Friday, 27 February 2009

Standard Life rating upgrade

Standard Life has had its credit rating upgraded from A to A+ by rating agency Standard & Poors this week.

Such ratings are not infallible guides. For example, Enron's rating remained at investment grade four days before the company went bankrupt, despite the fact that credit rating agencies had been aware of the company's problems for months.

But nonetheless an upgrade is a positive endorsement and is welcome news.

Monday, 23 February 2009

New ICS First Time Buyers Mortgage package

Just got a release from ICS about their mortgage package for First Time Buyers.

A fantastic 1 year fixed rate of 2.55% (3.6% APR*) available to First Time Buyers who drawdown their mortgage before the 30th of June 2009

€1,000 cash First Time Buyer mortgage customer's will receive €1,000 cash for mortgages drawn down by the 30th of September 2009

€1 billion fund - On Monday the 16th of February 2009, Bank of Ireland announced that it has put in place a fund of €1bn for First Time Buyer mortgage customers. This fund of €1bn is across Bank of Ireland Group, including ICS Building Society

These are welcome initiatives but I can't see them causing too many First Time Buyers to rush out and buy now. The one-year fixed rate is only of value if the rates after year one are competitive.

And what exactly does it mean that they have put in place a fund of €1bn for First Time Buyer mortgage customers?

A really low rate fixed for three years or longer would be a nice twist. Over to you, AIB...

New statistics on life assurance & specified serious illness claims

There are some interesting statistics contained in Bank of Ireland Life's latest press release - just 20% of surveyed adults have serious illness cover and just 40% have some form of life assurance cover.

The former figure is the most worrying as further research showed that 50% of specified serious illness claims were by people between 20 and 49 years of age.

The Bank of Ireland Life release doesn't mention the need for Income Protection, as they don't sell the product, but their research highlights the need for it. If your income stopped because you couldn't work, how would you survive? If you're self-employed or a shareholding director, you'd receive no income from the State. Even if you're a Class A PRSI PAYE worker, the State Disability Benefit for an individual is barely €200 per week.

Thursday, 12 February 2009

Public Service Pension Levy - some sense prevails

I blogged last week here about the possibility that the levy could cause some people to reduce their pension contributions. Thankfully, my fears in this regard have turned out to be unfounded.

The following is the latest information available about the levy, with thanks to Eagle Star / Zurich: -

We (Eagle Star / Zurich) have been asked a number of questions in relation to the levy and its impact on pension contributions. We contacted the Revenue and have just received the following answers:

Q1. Are these levies regarded as pension contributions or as a separate levy / taxation?

A. The levy will be regarded as pension contributions.

Q2. Do the levies form part of an employee's age related contribution limits?

A. No, they do not form part of the employee's age related contribution limits.

Q3. Will the levies be applied to an employee's gross salary or net salary after the deduction of any employee / AVC contributions?

A. They will be deducted from the employee's gross salary, net pay arrangement to be operated.

Q4. Do the levies qualify for tax relief & what happens to anyone earning over the 2009 earnings cap of €150K?

A. Yes, tax relief is available, see 3 above. No restriction with reference to €150K earnings cap.

Q5. Is this proposal contingent on Union agreement & what timeframe are we looking at?

A. This proposal comes into effect on 1st March 2009.

Monday, 9 February 2009

Eagle Star Zurich - a good news story

In the current climate, I'm almost relieved to read some good news stories from time to time. Eagle Star / Zurich's new business in 2008 was actually up by 1% on 2007, despite the difficult year. This was largely driven by pension & PRSA sales which pulled the overall average up - other areas like Mortgage Protection life assurance were understandably down.

Credit where it's due - we've enjoyed a good working relationship with Eagle Star for many years and I'd suggest that their trend-bucking performance is largely attributable to consistently above-average fund performance, excellent online platform and a strong PRSA contract.

With hindsight, they have done themselves favours by steering clear of exotic and over-complex investments (e.g. ISTC) in favour of good old-fashioned stock picking.

More details can be read here.

Friday, 6 February 2009

Public Service pension levy

I've been following the reporting of the Public Service Pension Levy announced this week.

I can't see any clear explanation as to whether this new levy will be included in your usual limits for tax relief on pension contributions (e.g. 20% of income while in your 30s, 25% of income while in your 40s etc.) As the levy qualifies for tax relief, it seems reasonable to assume that it will be included as a pension contribution for the calculation of these limits.

If it is, a rather bizarre situation may arise where an individual has been voluntarily making additional pension contributions - Additional Voluntary Contributions (AVCs) and/or Notional Service Purchase (NSP - "buying back years"). The additional levy could put them over the limit for tax relief for their age. So the logical thing to do would be to reduce their voluntary pension contributions.

Given that the Government has spent an awful lot of time, effort & money trying to encourage people to contribute to their own pension, it seems counter-productive to then introduce a levy which may have the effect of encouraging people to reduce their contributions.

Brian - make sure the levy doesn't count towards the age-related limits for tax relief!