Money Times - July 5, 2016

Posted by Jill Kerby on July 05 2016 @ 09:00




The anti-Brexit referendum result means that quite a few readers, who were worried about their UK pensions, properties, bank accounts and even whether they would end up paying higher university fees for their children could end up worse off financially. We’ll answer some of these and other questions this week and next. 


What to do with cash was of particular interest to several readers:


Ms JN writes: I live and work in Northern Ireland. I will soon receive an inheritance of €50,000 from the sale of my late parents’ house (in the South). Is it better to open a bank account in the Republic or get it transferred directly into my bank account in the North? I'm a bit worried about exchange rates right now. I don’t want to lose too much in the transfer.


Sterling had been weakening against the euro this year, mainly due to concerns about Brexit. The ‘Leave’ vote further weakened the euro/sterling price – at time of writing it was 83 cent to the pound; the day before the referendum it was 77 cent so there has been a 10% shift. But this rate means that your transferred euro inheritance will buy you more in the North and is good news for visitors to the UK, for parents supporting children studying in the UK or for any of us who buy sterling denominated goods and services.(It’s bad news for anyone selling stuff into the UK or for Irish tourism.)


Transferring this €50,000 inheritance to your account in the North will boost its spending power by about €5,000, but sterling has fallen heavily against the US dollar as well and Britain is a huge importer. This will eventually be reflected in the price of your high street goods, the cost of oil and petrol in the North.




Mr SK writes:  I lived and worked in Birmingham receive both a UK old age pension and a small occupational one as I lived for more than 20 years in Birmingham. What is going to happen to my pensions?


Your pensions will continue to be paid. However, the fall in the value of sterling is going to impact on your spending power. But interest rates don’t stand still; they fluctuate all the time and a 10% “loss” today is not written in stone. The euro is not immune to falls either and could happen if EU recession returns or from Brexit contagion risk. A fall in the euro will counterbalance the sterling drop.


Since you can’t impact or even accurately time exchange rates, you need to concentrate on what you can do:  review your finances, especially if you have investment funds. You need to find 10% more spending power. Are you paying too much tax? Claiming all eligible social welfare benefits? Have you a spare room you could rent out via the tax-free Rent a Room Scheme or even AirBnB. Try to squeeze out more deposit interest you (see www.bonkers.ie for deposit rate comparisons). Could you get a part-time or casual job? Do you have stuff your could sell on Buy‘nSell, eBay or at your local car boot sale? Ever considered barter?  I know a retired accountant, a widower, who helps his family and friends (and their family and friends – word gets around)  prepare their tax returns in exchange for DIY jobs around his house, home cooked meals and baking that goes into his freezer. One ‘client’ even lends him their holiday apartment in Spain where he goes hill walking with his buddies every year.





Mr DR writes:  My girlfriend and I both have rented properties that are covering our repayments, and we are getting married in 2018. We both live at home with our parents and we are both working with a joint income of about €70,000.  I’m from a farming background and own a share of the farm and earn some farm income.  How favourable would a bank be to lend for a self-build on my own land, taking all this into account. Selling either of our houses would mean selling at a loss.


You don’t say how much you think it would cost to build your new home, but with a joint income of €70,000, under the new Central Bank rules, your mortgage limit would be €245,000. As existing owner you would have to produce a 20% downpayment on the total build price, or €49,000. However, the fact that both your properties are in negative equity and you are servicing two mortgages is not going to help your case, said Michael Dowling, a well known mortgage and financial adviser (www.mdowlingfinancialservices.ie).

According to Dowling the lender must stress-test their existing loans, even if they are cheap trackers, as well as any new one and the stress rate is between 5%-7%. “That alone might disqualify them from a new loan for their self-build.”He suggested that if you want to start the new build anytime soon, that you first pay off one of the existing negative equity houses with your existing (and ongoing) savings and then apply for a negative equity loan. Hopefully you will be in a position to start building your new home by your wedding day.

Next week:  More of your letters

Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie



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Money Times - June 28, 2016

Posted by Jill Kerby on June 28 2016 @ 09:00




The day after the Brexit vote, it spooked the markets, sent the pound tumbling and caused the UK prime minister to fall on his political sword.  At time of writing, the only certainty was the last one: David Cameron will resign in October, but the pound/euro rate has been up and down, and so have the markets. As they do, and will.

Last Friday morning the BBC was the first off the mark to try and answer that question (and you have probably seen other such articles in the ensuing days) and all of them have come to the same conclusion – nobody knows.

Over the last month this column received a number of emails and letters from readers about how a Brexit vote would impact on their UK state and personal pensions. They asked what would happen to their second homes or buy to let properties in the UK. They wanted to know what to do with their savings in UK bank accounts.

With so many close family connections between these islands, a few of you also raised the question of what to do with an Irish or UK inheritances, tax liabilities and one worried parent even queried whether they will face higher fees in September when their child returns to university in Northern Ireland.

The immediate fallout of last Friday’s vote is the sharp fall in the value of sterling. This means that the cost of goods and services here will be more expensive or British and Northern Ireland traders and visitors.

Irish people who are receiving a UK pension – and tens of thousands of people who worked in the UK and returned here in their retirement may be entirely or partly dependent on this income - might find that their next cheque or payment will buy them less if sterling is lower against the euro. It dropped by up to 10% early on the day after the vote, then it recovered…and fell again.

As you read this, sterling may or may not be up …or down against the euro, again.  The only sure thing is that pensioners may have to tighten their belts, dip into their savings or find another source of income. Or not.   

Anyone collecting rent from a UK-based property or from share dividend income or from a sterling capital gain can also experience a loss of income if the sterling exchange rate with the euro falls.  The parents who already pay fees to a UK university will pay less if sterling falls against the euro and stays there.

Shoppers and holiday makers in the UK will also pay less if the value of sterling falls and stays down.  This will boost UK business (and exporters) and its tourism industry. Can they adapt to higher import prices?  If they can’t they will lose competitiveness, and lose business.

We’ve all been here before. Currency fluctuation has been frequent and sometimes brutal since the 1970s when currencies were completely decoupled from their historic anchor, gold.  Brexit looks like being just another trigger for a  major development in this long game of currency, trade and business ups and downs.

So what should we do, as individuals, about the UK leaving the European Union?

There is absolutely no point in anyone here wringing our hands about a decision we had no part of.

But what we can do is accept the reality of Brexit. And act in our own best interests.

Review your own finances. Know exactly how much your household earns, spends, the exact tax it pays. Find out exactly how much debt you own and its service cost. How much do you save and invest? Is it enough to meet your important life goals, like home ownership, your children’s education, your retirement?

If you can’t do this review yourself, or you don’t feel confident in doing so, seek out some independent, impartial help. Discuss your financial exposure to the UK with someone who is aware of UK property, pensions and tax. Check out the website of the Society of Financial Planners of Ireland (www.sfpi.ie) or contact an independent adviser –ideally a fee-based one – who comes recommended from a person you trust.

Irish businesses face competitive challenges and so do the rest of us.  But Brexit is just one of the challenges ahead. A US recession in 2017 appears on the cards and the EU’s long, drawn out recession continues. Greece, and now Italy’s basket case economy are going nowhere.

Brexit has introduced some reality to the economic ‘la la euroland’ that has been fostered by politicians and their creatures in the Central Banks which was always going end badly.

There is now a two year window for the UK and EU to negotiate a realistic new relationship. You might want to move a little faster than that in preparing yourself and your family for whatever that outcome might be.



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Money Times - June 21, 2016

Posted by Jill Kerby on June 21 2016 @ 09:00




The idea of emptying granny’s savings account because she’s frail and a little forgetful or in a nursing home, or because she’s still living independently but a soft touch, is a pretty distasteful subject.

It happens a lot, according to advocacy organisations like Age Action, the HSE sponsored National Association for the Protection of Older People, and even Ulster Bank, whose survey a year ago found that up to 45% of its own staff had experience of dealing with suspected elder abuse cases. (A story this column covered at the time.)

Last week, again with the support of Ulster Bank, Age Action launched a new two minute video about elder abuse: https://youtu.be/cRA_Hsj5HVg


Twenty thousand leaflets are also going to be distributed to older people and their families all over the country about the dangers of this kind of abuse, in the hope of reducing cases.  About eight cases a day – nearly 2600 a year - are reported to the HSE, of which about 20% concern the elderly person’s finances. (Over 80% of all EA cases involve women aged 80 and over.)


The new video doesn’t beat around the bush and it claims that that the vast majority of cases involve a friend or family member, often an adult child.

The abuse is usually perpetrated in three ways claims Age Action:

-       The misuse of personal financial details without knowledge or consent;

-       Pressure to sign legal docs without access to independent advice;

-       Theft of personal property and financial assets.


The misuse of personal financial details includes the use of credit card and debit cards and PINs, forging signatures, transferring money from the older person’s bank accounts and even overt identity theft.

Not having independent legal or financial advice is common enough even among married couples when important business or financial events occur, let alone between an elderly person and a relative or friend, eager for their signature. (Wives who are ‘paper’ directors of a husband’s company often sign contracts and loan documents they’ve never read, to their eventual detriment.)

Pressuring an elderly relative to friend to co-sign or guarantee loans, to favour them in their wills, or to even turn over their homes in the form of an early inheritance can be achieved often by threatening to withdraw care. It is certainly more likely to happen if the older person doesn’t have access to a trusted legal or financial adviser (or any impartial outsider.)

Meanwhile, the theft of personal property and financial assets can and does happen with considerable ease, whether cash, jewellery and other small valuables or larger assets – art, furniture, cars, even their homes.  Even gentle bullying (“Don’t you remember you said I could have this?”) is a form of abuse, especially of a frail and perhaps forgetful person.

Banks, post offices and credit unions are becoming more aware of the signs of financial elder abuse, say the advocacy groups and, as the Ulster Bank survey showed, keen to encourage their staff to report their suspicions and then discreetly follow up these suspicious, if necessary, with the Gardai and the HSE National Safeguarding Office.

General signs that financial elder abuse may be happening, according to Age Action is that the older person (or someone else) notices that money or belongings have gone missing, that the person appears to be short of money when they shouldn’t be, or even that they appear to be reluctant to keep regular appointments with friends or family, away from their carer or closest relations.

The ideal solution to this kind of abuse, of course is to take some precautions early and to make sure you always have a trusted ally – your family solicitor, financial adviser, even your medical practitioner or priest. Don’t be afraid to contact them if you are being put under unwelcome financial pressure.

Always keep orderly financial records, including spending diaries/budget. Make sure you have a will that includes an Enduring Power of Attorney that will ensure your financial wishes are fulfilled if you are no longer mentally capable.  Valuables should be itemised for insurance purposes. 

The HSE lists a number of practical tips to help you keep control of your finances and they include

-       appointing a trusted person to collect your pension for you if you can’t do it yourself;

-       setting up direct debits and standing orders to pay your bills;

-       never revealing your PIN numbers to anyone;

-       keep a close eye on your bank statements and card transactions.

On this last point – if you do give access to your finances to someone else, list exactly the extent of that access and the limit of their authority, and share this information with your bank/post office/credit union manager and ideally your solicitor. 

If you think you might be a victim, or suspect someone is, speak out. Contact Age Action Confidential at 01 4756989.

Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie



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Money Times - June 14, 2016

Posted by Jill Kerby on June 14 2016 @ 09:00




Welcome as the extra €3 state pension payment has been since the October budget is the freezing of the weekly payment at c€230 a week since 2009 had taken its toll.

With half of all pensioners relying on their state pension (and whatever savings they might have), the last eight years have taken their toll.   Most would report that not only have they had to tighten their belts to pay for extra taxes, higher fuel, transport, insurance and health care costs, but in recent years they’ve had to dip into their savings to meet many of these rising costs.

The nil return (after DIRT and inflation) from deposit accounts has accelerate this capital decline and it certainly explains the sharp rise in queries, both to this column and financial advisers about equity release mortgages and home reversion schemes from older home owners who are typically asset rich but cash poor.

“I get a lot more calls like this, usually from a younger relative, a son or daughter, of an older person,” a financial broker told me last week. “They are very keen, now that property prices have been rising in Dublin, Cork and Galway and in big commuter towns, to find out if their relative could raise some cash from the equity in the property. The money isn’t just to replace windows or change the central heating, but to just help them pay bills and live better.”

 “Unfortunately, I have to tell them that the once popular equity release and home reversion options that were on the market before the crash are just not available anymore. But worse still, other solutions, like adult children borrowing against their own homes to provide some cash for their parent, are also quite difficult to arrange.”

Older people, even those still working, are finding it increasingly difficult to arrange loans of any kind, he added, especially if they are in their 60s and banks expect mortgages to be paid off by age 70.

“Despite the fact that house prices are up, and that some people have both a state and private pension, the banks are unwilling to take a chance that something might go wrong with an equity release loan,” the broker explained. “A fall in prices could happen if enough new supply does come on stream in the next few years. They are being extremely cautious in their valuations.

“The risk with equity release loans is that the interest is building all the time. The banks have told me that they aren’t so much worried about collecting their debt from the estate when the client dies, as collecting if the owner needs to go into a nursing home. To qualify for Fair Deal, the interest and capital debt would have to be repaid without the selling the property.

“If there is a dispute, the banks say they don’t have much confidence in the Courts supporting them against a charge that the original loan was not arranged properly, or the person was not entirely sure of what they were undertaking, or where a dispute arises within the family that the older person had been coerced into borrowing the money for the wrong reason.”

Disputes have arisen, he said, where the equity release or reversion (where a portion of the value of the house is sold in exchange for a discounted lump sum or annuity income) was arranged in order to provide financial assistance to an adult child or grandchild, either to help them clear their debts or to give early inheritances.

“I would never recommend that anyone borrow against their home or sell a part of its value to then give that money away, even if it is considered an early inheritance.  The risk is that you might be caught short if you ever did need to sell the property or downsize,” the broker told me.

“It’s also a good way to cause considerable dissent among the remaining siblings if the money is not divided among them all.”

With none of the banks willing to extend equity release or reversion finance anymore, the only options to raise more capital or income “is to consider joining the €12,000 a year, tax-free, Rent a Room scheme; by downsizing or by arranging an inter-family loan. This involves their own children taking out personal loans, or by convincing their mortgage lender – and it won’t be easy - to give them a second mortgage on the grounds that they will hopefully, eventually, be a beneficiaries of the parents’ estate.”

 “I tell my clients to prepare their case for an equity release loan very carefully.

“Be realistic about how much you want to borrow and the valuation of all the properties involved.  A pensioner in their late 70s or 80s with a valuable property in a good location, or their children on their behalf, who wants to borrow €30,000 is more likely to succeed than a 66 year old who only has the old age pension to live on, no matter how nice their house.”


Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie


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Money Times - June 8, 2016

Posted by Jill Kerby on June 08 2016 @ 09:00




Last week I noted how difficult, well, how pretty impossible it is, for older homeowners to downsize to a small home if they don’t first sell their existing one and then close the sale with cash.

The problem is that the banks won’t lend them the bridging finance they need when a link in the property chain gets snagged or broken often due to problems with the buyer of their place securing enough finance to keep up their end of the sale.

Quite a few of you passed on your unhappy property chain experiences and one of them was particularly interesting…to anyone who has a house that happens to be over 100 years old.

“My husband and I are both originally from the South East,” Mrs G explained when I contacted her. “Our last child finally left home  (in a nice Dublin suburb) two years ago and last year we decided with house prices doubled from where they were in 2010 we would sell up and move back to Wexford.

“We found a really nice, modern house in a great location. The owner was in no huge rush, so bridging wasn’t an issue.  The prospective buyers were keen and had a pre-approved mortgage. But we lost that sale, not because of our ages or a bridging issue, but because of the age of our house.”

According to Mrs G, their house, a Victorian terrace (not unlike my own) was built in the 1890s and the black slate roof had not been replaced in last 100 years, though it had been patched, repaired and fitted with new gutters.

The age of the roof was discovered when the buyers made their final mortgage application and inquired about building and contents insurance. The lack of a “new” roof wasn’t going to prevent them from securing their mortgage, they were told, “but it certainly delayed the process and it eventually spooked them,” she explained.

“They told us price of the insurance seemed very high relative to what they were paying and they discovered that only the bank’s preferred insurer was willing to give them a quotation. No other company would insure them unless they replaced the roof.”

The Dublin house was eventually sold – to a cash buyer.  “We made it clear that there might be an insurance “issue” because of the roof, which is perfectly okay, according to our roofer, but they didn’t care.

“You may want to warn your readers that older houses are discriminated against as much as older sellers and buyers.”

According to Sean O’Connell of The Insurance Shop in Dublin, who specialises in insuring homes and business premises and is a Chubb ‘Masterpiece’ agent in Ireland, “it isn’t just the roof that is the problem for owners of older houses. It’s also the wiring and plumbing.

“The state of the insurance industry is all over the place at the moment. Too many experienced people have left as a result of the recession and junior staffdon’t have the knowledge or authority needed to deal with older properties.

“An old roof that hasn’t been replaced, or even a house, young or old, with a flat roof that is more than 20%-30% of the roof space, is going to raise red flags.  But the insurer might refuse to quote if the plumbing and wiring hasn’t also been replaced.”

Even if you can produce the RECI (electricity) or engineering certificates, there’s no guarantee you’ll get a quotation. Comparison shopping, he says is out of the question. And while existing contracts are being renewed, the ‘captured’ nature of your relationship means premiums will keep rising.

Unlike the motor sector, where third party cover is a legal requirement and someone who has been turned down can appeal to the trade body, Insurance Ireland, “there is no such appeal process for home cover since there is no equivalent legal obligation,” says O’Connell.

Yet he acknowledges that not only is much of the existing housing stock in Irish towns and cities over 100 years old, but a mortgage can’t be secured unless the building is insured.

“Once you disclose – and you must – the age of your house or that it includes a flat roof, chances are as a new customer you will have to produce compliance certificates.

“If you can’t you can seek a quote from Lloyds of London through an Irish insurance broker but expect to pay two or three times higher and it isn’t an ideal arrangement, service-wise.”  Chubb insure properties worth over €1 million regardless of their age, O’Connell explains, but even replacing the roof “is no guarantee that you will get an affordable quotation.”

Insuring older properties “is turning into a nightmare for owners and buyers.”  If the new Minister for Housing is serious about freeing up the housing supply, he might want to deal with this one before it gets any worse.

Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie



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Money Times - June 1, 2016

Posted by Jill Kerby on June 01 2016 @ 09:00



The strict 20% downpayment criteria set by the Central Bank hasn’t just got young, first-time buyers scrambling to find sufficient cash to buy their preferred property (if it’s worth over €220,000.)

Older buyers, keen to downsize are also being caught by this requirement and the additional problem of mortgage age restrictions and the fact that bridging finance is a thing of the past.

Recently, yet another reader was in contact after her request for a bridging loan was turned down by her bank of over 25 years.

Like other readers who’ve been in touch, she has also lost out on the purchase of a smaller, less expensive home because the property ‘chain’ has broken down, mainly due to the Central Bank’s strict lending rules.

A widow, aged 70 and on modest pension income of only about €17,000 a year, her large family home in Co Kildare has been valued at between €400,000 -€440,000.  She has about €250,000 in cash. The latest house she would like to buy is on sale for c€340,000 but to secure it she wants to borrow €100,000 in the form of a bridging loan.

Interest in her home has been strong, but in at least two cases the prospective buyers took too long either in getting their down payments and/or mortgage approval in place and by then, the new smaller property she wanted, was bought by someone else with the right amount of cash.

It isn’t just older people, keen, like this reader (and a number of others who have written to me, in exactly the same situation) who are being turned down for the much needed bridging loan.

“The banks simply are not extending this finance to anyone,” says Karl Deeter of Irish Mortgage Brokers. 

Risk-taking of any kind is being discouraged by the Central Bank but the situation is further complicated for older, often retired borrowers because their incomes may be deemed too low (and fixed); they may have health problems which could impact on any insurance requirements and make any default process (should the worst happen) very problematic and expensive for the bank.

Unfortunately, says Deeter, there are no satisfactory and affordable univeral solutions.

“Older people who find themselves in this situation might have to be more patient and consider selling their house and then renting short term in order to be able to buy the right property at the right price.”

Having the full sales proceeds in their bank means they don’t then have to rely on the property chain working smoothly. Instead, they join the group of cash buyers who don’t have to worry about 20% down payments (over €60,000 in our readers’ case), bridging finance or the possible breakdown of any purchase offer of their own home.

The downside of renting, of course, is that in the major cities and surrounding commuter counties (like Kildare, Wicklow, Meath and Louth) rents are still going up, as are property prices.  This is an altogether uglier kind of property chain.

According to the latest Daft.ie survey, rents have gone up nationwide for 15 of the past 18 quarters and now average €998 per month with the average rent in Co Kildare at €994 per month, €1,029 in Wicklow, €926 in Meath and €835 in Louth.  Short-term lets can be even more difficult to secure – at that price - than longer term ones.

Since there are practically no positive returns on demand deposits, paying rent while you wait for the right house to appear just has to be written off as the best worst option if you want to avoid continually the bidding war on the perfect downsized property that you want for your retirement or advanced years.  

Reluctant renters need to focus on the positives and not on their rent money going down the proverbial drain:  A smaller, and perhaps more modern rental house or apartment will hopefully result in lower heat and electricity bills. The rental property (and their new home) might be within walking distance or on public transport routes and therefore might save on petrol and transport costs.  Unfortunately, rent relief no longer exists for any private tenents.

(Wherever you move, these are the sorts of costs you should aim to be saving; a lower value property also means lower property tax bills in the long run. Well built, newer properties should eliminate expensive maintenance costs.)

Our reader, could of course set her sights lower and buy a property with her €250,000 cash.  But the return of bridging finance – which has always been such is a useful tool in the past – would be a far better option for her and so many other older owners keen to downsize.

Unfortunately, it looks like our dysfunctional and micro-managed mortgage lending market is here to stay until the legacy mistakes of the boom years are sorted out. And that could still take some time.




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Money Times - May 17, 2016

Posted by Jill Kerby on May 17 2016 @ 09:00



No matter how hard every Irish government tries to ignore the pension problems we have in this country, or to pass the parcel to the next administration, they simply won’t go away.

I attended at a major pension conference last week on the dire conditions of our state old age pension organised by the Society of Actuaries and the think-tank, PublicPolicy.ie.  The most salient and ironic comment made was by the retired head of the Pensions Board (and PublicPolicy.ie director) Anne Maher who said, “If we had undertaken the pension reforms recommended in the late 1990s or in the 2000s, we would not be here today.”

I remember well the first major report which started being compiled in 1993, the ground breaking and seminal National Pensions Policy Initiative. It’s most notable achievement – years later – was the introduction of the Personal Retirement Savings Accounts (PRSAs). 

Several other major studies have been rolled out since then, but the pension time ticks away, louder and faster. We are not the only country struggling to come to grips ageing populations and insufficient amount of funding. Back in 1993 we were in a perfect demographic position (with a very, very young population) so reform the old age pension, but 23 years later, we too are running out of road and now face a huge jump in the percentage of gross domestic product (GDP) needed over the next few decades if today’s young workers will see any benefit from their PRSI contributions.

Since this is the fourth article in our ‘Spring Clean/Declutter Your Finances’ series, you might want to know what kind of conclusions and recommendations were being bandied around at last week’s conference: three important reports were discussed, the substantive 2014 OECD Review of Pension Systems and two others, on Ireland, by the private consultants,  Milliman and McKinsey.

All three come to the pretty much the same conclusions:  Irish people are living longer, which is a good thing but they are not contributing enough to state or private pensions. Universal benefits are too high; deficits are growing and are becoming unsustainable. There is too much inflexibility around retirement rules.

The recommendations that have emerged are – and this is the good news – are varied, practical and do-able, but will take considerable political will and courage: retirement age has to increase to reflect greater longevity and improved health outcomes for older people; contributions have to increase if benefits are to be sustained for longer;  universal benefits, need to be reconsidered to improve more equitable financial outcomes for all pensioners. Incentives need to be considered to change attitudes in favour of working longer, but differently and   taxation has to be reviewed to stop incentivising early retirement.

This isn’t an exhaustive list. But if these key recommendations are ignored, the gap in Ireland between how much it currently costs up to fund the €12,131 per annum pension to 600,000 pensioners – 3% of GDP - will soar to over 9% of GDP by 2055 assuming our pensioner population more than doubles to c1.4 million over 65’s.

So if you have a state pension, lucky you.

Yes, you paid into it, as did your employers, a total of 14.75% of your annual salary.

But if you retire at 66 and live to be 86, you will collect (at the current payment) nearly €243,000 in benefits (and at least another €161,700 if you also claim for an adult dependent). Even if you earned the average industrial wage every year of your working life, the amount paid into the Social Insurance Fund (which is not exclusively for pensions) would have been far, far less than what you will collect.

Most civil and public servants who receive a final salary defined benefit pension (half salary, plus 1.5 times final salary as a taxable lump sum) will enjoy a greater income than if they received the State pension. But the people who will struggle most, are those members of defined contribution or self employed pensions who, on average will end up with private retirement incomes of between €3,000 - €5,000 per year.  Without the state pension, which represents c33% of the average industrial wage, many would be destitute.

Until governments start taking action on the funding and sustainability of ALL pensions, you need to:

-       Review your PRSI contributions. The eligibility rules keep changing. Will you have paid enough to claim your pension at retirement age?

-       Do you have a private pension? How much of your salary are you and your employer contributing? You should be allocating at least 10% of your gross salary…from the moment you start working.

-       Are you nearing retirement age, (say within 10 years)? Get an accurate assessment of what your fund is worth now and how much income and tax free lump sum that represents. Get a forward estimate as well.  Will it be enough, with the state pension, for you to live on?

If you are facing a pension income shortfall, get ALL your retirement provision reviewed by an independent, impartial adviser. See www.sfpi.ie for a financial planner near you.

Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie



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Money Times - May 10, 2016

Posted by Jill Kerby on May 10 2016 @ 09:00


Do you have a complicated mortgage, one that needs to be de-cluttered or ‘spring cleaned’?

A very large number of mortgage holders – half of all home owners have a mortgage - probably fall into this category, judging by the 80,000 plus mortgages still in arrears and the 120,000 that have undergone restructuring..

The new government may be considering extending mortgage interest relief past its 2017 expiry date, which will benefit just over 300,000 mortgage holders to the tune of about €750 a year, but what it really needs to do to relieve the financial pressure on new buyers is to build thousands of new homes as quickly as possible.

An easing of the Central Bank’s lending rules would also provide much needed relief to the thousands of prospective buyers who are unable to buy high rent and save the required 20% down-payment on properties over €220,000.

The flip side of our highly dysfunctional market, however, is that prices have been rising across the country and are slowly bringing hundreds of thousands of existing mortgage-holders out of negative equity, freeing up some properties for re-sale. The challenge remains to find another suitable home to buy (or rent). 

Even with the improvements in the market – less negative equity, some improvement in the ability to pay – the rate of new borrowing is still very weak: with over 80,000 mortgages still in arrears and too many underperforming, restructured loans on their books, lenders are cherry picking only the best borrowers.

The long term risk is that any rise in interest rates – and there’s no sign of it at the moment - could blow apart many of the restructuring deals that are based on variable rate repayments.

That said, a lot of people who are not on tracker rates but who are making their repayments, are very unhappy with the cost of their mortgage commitment. Like the prospective first time buyer, they need to consider all their options.

Eight years after the great financial crash, some governments – like the UK - are re-introducing saving incentive schemes, tax relief or both, like the UK.  In the US, there is a dangerous drift back to sub-prime lending (guaranteed by federal mortgage agencies).  Here, with the exception of the tax relief for some existing owners, there are no such schemes to alleviate the funding pressure.

For new buyers who can put together the down-payment, the options are a standard variable rate that ranges from 3.3% to 4.25% (or 5.2% subprime with Pepper Homeloans) or a fixed rate (usually for one year) of c3.3%. (Existing owner fixed rate begin at about 3.5% for most lenders.)

Existing homeowners who want to move home or switch to a fixed rate face charges of c3.5% - 3.8%. (See www.bonkers.ie)

(Anyone with a tracker – and paying just .5 - 1% over the ECB base rate of zero should hold onto it for dear life and avoid fixing or switching providers. You will never be offered such cheap credit again.)

Mortgage brokers suggest that variable rates are more likely to fall than go up anytime soon, so locking into any fixed rate needs careful consideration. But every 0.25% savings per month on a 30 year loan amounts to a c€15 savings for every €100,000 borrowed, or €45 on a €250,000 loan (€540 per annum).  Switching to a cheaper lender – and this is where the best deals lie at the moment if you have a clean mortgage record – could result in an annual cost reduction of €2,160 a year if you can cut your mortgage rate by 1%.

Start the switching process by checking rates: www.bonkers.ie and www.consumerhelp.ie are two reliable websites. You should also review your mortgage protection and home insurance and make sure to check for better premiums as part of your switch.

First time buyers are especially badly served by the dismal to nil savings rates. This is where creative financial thinking comes into play.

Can you earn more?  Can you pay less rent by adding another flatmate or even rent a spare room in your apartment or house. You qualify for the  €12,000 tax free Rent a Room income even if you are a tenant(and you clear it with your landlord.)

Some brokers say some banks are not disqualifying borrowers who come with early inheritances or parental guarantees. Is there any chance of any early inheritance? 

Finally, one form of finance that is under-rated, but should be explored for putting together a downpayment is a private family loan.  In a world of negative net interest rates, a 20 year (albeit unsecured) capital and interest loan that pays 4% to a willing parent of other relative who is getting no yield on their savings could be the difference between getting on the property ladder and being a permanent tenant. Just make sure both parties get proper financial and legal advice.

Next week: Investment and pensions.


Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie



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Money Times - May 3, 2016

Posted by Jill Kerby on May 03 2016 @ 09:00



What’s the difference between a ‘Spring Clean’ and a ‘Spring De-Clutter’ in my house?  The former is a noble aspiration. The latter actually happens, one step, and one room at a time.

Gradually, but steadily decluttering your finances may also be a more realistic way to get your wider financial position sorted out, though I still highly recommend a big, major wealth review at least once in your lifetime and usually triggered by three major events:  marriage, a house purchase and as retirement approaches.

But this column is about how to do a “Spring De-Clutter” and the best way to begin is with the financial issue or issues that you’ve been putting off, or that is causing you the most grief.  Judging from my postbag these include poor returns on savings; expensive and elusive mortgages; investment funds and pensions and long term funding for children’s education. I’m going to address each of these issues over the next few columns:

Let’s start with savings.

The legacy of the 2008 crash in this country is that not only are personal borrowing rates considerably higher than in many other EU countries, especially for mortgage loans, but Irish savers are also penalised by the wider, on-going policy by the ECB and other central banks to maintain zero and below zero base interest rates in order to “stimulate” moribund economies where borrowing is low and the paying off of debt by individuals is high.

The great fiscal stimulus hasn’t worked, though it has pumped up stock prices and other favoured assets of the super rich, like their incomes, share options, property and art. The rest of us are avoiding more debt, paying off existing ones and we’re saving more.  We’re also buying more precious metals, that, like cash these days, never pays a yield, but unlike cash, maintains it’s intrinsic value for the simple reason that it is impervious to the on going devaluation and debasement of paper money by central banks. (The intrinsic value of a paper (or even electronic) banknote is nothing more than the cost of the ink and paper.)

There is no easy fix for cash savings that are yielding no or nil returns. We are at the mercy of global central banks that have already introduced negative returns for their wholesale customers, who in turn may be considering charging their customers – us – for our deposit accounts. It’s also one of the less publicised reasons for why central banks are so keen to replace cash with electronic money – it will stop people from withdrawing cash and stashing it in mattresses and homes safes, which is an even worse consequence of their ‘stimulus’ campaigns.

But I do have a few suggestions on how to make surplus savings work harder:

-       Have a clear picture of how much savings you have – in your deposit bank or building society account, the credit union or post office. Does any single, individual account exceed the €100,000 bank deposit guarantee limit?

-       Use surplus savings, especially if it is earning nil net returns to pay off expensive debt – credit, hire purchase and personal loans. There is no point in paying a range of interest from 10%-24% per annum on any debt if your savings are only returning 0.24% gross. (Anyone with an incredibly cheap tracker mortgage (as little as 0.5% in some cases) will probably want to hang onto it as inflation is also steadily eating away at the capital repayment.)

-       If you can afford the time and effort, consider shifting some cash in and out of different deposit term accounts. Up to date savings comparison websites like bonkers.ie and the government consumer site, consumerhelp.ie show the best demand short and longer-term variable and fixed rates.

-       Investing some of your surplus cash will most likely produce a better return …over the longer term. Upfront costs and on-going charges are a drag on all investments, but this impact can be reduced if you choose low cost funds and take a realistic longer-term view and get proper professional advice.

-       Private lending. Any positive return from savings needs taking a risk. Lending a portion of your surplus savings to a family or friend runs the risk of default that may be difficult to foreclose – even if you create a legal contract. But charging a grandchild 4% for college loan, for them to buy a much needed car to get to work, or even to buy a home, is still 4% more than you will get from any bank.

-       Ditto for peer to peer lending in which you bid to lend money to small companies who need modest loans, usually €20,000-€30,000 that they repay with interest over three years. Average returns are c7%-9% according to Irish P2P lenders, www.LinkedFinance.com.

-       Consider exchanging some paper currency for real money - gold or silver.  (See Goldcore.com for details and costs. Check out their monthly Goldsaver Account.


Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie


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Money Times - April 26, 2016

Posted by Jill Kerby on April 26 2016 @ 09:00




The next time you can’t afford to put petrol in the car or groceries on the table – and you happen to have an eight year old living in the house – you’ll know who to turn to for a loan.

Or at least that’s the unintended conclusion of a recent survey of First Communion costs by the popular social media site for MummyPages.ie that claims to have over 700,000 followers. While the average amount of gift money that a First Communicant received last year was €323, up from €299 in 2014, it states that 56% of them received between €500 and €1,500, and one in five children received €1,000.

It isn’t just the family and friends of the Communicants who are feeling more financial flush, said MummyPages.ie but parents too who, the survey discovered will spend between €1,222 and €1,525 this year for their child’s spiritual induction into the Catholic Church. (It gives a breakdown on the amount spent on new shoes and clothes for the child and rest of the family, makeup and hair appointments, presents, professional photographers, catering/restaurants/food and drink/entertainment)

A spokeswoman for MummyPages.ie noted that this appears to reflect a pick-up in the economy. The survey doesn’t reveal whether these higher figures for cash gifts and expenses are mostly happening in Dublin, Cork and other cities where it is claimed all the ‘recovery’ is happening, but it might be useful to add that question to next year’s survey and then use it as yet another economic indicator.

Springtime always begets stories about First Communion excesses that were curtailed a bit after 2008 crash, but never really went away.  Does it really matter how much people spend their own money on a big family party? Or that in an increasingly secular society that what were once religious events (like Christmas or Easter) are now the dates that kick off the family or society’s calendar of parties and get-togethers?

It becomes a problem only when the family or parents decide to spend other people’s money that they can’t afford to repay. First Communion ‘season’ is also the start of the Moneylender season in which interest of up to 187% can be legally charged on short-term loans. Too often a small First Communion loan can (against all rules) roll into a small summer holiday loan and then into a back-to-school and Christmas loan. Ultimately it keeps the borrower in a perpetual state of penury.  

But there’s a wider issue that all responsibility parents should want to address:  how much do their young children understand about money and how much access to this cash should we give them?

So here are a few thoughts you might want to share with, or better still, impose upon your little Communicant before and after their big day:

-       A lot of nice people are going to give you cards for your First Communion in which there will be some money for you. Open each card. Read the message and then, politely thank the giver. Do not just grab the money and run off, throwing away the card. (This will drive your grandparents nuts.)

-       Do not stand around counting this money during the party, or keep a running tab. Again, your grandparents will disapprove.

-       Do not compare how much you are getting compared to your brothers/sisters/cousins/friends. Do not brag about how much you have got to the neighbours. This is called “being vulgar”.  (Something your disapproving grandparents will not hesitate to remind US about.) 

-       €1,000  (or €200 or €500) is too much cash to leave lying around your bedroom. It needs a safer home.

-       A home for cash is a bank, post office, credit union or building society account.

-       The main reason for putting it into such an account is so it doesn’t get lost, chewed up by the dog, pilfered by older siblings or mums and dads. It will help you avoid something called ‘temptation’. (You may or may not have learned about this in your First Communion class.)

-       The other reason is so that you learn the importance of saving and the satisfaction of buying things with your own money.  The earlier you learn that the Bank of Mum & Dad is not a permanent institution, the better.

-       We also need to set some spending rules about this First Communion windfall. (Definition of “windfall”: “A large amount of money that is won or received unexpectedly.”)  You did not earn this money. Someone else did. Their act of generosity deserves to be respected. So how about, you can save a third of your loot, give away/donate a third to your favourite charity or good cause and you can spend a third, within some agreed limits.

The lost concepts of prudence, generosity and responsibility are difficult enough for adults, let alone small children to grasp. The First Communion provides just such an opportunity.  

And it will make their grandparents so happy. 


Do you have a personal finance question for Jill?  Please write c/o this newspaper or by email to jill@jillkerby.ie



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