers and company directors who had not been eligible for the PAYE credit worth €1,650 (€1,830 from 2018). In 2018 it will rise to €1,150.

Last Spring the Department of Social Protection announced it was extending treatment benefits like dental and optical examinations under the Treatment Benefit Scheme to the self-employed and last week it was announced, at a cost of about €23 million, that the Invalidity Pension will also be payable starting next month.

The pension is a modest €198.50, is taxable and will only be payable to people under the age of 66 who, due to sickness or disability cannot work anymore and who have the qualifying number of PRSI contributions:

-       48 PRSI paid or credited Class A,E,H,S in the last complete contribution year r the second last contribution year before the date of their claim.

(This benefit is payable even if you have income protection insurance – something every self-employed person or small business owner should have had to protect their your income in the event of illness or disability up to age 65. The cost of income protection insurance is tax deductible at your highest rate of tax.)

When the government first suggested that it would consider extending PRSI benefits to the self-employed many wondered whether PRSI contributions would have to go up. Or if the new system could be voluntary, with people who could afford private dental/eye treatment or income protection insurance being allowed to opt out.  Instead, they found the money to finance the benefits …for now.

People decide to become their own boss for lots of different reasons: you might be stepping into a family business. Or you’ve worked for someone else and spotted a great opportunity to do something similar in a different way. Others become self-employed by necessity after losing a job and the hours can be more flexible if you also have a young family to care for. Artisans and farmers’ work, is clearly more ‘unconventional’ and is produced at a different work pace than that of the office or factory worker.

As every self-employed person knows, corporate life has some big attractions – a regular paycheque, a pension (if you’re lucky) and hopefully an opportunity for job security that will get you closer to the top of the queue if you need to speak to a mortgage lender.

Self-employment is riskier, but it also means you get to be the dictator or your own success. There’s no one else to blame if things don’t quite go to plan. It rewards people who can cope with risk and uncertainty and it suits people with imagination, are innovative and flexible. (There’s no question having a fully employed spouse or partner in the early days of self-employment will help you sleep at night.)

The best advice I ever got when I became self-employed 30 years ago was to get a good accountant and to start a pension. I did both and am eternally grateful I took it. But my accountant also told me that I would have to build my own welfare safety net of life, income and health insurances and to ring-fence at least one-third of my gross turnover into my tax payable account. Only after the Revenue got its cut, could I then pay myself.

These extra PRSI benefits are especially welcome for the self-employed on tiny incomes. The government has actually done the right thing.

 

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

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Money Times - November 21, 2017

Posted by Jill Kerby on November 21 2017 @ 09:00

HEALTH INSURANCE COMPANIES WANT US FITTER AND HEALTHIER

 

Many commentators believe that spending more money on the public health service will improve services and patient outcomes. Yet billions more has yet more money has been added to the HSE budget for decades, too often with less than sterling effect.

Preventative medicine and early intervention should be getting a higher priority from the HSE especially as our population lives longer. Treating medical conditions associated with old age, not in general hospitals and public care homes, but in local community and in people’s own homes is an important part of the solution. The Department of Health does appear to be trying to introduce new community and home based services but rearguard battles continue against its own expensive bureaucracy and many vested interests.

Fortunately for those 2.1 million members of private health insurance plans, there has been access to preventative health benefits for many years – like benefit payments towards the cost of GP check-ups, early intervention consultations, annual or bi-annual health screenings, physio services and other checks and treatments.

Now, the insurers are coming out with on-line fitness, diet and lifestyle blogs and programmes that app-savvy customers (with high expectations) will easily integrate into everyday lives and schedules.

The latest one is called healthcoach from Laya Healthcare that was launched a week ago, and is a unique, free fitness, diet and wellness programme for every one of their 580,000 customers aged over 18.

First, the customer fills out a short on-line survey (and for the record, I am a long standing Laya customer) and then makes an appointment for a 30 minute face-to -face, health and fitness consultation with a qualified health coach at one of the six, designated healthcoach clinics around the country. (Currently there are three in Dublin and one in Cork, Limerick and Galway.)

I met my coach, a nice friendly guy called Gavin, at the healthcoach centre in the IFSC in Dublin, who took my blood pressure, glucose levels, body composition (which tells you all about how much fat, muscle, bone density, water retention) plus a lung function and three minute fitness test that gives you an idea about cardio performance.

He then asked some more questions about my lifestyle habits, exercise routine and diet and then started to select the elements that will make up my bespoke eight week programme.  The technology is impressive and within a few minutes it all appeared on my healthcoach smart-phone app.

The app, which is easier to use (and very logical) than I expected, includes a Fitbit step-counter, a large range of healthy eating recipes and calorie counters for every meal and snack you are encouraged to eat as well as a huge range of short ‘live’ videos on everything from how to give up smoking to, or in my case, even how do the two recommended yoga exercises I’m supposed to do three times a week. Dieticians on healthy eating choices and how check my calorie intake.

There are also videos pep talks from qualified psychologists on how to keep my motivation up (reading is my favourite activity of all time) and how to keep at the (tiny) fitness challenges I’ve set with my coach. I’m not a gym or sporty person, so mine are based around walking a lot more and extra cardio work I can do around the house, but keen hillwalkers and runners get help on how to complete the Ring of Kerry, Hadrian’s Wall, Inca Trail or Camino Challenges. 

Signing up for healthcoach ‘challenges’ also unlocks your ‘healthy’ reward offers and retail discounts from the likes of Lifestyle Sports, Eason and Deliveroo.

Recently Irish Life Health launched their new fitness and wellness benefit to their ‘Benefit’ plan holders - all three plans cost under €1,000 a year and are popular with younger customers. It offers refunds up to €250 refund a year when those plan members sign up for individual fitness programmes, or a combination of visits to life coach, nutritionist or dietician, for sports club membership or fitness wearable, massage treatments.

“Younger ILH members will appreciate getting some money back,” Dermot Goode, of TotalHealthCover.ie the independent health insurance adviser told me last week. “But the big attraction of Laya’s healthcoach is that it is an automatic, free benefit for every adult customer, no matter their policy, and it includes that one-to-one, face-to-face personal consultation.

“Laya has spent a vast amount of money and time on this new automatic benefit,” said Goode, “because they know that ultimately, healthier customers make fewer, less expensive claims.” 

Up to now, the health insurers have mostly been targeting their big corporate customers with their wellness programmes. They’re now focussing on individual customers.

So I’m going to give my eight week healthcoach programme my best shot. My fitness and weight loss goals are extremely modest and do-able.

Best of all, the price is just right.

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

 

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Money Times - November 14, 2017

Posted by Jill Kerby on November 14 2017 @ 09:00

HOW SMART WILL YOU BE WITH YOUR CHRISTMAS SHOPPING THIS YEAR?

 

I don’t usually mention the C word in this column before December 1.  Much as I love the anticipation of Christmas Day – decorating the tree and house, cooking special foods, carol services and buying gifts for loved ones, I loath how it all starts in October.  Before Halloween. Which now starts in September.

That said, there is no getting around the huge expense that we go to for the annual holiday.  When all the bills are added up for food, drink, presents, Christmas trees and decorations, new clothes, entertainment and travel, the typical Irish Christmas bill can easily reach €1,500.

Ideally, you will have budgeted this cost, saved into a special Christmas savings account or even spread out the spending by buying gifts on sale during the rest of the year, by stockpiling some alcohol, joining a Christmas Club at the butcher. The last thing you want to happen is to have a large credit card bill arrive in January that takes months to clear…just in time to lament that you haven’t any spare income or savings for a summer break with your children or other loved ones. 

Which is why it is worth revisiting the newest and most innovative current account and savings product on the market, An Post’s Smart Current Account now been rolled out to nearly every one of its 700 post offices nationwide.

First introduced last June, this unique current account and debit card rewards account holders for every purchase they make in store or on line at these popular retailers – Lidl, SSE Airtricity, Oxendales, Elverys, Sunway Travel, OutdoorLiving.ie, GreatBreaks.ie, Kennys.ie and An Post Insurance.

The Smart Account combines a MoneyBack feature, along with Smart Wallets where you can designate regular savings or your MoneyBack rewards; a Smart debit card in partnership with MasterCard®; access to online payments and a user-friendly Smart Account 24/7 app to keep track of your cash back balance and purchases.  

So how much could using this account be worth to you?  It entirely depends on how much you spend but, for example, Lidl and SSE Airtricity customers will receive 5% cash on all purchases over and 10% back respectively. This money money is then paid into their designated account once a month and then into a designated Smart Wallet, if they wish.

Since I spend about €100 a week at Lidl, and about €1,000 on electricity over the course of a year I would get about €360 back in cash just for paying ordinary grocery and electricity bills. Add a modest two week annual family holiday with a spend of say, €2,000 with Sunway (5% back) or GreatBreaks.ie (7.5%) and I’d see another €100-€150 being lodged to the Smart Account.

There are minimum purchases to watch out for and the cost of running this new current account is €5 a month; someone who gets free banking may want to take that into account. But the payback is automatically earning a 5%-10% cash reward. No one with a typical bank saving account these days needs reminding that €10,000 on deposit at 0.25% will yield them €25 a year.

Other popular supermarket cash back schemes are not as good value as they once were. There was a time when you could use your accumulated cash points at any time to reduce your grocery bill, say at Christmas when your weekly spending spikes. Today you get a cash coupon that you can only use over very short durations, which I seem to keep missing and sometimes only in particular stores.

By comparison, this Smart Account ticks all the right boxes a widely accepted debit card but no overdraft facility to risk overspending; a generous cash back scheme in which the reward can be automatically saved in a designated wallet.  And setting it up and using it is secure and easy.

Yes, post offices (and banks and credit unions) are closing down in many rural and urban areas.  But there’s no turning back to on-line banking services and this new current account doesn’t carry any extra charges, outside of the €5 monthly charge for direct debits and standing orders or ATM usage.

A couple more big-ticket retailers (like an airline or health insurance company) would be a really welcome addition to the list of Smart Account retailers, but even with just the nine, An Post reckons that a family that buys a typical spread of groceries, electricity, insurance, holidays, books, clothes and sports gear will earn about €660 in MoneyBack payments.

Getting started even now may only put a small dent in your Christmas shopping bill, but it could pay off a big chunk of next year’s…

The 2018 TAB Guide to Money Pensions & Tax will be appearing in bookshops and on line soon. See www.tab.ie for ebook edition.

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Money Times - November 7, 2017

Posted by Jill Kerby on November 07 2017 @ 09:00

DON’T WASTE THE EXTENDED TAX DEADLINE:  USE A TAX ADVISER

 

No one knows for sure what the total value of uncollected tax refunds is every year in this country, but it could be in the billions of euro.  Since 2008 this state collects a disproportionate amount of tax from individual income earnings, yet so may of us consistently fail to ensure that we pay only the correct amount of tax.

Fortunately, storms Ophelia and Brian came with a small silver lining:  the Revenue have slightly extended their final on-line file and pay tax deadline to Thursday, November 16 due to the disruption caused to so many individuals and small business. 

The paper filing deadline passed was October 31, but you can still register with ROS, the Revenue on-line service, to file and pay your 2016 Form-11 income tax liability and to claim refunds or, better still, make a pension contribution that will lower your bill.

The process is pretty simple once you register with ROS (which can take 1-2 days, so don’t leave it to the last moment) but on all matters tax, especially if you happen to be a novice filer, I highly recommend that you hire an accountant, or use the services of a popular and well-known tax refund firms, like www.taxback.com .

Missing your filing date, or not filing at all, can result in penalties and surcharges, which is another good reason to hire a tax expert who will not only ensure you don’t miss deadlines but can deal with any Revenue queries or represent you in the event of an audit.

So are you a “chargeable person”?  You are if you have non-PAYE income like rental income (including from AirBnB or holiday home), or you draw down dividend income from shares or you have any kind of part-time income, say, by selling stuff on-line, or from giving grinds, or from any kind of contract work.  Anyone receiving a foreign pension also needs to file, even if it is paid net of tax.

Landlords can claim certain property-related expenses and capital expenditure to reduce their income tax bill. The self-employed and sole traders have many business expenses they can claim, even if they work from home. Again, your accountant or tax adviser will have a comprehensive list of all these tax-deductible expenses, and of course, all your personal tax credits and allowances.

The other side of the file and pay process is that it is a chance to further reduce your tax bill, especially if you’re self-employed or if you are employed by a company but are not a member of an occupational pension scheme, by making a pension fund contribution. Depending on whether you pay income tax at the standard 20% or marginal 40% rate, you can claim tax relief up to the maximum allowable amount, based on your net relevant earnings (which are capped at €115,000) and your age.

For example, up to age 29 years you can contribute 15% of net relevant earnings; age 30-39, 20%; age 40-49, 25%; 50-54, 30%; 55-59, 35% and age 60 and over, 40%.  What this means is that for every €100 you contribute to your pension you can cut your tax bill by €20 or €40, depending on which rate of tax you pay.  The €100 will be invested in your fund but your cost will only be €80 or €60 to your when your income tax relief is claimed.

Pension (and income protection insurance) tax relief remains one of the few generous tax breaks left for all private and occupational pension fund holders because– like nursing home expenses – it can be claimed at the higher marginal rate as well as the standard rate of tax. Too many self-employed tax-payers leave this benefit behind (even people with access to occupational schemes in which employers can also make tax deductible contributions.) Meanwhile, only one in three people know to claim for qualifying tuition fees.

Some common standard rate tax breaks you should remember to claim if you are filing on-line by November 16, are for a long list of medical and dental expenses that include not just the usual GP and consultant’s fees (not already covered by medical insurance), but prescription drugs and medicine, prescribed medical, surgical, dental and nursing appliances, the cost of an ambulance, in vitro fertilisation, gluten free foods for coeliacs and dental treatments including crowns, veneers, orthodontic treatment (like braces for your kids.) 

You can also claim tax relief for payments for deeds of covenants, for taking part in the Home Renovation Scheme and if you qualify for the Help-to-Buy Incentive as a first time home buyer.

Best of all, while these tax breaks can reduce your tax liability, the most welcome news is that you may have up to four years of previously unclaimed expenses that you can claim. Use a tax expert to find them all. 

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Money Times - October 24, 2017

Posted by Jill Kerby on October 24 2017 @ 09:00

OPHELIA’S AFTERMATH:  A CLAIMS ASSESSOR COULD BE YOUR BEST FRIEND

If ever there was a reason for using the services of a loss assessor, the aftermath of Storm Ophelia is it:  roofs blown off; trees uprooted; cars and buildings damaged by flying debris and flooding. The estimated cost of damage nationwide could be as high as €800 million.

All over the country, with electrical power and water services only just restored, home and business owners are completing their insurance claim forms. But how many know to use the services of a loss assessor, who will act on their behalf in what could be a lengthy and potentially expensive claim process?

Niall Daly, is the owner of an independent loss assessors, ProInsuranceClaims.ie in Co Meath, with sub-offices around the country. A loss assessor “can typically increase the payout of an insurance claim by 30%” and speed up a potentially long, drawn out process, these days mainly due to the shortage of trained adjustors in insurance companies.

“The insurance companies have made significant cuts to their loss adjustors.  Policy holders are finding that their claims call will be taken by junior, inexperienced staff who don’t properly understand the claims process.”

This is particularly the case after a big storm event like Ophelia and while a typical claims process can take about four weeks, it could take longer to process Ophelia claims.

Ideally, the first thing the householder should do is to contact their insurance company to report the damage. But many people will have to take some remedial action, even before the insurance company is alerted, action that might cost you money right away.

In such a case, you need to log every action, says Daly, or risk not being fully compensated by their insurer. “This means taking pictures of the damage and keeping all receipts for any tradesmen call-outs, repairs or vouched expenses.

You should be looking for an interim payment from your insurers for this, to ease some of the financial burden,” he says. This might even include the cost of accommodation if you have to leave your property. Most insurers will pay interim payments under the terms of the contract for natural disasters, he explains.

However, any arguments – and delays – that can emerge are usually over the total cost of the damage and repairs. The policyholder needs to keep in mind that the loss adjustor is there to act in the interest of the insurer, not you.

Contacting a loss assessor before you engage with the insurance company means you now have a counterparty acting in your interest and when the loss adjustor is assessing the damage (and doing everything possible to reduce the cost to the insurer). Attention to detail is crucial for a correct damage report.

A good example, he explains, is water damage to the property – a far more subtle claim than missing slates on a roof or a tree collapsing on a shed (or car) both of which can be easily verified and costed. 

“The loss assessor will always use a moisture meter to determine not just the immediate damage caused,” like ruined floors and carpets, damaged electrical devices and plasterwork. A moisture measure over 16% suggests the problem is more serious, says Daly and that once the property dries out the damage could be very extensive.

“Adjustors don’t use these meters for obvious reasons and prefer to settle quickly. A €5,000 visual damage assessment may seem fair, but often we find the actual cost of the damage could be €15,000 or €20,000.”

Roof damage after a big storm isn’t just about agreeing the cost of replaced slates or chimneys. “Where scaffolding is required, householders need to be very careful about the adjustor’s recommendation. A scaffolder without the correct insurance/public liability cover might cost less, but could ultimately cost you a great deal more. An assessor will make sure the right scaffolder is hired and is paid for by the insurer.”

Insurance companies are compelled by the Consumer Protection Code of 2012 to always “act fairly, honestly and professionally” with their customers, but they are not obliged to inform you of all the items that you are entitled to claim for, he explains. They can also be quick to try and convince policyholders not to hire an assessor on the grounds that it’s just an extra expense.

Not true, says Daly. Assessors are paid, as will be the quotations that builders and trades people will charge to assess the damage, out of the final award, which is typically 30% higher than an adjustor’s award recommendation.  The assessor’s fee is typically 10% net of the final award.

Finally, always deal with an experienced loss assessor company. Under the Central Bank’s Minimum Competency Code they must be an APA or Accredited Product Adviser or work under a supervisor who is.

Due diligence is the other safeguard you need to make a successful claim.

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Money Times - August 29, 2017

Posted by Jill Kerby on August 29 2017 @ 09:00

HAVE YOU MISSED THE BITCOIN EXPRESS?

 

Spotting financial bubbles are clearly harder than you may think.  Keeping well away from them, for many, is even harder. 

The latest bubble is the crypto currency Bitcoin, which in just the past year has gone from $575 in price to $4,262 at time of writing.

We only have to look at the property buying frenzy that began around 1997 here in Ireland to recall our own experience with bubbles. That one exploded – slowly, then practically overnight - when the property-as-investment bubble met its pin a decade later in 2008 with the realisation that we’d run out of buyers – and cheap finance – for the tens of thousands of surplus properties that were built here at such inflated prices.  Homeowners, worried about never getting on the property ladder, were unfortunately the biggest victims of all.

But Irish people have willingly participated in other, smaller speculative bubbles - nearly 600,000 people, encouraged by the government, bought privatised Eircom shares in July 1999 at the equivalent inflated price of €3.90 only to lose a third of their value.

Not long after that collapse was that of the NasDaq stock market in New York. Enthusiastic dot.com investors were far fewer than Eircom ones, but Irish pension funds were hard it and it triggered the downward interest rate adjustment by the US Federal Reserve and other global central banks, which in turn created the property bubbles in many Anglo-American economies.

Fools and their money have been parted many times by financial manias:  shop girls and shoeshine boys, along with lords and ladies, were caught up in the share mania of the late 1920s that turned into the Great Depression. Before that there was Tulipmania in the early 17th century; the South Sea and Mississippi bubbles a hundred years later.

And now there is Bitcoin.

Cryptocurrency proponents insist “this time is different’, but they should be reading the book of the same title by economists Carmel Reinhard and Kenneth Rogoff.

Today’s cryptocurrency mania is no different from all the others times when the inexplicable exuberance of the crowd, fed by soaring trading prices has led people to wildly speculate on a single asset; they are always certain they’ll know when to sell to the bigger fool and be out of the market before the price collapses.

‘Bitcoin’ was the first cryptocurrency and was launched in 2009 at the cost of only a few pennies. Its shadowy creators claim its production is limited to just 21 million units – thus ensuring a constant measure of value. To create a new blockchain of Bitcoins requires a lengthy and expensive computer “mining” process.

(Cybercurrencies are not held in physical form like cash currencies (or gold and silver coins, for example) or even in conventional bank deposit accounts. Instead, they exist exclusively as blocks in cyberspace, owned and then traded or sold directly by individuals (who hold then them in online purses) with no official third party intermediary, like a central bank or state revenue authority to regulate or or tax them. The blockchain miners are self-regulating.)

Today, there are over 830 cryptocurrencies like Bitcoins, most of them the equivalent of risky “penny stocks”. But some early traders have literally made overnight fortunes buying low and selling high. The market is now being flooded with ‘coins’ and they are being invested in and traded by some of the biggest investment banks in the world.

Cybercurrencies are supposed to be the ‘purest’ form of money with the value of each ‘coin’ set by willing buyers and the 260,000 retailers who participate in the cryptocurrency market. They may be easily portable (via crypto purses) and divisible (in coin ‘units’), two important factors for an viable currency but their “instrinsic” value and viability as a store of value (unlike an ounce of pure gold or silver) is still debateable.  And any asset that soars in value from €575 to $4,262 a unit in the space of 12 months is in a hyper-bubble that could prove very expensive to ‘the greater fool’.

I only know one Bitcoin owner personally who still has eight out of the 50 bitcoins his teenage son convinced him to buy a few years ago…at $2 a piece. He’s mostly spent the coins taking lovely holidays with travel operators and hotels that take these coins.

I’ve also had some recent discussions with some friends, readers and even Twitter followers who swear that crypto currencies, and especially the original Bitcoin will double in price as more and more corporations and individuals realise (as they do) that it is the only alternative to the corrupted currencies and physical bank ‘notes’ that we have no choice but to use.

They could be right. But not at this degree of volatility. At the top of this article I wrote that Bitcoin was $4,262 a ‘coin’ as I write. As I sign off…it’s price has fallen to $3,531.

 

Please send your queries to Jill c/o this paper or by email: jill@jillkerby.ie

 (The new TAB Guide to Money Pensions & Tax 2017 is now out. €9.99 in good bookshops. See www.tab.ie for ebook edition.)  

 

 

 

 

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Money Times - August 22, 2017

Posted by Jill Kerby on August 22 2017 @ 09:00

BACK TO COLLEGE COSTS MAY NEED MULTIPLE FUNDING OPTIONS

 

Putting a youngster through college, especially if they cannot live at home is a serious financial challenge for most parents, and especially for those whose income puts their child outside the student grant scheme.

How to fund a four or five year third level education (that fifth year being an expensive post-graduate degree) is something that parents need to consider from their children’s early years. It’s why it makes sense to commit your annual child benefit payment, to a good savings account and to also consider investing accumulated lump sums.

Saving the €140 a month (€1,680 pa) child benefit payment in a tax-free State Savings scheme and assuming even just a 1.5% average return over 18 years will return nearly €34,700. Investing the money in a longer term, low cost investment fund should beat deposit returns, but the current 41% exit tax on investment returns is a major disincentive and should be abolished. At the very least, the government should be introducing an ISA, and Junior-ISA - the tax-free individual savings accounts that exist in the UK - that are widely used there to fund third-level education.

With the cost of the 2017-2018 university education year expected to hit €12,500         according to the USI (University Students of Ireland), college-goers and their parents with more than one child in the family and with a moderate income and inadequate savings, would have had to apply for their student fee or maintenance grant by the July 13 deadline.

The SUSI.ie website, criticised in the past for being too complicated and unwieldy now provides an easy to use “eligibility reckoner”.  I keyed in the following information: 18 years old; a first year undergraduate doing a level 7-8 degree; one younger sibling and another already in college; parents with joint income of €100,000. The ‘reckoner’ concluded: “Based on the information you have provided, you may be eligible for funding. Please refer to the guidance on making a grant application.”

Clearly, the smaller the family and higher the gross income (from all assets), the lower the chance of qualifying for a SUSI maintenance grant, the maximum of which are in the region of €6,000. For those students who don’t qualify with SUSI, the search for funding will be more precarious.

Gifting

Bank and life assurance surveys regularly show that other family members, like grandparents, are generous contributors to the rising education costs of their grandchildren.

A tax efficient option for grandparents with spare cash who also want to minimise the long term inheritance tax bill of their family heirs is to gift the capital acquisition-free gift provision of €3,000 per annum to either help build up an education fund (via a deposit account or investment fund) for their individual grandchildren, or to meet the actual cost of Irish college registration fees, housing or other expenses listed by the USI.  There is no limit to the number of grandchildren (or anyone for that matter) that you can gift each year. Even the accumulation of the annual €3,000 gifts has no impact on the lifetime tax-free threshold between grandparents and grandchildren, which is currently just €32,500.

Bank Loans

Many third level students and their parents also turn to their banks or credit unions to fund their education costs. 

Depending on the course and income prospects for the student once they graduate, banks will lend some or all of the costs.  A single, €20,000 loan, repayable over four years from AIB, for example, will cost about €500 a month, repayable immediately, at interest of 8.5%. The total capital and interest will be c€23,500. There is still no official student loan scheme here, though it is under consideration with repayments made up to a decade after graduation and the securing of a job. 

It’s worth shopping around for best rates, especially from your local credit union where interest repayments are made on the diminishing balance and not as compound interest and loans repayments are covered by life insurance.

Finally, during the mad Celtic Tiger boom years home-owners with positive equity (at least on paper) were able to draw down equity loans for the purpose of paying secondary, let alone third level education costs.

Today, equity release loans are not available, but your family home still might be able to play a role in paying for your youngster’s expensive third level education if they living away from home.

The Rent-a-Room Scheme allows you to rent out rooms in your house entirely tax, PRSI and USC-free and earn up to €14,000 per annum. Demand has never been higher for student ‘digs’ and many students are happy to rent for five days a week, leaving you with some privacy on weekends (if your own child doesn’t return themselves.)

That €500 a month (or more) renting out your child’s vacant room could go some way to meeting their annual costs. (See www.citizensinformation.ie for details.)

 

 

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Money Times - August 15, 2017

Posted by Jill Kerby on August 15 2017 @ 09:00

WITH RECORD HSE QUEUES YOU NEED YOUR OWN TREATMENT PLAN

 

If you are over age 75, and have need for the services of a public hospital Emergency Department you may very well be worried.

And if you are one of the 687,000 patients still waiting for treatment in a public hospital anywhere in the country – up nearly 10,000 on July - or know someone who is in the 50% waiting over six months, you might want to do something more than just worry about the length of that delay.

The latest news about HSE waiting lists is only getting worse, and the Minister for Health is now on the verge of appointing a new ‘health Czar’, to try and bring some control to the €15 billion mess that is the public health service here.

Good luck to him. 

Until that stubborn nut is cracked, anyone who doesn’t already have private health insurance or a large bank balance needs to ‘hope for the best and plan for the worst’. And that means coming up with a practical, personal, affordable health plan of your own to ensure that you (or someone you love) doesn’t end up on that ‘patient-in-waiting’, or better still, is able to get off that list by receiving appropriate treatment.

Find a Private Consultant

According to the latest National Treatment Purchase Fund survey, the majority of the 687,000 patients– 493,780 - are waiting to see a consultant.

Since the public consultants’ supply problem will not be sorted out easily or quickly, you need to get your GP to recommend one. Expect to pay the consultant a fee of c€200, which is tax deductible. Use income or savings. If you have neither, sell something on eBay, DoneDeal.ie, Gumtree.ie , at a car boot sale or local market. If that isn’t possible, try borrowing the money from family or friends or the Credit Union. Check out the CU’s ‘It Makes Sense’ microloan scheme for people in receipt of a social welfare payment.

Try to avoid borrowing the money from a moneylender, but frankly, a €250 loan for an important medical consultation is just as worthy as a loan for expensive Christmas toys or elaborate First Communion clothes. On-line begging for expensive private medical treatment/hospitalisation is also perfectly respectable:  it’s called ‘crowd-funding’.

Private Treatment

Once you have a diagnosis from the consultant you can start investigating how to arrange and pay for your treatment.

The reactivation of the National Treatment Purchase Fund in 2017 means that public patients on hospital waiting lists, or on the recommendation of a consultant  are being sent to private hospitals in the EU/EEA under the EU Cross Border Treatment Directive or under the HSE Treatment Abroad Scheme if treatment is not available in Ireland (or is taking longer than it should to occur.) The cost to you, the patient is refunded by the HSE up to the cost of the same treatment in a public hospital in Ireland. (Ironically, the only private hospital treatments the HSE will not refund are those incurred in the 19 private hospitals located here in Ireland.)

The single longest outpatient waiting list -18,660 - is for a gastrointestinal check. The longest in-patient treatment list is for ophthalmology cases, followed by orthopaedic and urology cases.

Shop Around

If you need a hip replacement, for example, and are low on the Irish public hospital waiting list or the Cross Border or Treatment Abroad Scheme you can look for an approach a treatment centre in the EU and EEA and get prior approval from the HSE. See National Contact Points, Cross Border Health Directive on www.citizensinformation.ie

If for some reason HSE approval is not forthcoming, but your doctor still recommends treatment and you can afford to pay for it yourself, either from a private Irish or foreign hospital, you will at least be entitled to claim standard tax relief on your medical costs and expenses, according to Sandra Gannon of the tax consultants TAB Tax Services. (A hip replacement here will cost up to c€16,000 but just c€3,500 in Lithuania.)

Buy Health Insurance

The best way to avoid getting caught up in all the HSE’s legendary waiting lists, is to have a good private health insurance policy with comprehensive outpatient and hospital based cover (c€1,300 plus per annum.)  The greatest benefit of having such insurance is not the better accommodation or food in the private hospitals (however welcome) it is your ability to jump a queue that is now 86,111 long for inpatient or day care treatment in a public hospital.

It won’t do much good to someone with a pre-existing condition (like a dodgy hip) that caused you to join those horrific queues in the first place, says Dermot Goode of www.totalhealthcover.ie but you will be covered sooner for new, unrelated medical events.

Finally, even a good health cash plan (one premium can cover the entire family) from www.hsf.ie  for about €950 a year will pay tax-free benefits for a range of outpatient and in-patient events, including consultants fees and private hospital expenses.

 

Please send your queries to Jill c/o this paper or by email: jill@jillkerby.ie

 (The new TAB Guide to Money Pensions & Tax 2017 is now out. €9.99 in good bookshops. See www.tab.ie for ebook edition.)  

 

 

 

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Money Times - August 8, 2017

Posted by Jill Kerby on August 08 2017 @ 09:00

RELAX: THE GOVERNMENT WOULD NEVER RISK A PROPERTY CGT

 

Last week after appearing on the Today with Sean O’Rourke show on RTE 1 to discuss a proposal by the Department of Finance’s tax strategy group about charging capital gains on the profitable sale of the family home, a lot of angry tweets, texts and emails lit up RTE’s switchboard and my in-box.

The tax strategy group must know that the very idea of a tax on the family home would be ripped to shreds. It’s such “political dynamite” that I doubt if it will get anywhere near the Minister’s October Budget speech.

But playing the devil’s advocate, I suggested that such a tax actually makes a lot of sense in our debt-ridden, ageing economy where the demand is only going to get louder to higher pensions, more health care and more expensive long term care for the elderly.

I also argued that decades of misguided pro-property tax policies – which favour home ownership over all other kinds of savings, entrepreneurship, investments and even pension funds– need to be torn up if we are to break Ireland’s recurrent boom and bust property cycles.

Anyone lucky enough to have bought a home at the cheap end of the cycle and sell (or even become mortgage-free) at the top end, have been the biggest beneficiaries of those pro-property policies and tax subsidies over many decades. They also enjoy the ultimate reward:  an entirely capital gains tax-free profit when their property is sold.

I am one of them – an empty nester with a big old house.  If a CGT was about to introduced, I’d take the hint and sell now (and hopefully find a suitable, smaller property, something I wrote about last week.)  I have plenty of friends in the same position.  That drastic tax charge would certainly get the flow family sized properties moving again, and if supply was sufficient, bring down prices too.

A CGT tax might also – if it helped bring down prices and help restore some normality to the market - show that mortar and bricks are NOT a better pension substitute for a well-run, low cost, diversified, long term pension fund (which I also have). Or that it is our god-given right to magically reap a guaranteed, tax-free profit from our subsidised bricks and mortar…at the expense of renters, for example.

Memories are perilously short, but readers may recall how everything from the most ordinary, poky, 3 bed semi-d to a leafy Dublin 4 mansion was “earning” their owners the equivalent of a year’s salary. It was the most obvious sign of all that the property market was on a mad, bad, increasingly dangerous roller coaster.

I’m one of the lucky baby boomers and older retirees who happened to be in the right place and time to benefit the most from the upside of the booms and busts.

My husband and I were recipients of a £5,000 new house buyer grant to purchase our first house in 1986. It was sold in 1994 just as we started a family, but also just as the last great property recession was turning. We bought our current house – a big old decrepit Victorian end-of-terraced for c€125,000.  We doubled our mortgage.

Yet within a year, interest rates began their long deep retreat from double digits and property tax was abolished. The Celtic economy stirred and soon wages and salaries were up and taxes were coming down. Personal debt was puny.

But instead of reigning in the heated-up property market, the government encouraged it with more tax breaks and allowances for builders and developers. Addicted to stamp duty and other property taxes, it encouraged the banks to lend even more recklessly.

The rest is history.

By the summer of 2006 my old money pit of a house was worth €1 million - on paper. But by 2007 house values started falling sharply. The crash brought them all the way back down to c€300,000. Having paid off the mortgage – and not borrowed on the basis of its paper value - we were still “in profit” thanks in a big part to the legacy of favourable tax treatment (and economic growth) we’d enjoyed from the purchase of our first house.

Fast forward to 2017. My old money pit of a house is now “worth” c€700,000 even though it is now 122 years old and surely, a depreciating asset if only because of its age.

Yet if we sold it tomorrow, we’d still “earn” €575,000 tax free over it’s original asking price. (A 33% CGT would amount to €189,750).  Meanwhile young families (like we were once) struggle to pay exorbitant rents …if they can even find somewhere to rent.

So should a CGT tax be introduced to help wean us off this dominant, volatile and unevenly distributed wealth asset?  Maybe. But it won’t happen. You can all relax. We believe unearned, tax-free profit from property is a God-given right.

The next generation can make its own luck.

 

 

Please send your queries to Jill c/o this paper or by email: jill@jillkerby.ie

 (The new TAB Guide to Money Pensions & Tax 2017 is now out. €9.99 in good bookshops. See www.tab.ie for ebook edition.)  

 

 

 

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Money Times - August 1, 2017

Posted by Jill Kerby on August 01 2017 @ 09:00

WHEN SELLING DOWN ISN’T POSSIBLE…RENT-A-ROOM TO THE RESCUE

 

The Irish housing crisis has affected pretty much every age group except one – older, late middle-aged people and retirees, the vast majority of the latter - 92% - who already live in owner-occupied houses.

Not only do the majority of retirees have a place of their own, but 83% own their homes outright, with just 8% renting, according to Tilda, the TCD research group into our ageing population.

And while half of these properties have quality issues that need to be addressed, Tilda, in its 2016 housing report confirm what most of us know already: there is a serious and growing mismatch in housing occupancy in Ireland, with hundreds of thousands of older, single people and couples residing in properties that are more suited to families.

A functioning property market is one that keeps the flow of all types of property moving between the generations. Instead, we have a market in most of our larger cities that is forcing prices relentlessly upwards for people wanting to buy, or who rent. The solution is to start building more appropriate properties for the rapidly ageing – and demanding - cohorts of current retirees and ‘baby boomers’ who are keen to downsize even before they reach 65.

Nearly 24 years ago, my husband and I moved from a small, two-bedroom starter home in Dublin’s city centre to a larger, Victorian terraced property about a mile away.

It has served its purpose. The Child is about to fly the nest (we hope permanently) and the next logical step is to downsize and let a new family upsize into this bigger house. With its proceeds, we would buy (or even rent on a long term lease) something smaller, using any balance to boost our part-time earnings and retirement income.

Unfortunately, this virtuous property circle has broken down. Just like everyone else looking for a home, there’s a chronic lack of suitable and decent value smaller properties in or around this neighbourhood.

I admire people who intend to move to the country in their retirement thus almost guaranteed to maximise their dual goal – a nice, smaller place to live and money in the bank for their old age.

But the countryside isn’t for us. We are privileged to live in a very mixed neighbourhood of Victorian and Edwardian terraces, private semi-d’s built in the 1930s and 40s, privatised council houses from the 1950s and 60s and rather too many dubiously constructed apartment blocks that went up in the boom years, but are lacking any storage for suitcases, let alone boxes of Christmas decorations. Cash investors-cum-landlords are buying a disproportionate number of the properties that are for sale…and I believe its just a matter of time before this latest price bubble meets its pin. 

There’s also no point fighting city hall.

The down-sizing supply roadblock for already privileged older homeowners is not a priority. No one cares that ‘baby boomers’ and home owning retirees can’t find the perfect smaller house or apartment in their neighbourhood.

But that doesn’t mean that there are no options other than cashing in and moving to the country (or to a sunnier country like Spain, or the bargain basement that is Greece…)

Here are three ideas that I’m checking out right now…

1) Turn a larger, older property into a “duplex” with two self-contained units. Live on the bottom floor and sell the top floor. You shouldn’t have trouble selling the upstairs to a singleton, downsizing retired couple who want to stay in the city or even a small family (especially if you have a convertible attic). You get to stay put without all the responsibilities of a large property.

The downside is securing planning permission and refurbishment costs, etc.

2) Convert part of the house to a self-contained rental apartment. You get to downsize and still own the entire asset.

The downside is cost of refurbishment, the inconvenience and costs of being a landlord and big income tax liability: you can only claim 80% tax relief on allowable expenses. About half your rent could disappear in tax.

3) Upgrade the house but rent out that spare floor (once you move downstairs) under the Rent a Room scheme and earn up to €14,000 tax free.

“This certainly appears to be the best option,” says (my) financial adviser and planner Marc Westlake of Global Wealth Management. “Earning €14,000 tax free from renting rooms in your home, or even self-contained flat [in an attic, basement or unused floor] is a no-brainer.”

The Rent-a-Room scheme is, ironically, just another roadblock in helping to release much needed family homes. But until the supply shortage is comprehensively resolved, it may very well become the default option for the growing number of home-owners who want or need to downsize.

Get a good team of advisers together if you decide to downsize, including your financial and tax adviser and solicitor. Check local planning regulations. (See www.citizensinformation.ie then search Rent a Room Scheme.)

 

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