Liam Ferguson's blog

Two Months' Cash Back on Life Insurance & Income Protection

2012-01-25T16:44:00.004Z

If Life Insurance or Income Protection has been something you've been planning to get around to for a while, here's an offer that might motivate you to get it sorted once and for all.

Anyone who applies for a new life insurance policy (including Mortgage Protection life insurance) or an Income Protection policy before the end of February 2012 will receive a refund of their first two months' premiums. The policy must be issued before 27th April 2012, all premiums must be paid on time and the refund will be paid within 60 working days of paying the second month's premium. Maximum cash-back is €1,000.00.

As always, part of our Protection service includes a comprehensive Needs Analysis. We don't recommend that you take out a protection policy with a randomly-selected level of cover. Instead we calculate and show you the correct amount of cover for your needs.

For a no-obligation free quote, just contact us at info@ferga.com

Free €10,000 life cover offer

2011-10-03T13:49:00.005+01:00

A recent survey by Irish Life discovered that 2 out of 3 people who have life cover only have enough to protect their mortgage and have none to protect their children or dependants in the event of their death.

As a way of raising awareness, Irish Life are giving away €10,000 of free life cover for year to the first 20,000 people who sign up. There's no catch - the cover is free and anyone can apply provided that they're under 55 and have at least one child aged 13 and under.

Click here to get more information or apply. Or if you know people who might be interested, send them this link.

If you have any queries just drop me an e-mail to liam@ferga.com

An Irish institution bites the dust

2011-07-04T15:24:00.007+01:00

I couldn't help feeling a little bit sentimental when I got a notification on Friday last that the EBS Building Society has been replaced by EBS Limited with immediate effect. While it may seem like just a name change and has no impact on customers' accounts, it's actually more than that. It's the demise of the old Educational Building Society, a mutual society founded in 1935 to help teachers and civil servants to buy homes. In its place is EBS Limited, a limited company which will soon become a part of AIB.

It is a shame to see an old mutual society disappear like this, even if the name will continue. Mutuals are owned by their members and would traditionally offer better value for money than private or public companies, which are run for the benefit of their shareholders. I can remember that EBS had a reputation for consistently offering competitive interest rates to their members before the property mania gripped us all.

Admittedly, EBS did lose its way somewhat in recent years as it tried to compete with the other mortgage lenders. It entered the commercial lending arena just as the wheels were beginning to come off, a move from which it never really recovered.

Shame how some bad decisions over a relatively short period of time can bring down a reputable society with a history spanning over 75 years.

More reasons to incorporate your business

2011-06-11T11:04:00.007+01:00

If you're a sole trader, or thinking about starting up a business, new legislation should make it easier for you to incorporate the business as a limited company. For example, you'll be able to have just one director, just one document in the company constitution and you'll be able to have an AGM by correspondence. See this article.

At present, there are benefits to being a company director as distinct from a sole trader, when it comes to making pension provision. Here's a brief summary: -

Sole Traders

Pension contributions limited to a fixed percentage of Net Relevant Earnings, dependant on age.

Earnings cap of €115,000.

No PRSI or USC relief.

Earliest retirement age (except in ill-health) is 60.

Company Directors

Companies can write off significant pension contributions against Corporation Tax, up to generous Maximum Funding limits.

Funding not restricted by the earnings cap.

Company contributions offer effective relief against tax, PRSI and the USC.

Early retirement permitted from age 50, once director severs ties with company and disposes of shares.

Image: jscreationzs / FreeDigitalPhotos.net

No PRSI on Employer PRSA

2011-05-23T19:36:00.005+01:00

I know - snappy title. The Department of Social Protection have confirmed that contributions by an employer to a PRSA do not generate a PRSI liability for the employee. Such contributions do, however, generate a USC liability.

In clarifying this, the powers that be have gone less than half-way to rectifying a known anomaly between PRSAs and Occupational Pension Schemes. Employer contributions to Occupational Pension Schemes are not a Benefit in Kind and therefore do not generate a liability for the employee in respect of tax, PRSI or the USC. Employer contributions to a PRSA are a Benefit in Kind and, while tax relief offsets the tax and now the PRSI liability has been removed, the liability to the USC remains.

When PRSAs were launched, less than eight years ago, they were designed to be low-cost, transparent, portable pension savings vehicles that would encourage more people to save for their retirement. Why the Government is now discriminating against them in favour of the older type Occupational Pension Schemes is beyond me.

Image: graur codrin / FreeDigitalPhotos.net

Surprise - Mortgage Lending is Down

2011-05-21T15:23:00.003+01:00

This week, the Irish Bankers Federation published their Mortgage Market Profile. Unsuprisingly, the Irish mortgage market continues to contract. In my opinion there are two main reasons for this - (1) people are still deferring property-buying decisions due to fear / uncertainty / possibility of further price drops and (2) lending criteria has tightened so much that it's a lot harder to get approved for a mortgage than it was previously.

Here's an extract from the Press Release...

• 3,259 new mortgages issued in Q1 2011 to a value of €577 million
• Home purchasers continue to dominate the market

The IBF/PwC Mortgage Market Profile published today shows that 3,259 new mortgages to the value of €577 million were issued during the first quarter of 2011.

The volume of new lending is down 42% compared to the previous quarter and is down 53.1% on the previous year. While the seasonal pattern of mortgage lending typically results in a lower level of lending in the first three months of the year compared to other quarters, this more pronounced reduction in activity reflects the broader macroeconomic environment.

However, the key home purchaser segments of the market, First Time Buyers and Mover Purchasers, continue to dominate this smaller market. Together they now account for over 77% of the market by value and 67% by volume. In effect, more than three-quarters of all mortgage credit issued now goes to the home purchasing segments of the market.

Lenders generally continue to report subdued underlying demand for new mortgage finance. This has been influenced by uncertainty around macroeconomic developments, property price trends and future interest rate movements. At the same time, lenders continue to point to the need for prudent lending with the all-important focus on the borrower’s employment situation and capacity to repay.

Personal Fund Thresholds - Revenue deadline looming...

2011-04-26T16:26:00.008+01:00

In accordance with Section 787P(2), Taxes Consolidation Act 1997, anyone with pension benefits with a capital value of over €2.3 million at 7/12/2010 has until 7/6/2011 to apply for a Personal Fund Threshold (PFT) Certificate. Anyone who misses this deadline faces substantial additional taxation when they retire. Bearing in mind that an application for a PFT Certificate involves gathering details of all pension arrangements, often from a variety of sources, anyone who needs a PFT Certificate should be taking action now.

Worryingly, in this Irish Times piece, Dominic Coyle tells us that by April 8th, only 144 enquiries had been received by Revenue on this topic, out of an estimated 6,000 affected people.

Who does this affect?

While the figure of €2.3 million might seem enormous, don't forget that this is the capital value of a pension fund. So you don't have to be a multi-millionaire to fall into this category. Here's a few examples: -

• Anyone in a Defined Benefit pension scheme with an expectation of a pension of €115,000 per year or more, before lump sum entitlements.

• Any Public Servants with an expectation of a pension of €100,000 per year or more.

• Anyone in either of the above categories with a lower pension entitlement but with additional pension funds from other sources, e.g. AVCs, RACs, pensions from previous employments etc.

• Anyone with Defined Contribution pension funds totalling more than €2.3 million at 7/12/2010.

What happens if the June deadline is missed?

After 7/6/2011, anyone who retires with pension benefits with a capital value of greater than €2.3 million, who does not have a PFT Certificate, will be taxed on the excess over €2.3 million at 41%. This is an additional tax, over and above the normal taxes that will apply to drawdown of pension funds. So an individual who retires with a pension fund of €3 million and no PFT Certificate will pay €287,000 in tax before drawing their pension benefits in the normal way.

How can we help?

We can gather the required information from the various pension schemes, calculate the capital value of pension benefits in Defined Benefit and Public Sector schemes, calculate the Personal Fund Threshold and prepare the application for submission.

The world will end when men & women pay the same for insurance

2011-03-07T08:26:00.003Z

I wrote recently about how insurance premiums of all sorts will have to be harmonised for gender from 21st December 2012 following a European Court of Justice ruling. So from then on it will be illegal to charge different premiums for men and women for insurance.

But it will never happen!

As it turns out, 21st December 2012 is the day that the world ends. This is the day that the Mayan calendar ends and according to many highly respected sources, it will be the date that the world will come to an end. Google "End of World 2012" if you don't believe me. The internet never lies.

Oh those cunning Europeans.

Testing Posterous

2011-03-03T20:01:00.001Z

Nothing to see here folks. Just testing!

TRS online only...and Revenue on YouTube

2011-03-03T18:00:00.004Z

I see that Revenue are no longer accepting paper applications for Tax Relief at Source (TRS) on new mortgages - TRS must be applied for online. That might prove troublesome for people who aren't that comfortable with the web, don't have unrestricted access to the web etc.

However, Revenue have produced a few snazzy new videos and published them on YouTube to help people through the process.

You can get more details of TRS in general by clicking here and watch their videos by clicking here.

Unisex premiums for insurance deferred

2011-03-01T13:12:00.003Z

I blogged last week about today's European Court of Justice hearing in relation to whether or not men and women could be charged different premiums for various types of insurance. This includes life assurance, income protection cover, car insurance - any type of insurance where gender is a factor in the price.

Well the Court today decided that gender-based pricing is not in keeping with EU law. BUT they have permitted an extension such that the current pricing methods can continue to apply until 21st December 2012.

No doubt our insurance companies will be poring over the full text of the judgement in the coming days to see what needs to be done. But it's business as usual for now...

You can read the press release here.

Men and Women are different, you know

2011-02-25T10:25:00.005Z

Insurance pricing relies heavily on statistics. Men pay more for life insurance than women because the statistics show women tend to live longer. Women pay more for Income Protection because the statistics show that women tend to suffer more medium and long-term illnesses than men.

However, last year the Advocate General of the European Court of Justice claimed that it is legally inappropriate to price insurance products according to a person's gender. Next Tuesday, 1st March 2011 the Court is due to rule on this issue.

Depending on the ruling, this could mean that males and females get charged the same for insurance and assurance products going forward. It could even mean that existing policies need to be re-priced to harmonise for gender, although that would be a massive and costly undertaking, with potential challenges from people who have fixed cost contracts.

My guess would be that in the short term, insurance companies are unlikely to bring prices down. What are the bets we see costs of life insurance going up for women and costs of Income Protection going up for men, if rates need to be harmonised for gender?

Reviewable (me) Whole of Life

2011-02-19T08:31:00.004Z

There's a particular type of life assurance product that has been on the market since the 1980s known variously as Reviewable Whole of Life Assurance, Unit-Linked Whole of Life Assurance and Make Extra Commission for the Salesman Assurance. Most life assurance companies have sold this type of policy at one time or another; some still do.

The basic idea of this type of policy is usually that you pay a premium, often monthly, and your premium pays for life assurance cover - a lump sum in the event of your death - and also buys units in a fund, providing you with a lump sum that you can cash in after some years. So far so good. The sales pitch usually focuses on the fact that it's whole of life, (meaning that the policy doesn't expire at any fixed date and you can therefore choose to keep your life assurance cover for as long as you need it) and that unlike other types of life insurace policies it acquires a cash value, so you can decide to stop the policy if you do decide you don't need the cover any more and can cash it in. The inference is generally that this is better than paying into a policy that only pays out on death and will expire at the end of the term if you're still alive - "dead money".

Here's a list of reasons why I don't like this type of policy and wouldn't sell one to an enemy, never mind a client.

(1) Review clauses. While the policies can theoretically continue for the rest of your life, there are always premium review clauses - often after 10 years, each subsequent 5 years and when you reach age 70, annually. At these reviews, the life assurance company can put up your premium to maintain the same level of cover or can ask you to reduce your cover if you want to continue paying the same premium. The older you get, the more frequent the reviews become so that eventually you'll be asked to pay so much to maintain your life cover that it just won't make any financial sense. That's not true "whole of life" cover.

(2) Variable cost of life cover. Aside from the periodic reviews, the cost of the life cover is not fixed. Let's say you start a policy paying €100 per month and at the outset €50 of this is paying for your life cover and €50 is buying units in the fund. This 50/50 split is not fixed and as you get older, the split internally will change without you being notified, so that it could be 60 life assurance/40 fund, 70/30 and so on, while you still pay the same €100 per month.

(3) The policy can eat itself. If the internal split between the cost of life cover and the amount diverted into your "savings" fund swings so far in the direction of the life cover that the life cover cost actually exceeds the monthly premium you're paying, the policy can perform a feat that even Hannibal Lecter would have baulked at - it can start eating itself. So going back to the example above, if you're paying a premium of €100 per month and the internal cost of life cover eventually exceeds €100 per month, the policy can start eating into the fund you have accumulated to subsidise the cost of life cover. Over time, the cash value of the policy gets eaten away and can eventually dwindle to nothing.

So my advice is to avoid these reviewable whole of life policies like the plague. There are alternatives. Several companies offer Guaranteed Whole of Life cover - life cover at a guaranteed, fixed cost for the rest of your life. It's expensive, but remember that at some point the policy WILL pay out the life cover and you have complete transparency and certainty around what you're paying, now and into the future, and what you'll eventually get.

Anyway, most of us don't need Whole of Life cover. For many people, the need for life cover diminishes over time - the mortgage and loans get paid off, the dependent children leave the nest and become financially independent, we build up pension funds, savings and investments so that our death is no longer a financial burden on anyone. For anyone in that position, it's far more cost-effective to take out life insurance cover to fulfil a need for a fixed period of time - Term Life Insurance is invariably cheaper than Whole of Life.

If you still can't get past the "dead money" idea - that premiums paid into Term Life Insurance are dead money if you survive to the end of the term, consider two things: - (a) you'd pay extra for a horrible reviewable Whole of Life policy. Do a cheaper Term Life Insurance policy and put the difference into a savings account every month. You'll know exactly what you're paying for life cover and what you're saving and you'll still have a lump sum to draw on when you want. (b) You pay for insurance on your home and car and don't expect to get a return from either if you don't claim. Life insurance is no different.

Get Your Affairs in Order

2010-09-29T15:11:00.005+01:00

The title of this blog piece has nothing to do with Tiger Woods, Wayne Rooney or any of their ilk. I came across this checklist on Chartered Accountant Tommy McGibney's excellent tax blog.

Like most good ideas, it's a simple one. While most of you have already made a Will (haven't you?), this is a simple checklist detailing where various important documents, bank accounts, life assurance policies are held and who the relevant contacts are.

I'd strongly urge everyone to take an hour or two to complete this, make a few copies and let a few trusted people know where your checklist is kept. In the event of your death, it could make matters so much easier for those you leave behind.

MBNA - the good, the bad and the...

2010-07-19T14:02:00.003+01:00

I have an MBNA crdit card and I (nearly) always pay it off each month in full to avoid paying interest. In general I find that MBNA offer very good customer service, but woe betide anyone who falls the slightest bit behind in their repayments.

The Good. Option to manage your account entirely online eliminating paper with robust security. Option to notify MBNA when you're going abroad as they can and do contact you if an unusual transaction (e.g. one from a foreign country) appears on your statement.

The Bad. For no other reason than human error, I forgot to pay MBNA by the due date one month. This would be the first time I had been late with a payment in literally years of having the card. I received a phone call from a machine asking me to commit to a payment, which I did. The same (very irritating) machine rang me at least four subsequent times even though I had already made the payment and gone through the long process of "Press 1 for this, Press 2 for that" several times.

If you're unfortunate that you end up in arrears with an MBNA credit card, it can turn positively ugly.

Verdict? A fine service as long as you make sure to pay on time every time.

Deposit Guarantee Scheme extended

2010-07-01T11:02:00.005+01:00

The Department of Finance has announced that the Credit Institutions (Eligible Liabilities Guarantee) Scheme (the ‘ELG Scheme’) has been extended from its original end date of 29th September 2010 to 31st December 2010.

It's important to note that there are two deposit guarantee schemes in operation - the Deposit Guarantee Scheme, which covers all deposits up to €100,000 and does not have an end date and this ELG scheme which covers deposits in excess of €100,000 and has been extended to 31/12/2010.

It's also important to make sure you know if your own bank is part of either or both schemes. Not all banks operating in Ireland are part of both schemes and some are part of neither, as they participate in their own country's deposit guarantee scheme.

See the Department's press release here.

Feel free to talk to us about your deposits and their security. We are authorised to arrange deposit accounts and have attractive rates for demand, notice and fixed rate accounts for individuals, corporate customers, charities and pension funds.

Mortgage lending in Ireland has fallen off a cliff

2010-06-16T17:16:00.006+01:00

This is a guest post written by Simon Moynihan, Communications Director at www.bonkers.ie

"A bank is a place that will lend you money if you can prove that you don't need it."

Bob Hope could have written that line about lending in Ireland today. With high deposit rates, it’s a great time for savers, but borrowing has become more and more difficult each year since the bust. Customers have known for some time that the game has changed, but many banks still insist that they are open for business and approving large numbers of home loans every day.

A few weeks ago the Irish Banking Federation and PWC gave us numbers that tell a very different story. In their latest quarterly report on the Irish mortgage industry, they showed that mortgage lending is still very much on the slide. In the first quarter of this year, there was less money approved and funded for mortgages than at any other time since the beginning of 2005 (which is as far back as the IBF/PWC numbers go).

In fact, total residential mortgage lending in Ireland was just €1.22bln in the first quarter of this year. That’s a drop of 39% on the same quarter last year, and a drop of 85% on the first quarter of 2006. By anyone’s measure, mortgage lending has fallen off a cliff.

What’s really telling is that only 6,954 mortgages were actually funded in the first quarter of 2010; that’s just 77 per day.

Of the small number of people actually getting loans, most of them fall into Bob Hope’s category of people that don’t need the money. 61% of those who walked out of the bank with a cheque were topping-up, re-mortgaging or moving. Basically people that already had homes – and obviously enough equity to prove that they were worthy of the loans.

Although 35% of those loans were given to first time buyers, it was the lowest number of first time buyers given mortgages since the (IBF/PWC) records began, but still… good to know that there’s some hope for people trying to get their first home.

So what’s going on? Why, when there’s (supposedly) good value in the property market and the banks have been re-capitalised by the taxpayer, are we seeing the lowest number of home loans funded in over six years?

Well, the banks know that lending money for depreciating assets is bad business so they are requiring deposits of at least 8% and as much as 20% from first time buyers. Even in a collapsing property market these are very high ratios, and eliminates a heck of a lot of potential borrowers, most notably first-timers of whom just 29 a day are getting the money they need to get into their fist homes. Then there’s the new and rigorous vetting criteria that potential borrowers have to stand up to including financial inspections, job security checks, proof of savings habits, credit checks and so on.

Next, there’s the arrears issue. Thousands and thousands of Irish households are simply unable to make payments on their existing loans. The Financial Regulator announced a couple of weeks ago that more than 32,000 residential mortgage holders are over three months in arrears and of that number, 22,000 are more than six months behind. That’s a frightening figure because it accounts for more than 1 in every 25 mortgages held in Ireland. It is so much of a concern that Matthew Elderfield, the new head of the Financial Regulator reckoned that mortgage arrears may be “the biggest legacy issue” of the bust.

The arrears story got strong coverage in the press, as it should have. Then Charlie Weston of the Independent did some digging and in a captivating article published on June 2nd he pointed out that that figure for mortgages in trouble is in all likelihood much higher… here’s why:

• There’s another 15,500 householders getting mortgage support from the state.
• Thousands more have had the mortgages re-structured to interest only or the terms have been lengthened to reduce the payments.
• Householders who have lost their jobs are working through their savings to meet their payments.
• More cash-strapped householders have negotiated payments that are a fraction of their standard mortgage payments.

These loans are obviously in trouble but they are not included in the official arrears figures compiled by the Financial Regulator because they are still considered to be performing. When Charlie Weston was researching his article he spoke to Aoife Walsh, a representative of the housing charity Respond, and she reckoned that 70,000 householders could be in, or in danger of default. That’s more like 9% of all residential mortgages in the state, or 1 in every 11.

Next, there’s the government-authorized delay on legal repossessions for all lenders regulated by the Financial Regulator – better known as the Moratorium. Introduced back in 2009, a bank could not begin proceedings to repossess a home unless there was at least six months worth of arrears. This was good news for struggling homeowners of whom we now know there are many, but certainly a time-bomb waiting to go off.

Then in February 2010, Brian Lenihan announced that the Moratorium had been extended to 12 months. It looks like the potential shock of 22,000 repossessions kicking off was just too much for an ailing government to stomach. But doesn’t this reprieve have to come to an end sometime? Or, if the numbers in arrears keep escalating, should we expect to see Moratorium extended again next February?

Throwing even more fuel on the fire, the Irish Times reported that banks like Anglo Irish have begun selling off mothballed apartment schemes at knockdown prices. The first of the schemes to be sold off are in decent locations and serviced by decent amenities, so they should sell – but most likely to investors rather than the first time buyers who could really use them.

Sadly, it’s unlikely that first time buyers would get approval to buy these apartments; after all it’s the banks themselves that are now flogging them off. In addition, selling entire apartment schemes at hugely discounted prices will affect sale prices elsewhere, further depressing the market and making it harder to borrow to buy homes!

So how much have things really changed? Well, in the last quarter of 2005, just as the Irish property market began to boil, Irish banks gave out 8 times as many mortgages to 8 times as many people as they did in the first quarter of this year. Back then, 55,618 residential mortgages were funded in Ireland, which is 605 per day. Their total value was a staggering €10.34 billion. You guessed it – that’s more than 8 times as much money as Irish borrowers received in 2010.

It’s difficult to know when this will turn around, but the signs say no time soon. There’s simply too much pressure on the banks and very little incentive to for them to lend despite catchy claims and ad campaigns. Although we’ll never know the exact circumstances of the 77 people per day that are actually getting mortgages, one could make an informed guess they are seriously financially stable and as Bob Hope says, are able to prove they don’t really need the money.

Guide to Dealing with Mortgage Repayment Difficulties

2010-05-12T08:11:00.004+01:00

The Irish Bankers' Federation have published a guide containing some basic advice on what to do and what not to do if you experience difficulty meeting your mortgage repayments.

It can be downloaded from their website here.

There may possibly be comments about the irony of the IBF publishing such a guide when it could be argued that practices of some of their members may have contributed to some people's current difficulties, but we are where we are. It's a useful guide nonetheless.

National Solidarity Bond - is it any good?

2010-05-02T17:11:00.007+01:00

Details of the National Solidarity Bond were announced last week, the idea having first surfaced in the most recent Budget speech. The idea is that you invest an amount of money from €500 to €250,000 for a period of ten years, after which you get a State-guaranteed return of 50%, which is fixed from the outset.

In further detail, the return is 50% Gross over 10 years (AER 4.14%) consisting of 10% in 10 annual payments of 1% which are subject to DIRT at the prevailing rate (currently 25%) plus a 40% Tax free lump sum at the end of 10 years.

The net after tax return is 47.5% (AER 3.96%) assuming DIRT remains at 25%. Minimum investment is €500. Maximum individual investment is €250,000 (or €500,000 from 2 joint applicants or €750,000 from 3 joint applicants). If you do not have €500 to invest there is a facility to save through regular lodgements. You can access your money at any time by giving 7 days notice. There are no fees, charges or sales commissions.

The money will be used by the Irish Government. As the blurb says - "The Government of Ireland wants to make it easy for residents of Ireland to help to fund the Government’s capital investment programme, develop important infrastructure, stimulate economic recovery and create employment."

Looking at it purely as an investment option, I'd say it should only be considered by someone who is 100% sure they do not need access to their savings earlier than ten years as otherwise the rate of return will be just 0.75% per year after DIRT tax, which is paltry. If you are going to leave it for the 10 years, the return of 4.14% per year, before DIRT tax, isn't going to make you rich but it may be useful as a safe haven alternative to bank deposits for some long-term cash. This of course assumes you have confidence that a guarantee by the Irish State is a safe haven.

It is irritating that the 1% levy on other savings & investment products doesn't apply to this bond, which is an example of the Government using the tax laws to suit their own causes.

Further details available here.

(Note: This product is not available via brokers. The above article should be considered a personal opinion and not professional advice.)

Don't forget to tell the taxman

2010-04-13T10:10:00.004+01:00

If you're a PAYE employee and have a private pension policy that's paid through your bank account by Direct Debit (and NOT through your salary) you presumably have applied for and received your tax relief by way of extra Tax Credits. (You have got around to applying for your tax relief, haven't you? If not, do it NOW!)

Two things to remember: -

(1) You can also apply for a refund of Employee PRSI on the contribution at the end of each tax year, provided that you've already been granted the tax relief. Use this form.

(2) If you increase, reduce or stop your contribution, don't forget to let Revenue know. Revenue usually grant extra tax credits on pension contributions on the assumption that the contribution will remain the same until further notice. So if, for example, you stop your contributions altogether, you must notify Revenue or else you'll continue to get tax relief on a contribution you're no longer making and will have to give it back eventually. On the other hand, if you increase your contributions, you won't get your extra tax relief until you let Revenue know.

This applies to PAYE employees with Personal Pensions, PRSAs or AVC PRSAs who are paying their contributions gross and NOT via a salary deduction arrangement.

AIB Bank shun switchers; even less competition

2010-03-03T13:48:00.003Z

I blogged earlier in the month about the closure of Bank of Scotland & Halifax and the negative effect on choices available to Irish mortgage-hunters that this brings.

Now AIB have confirmed that they are no longer open for mortgage switching business, i.e. moving your mortgage from Lender A to Lender B because Lender B offers better rates or a better package.

While AIB's release tells us that their "primary focus for the year ahead will be to support mortgage applications from 'First Time Buyers' and 'Home Movers', I see this move as a bad thing. If other lenders follow suit, Irish mortgage customers are then left in a position where the only way they can move mortgage is to buy another house! Think about it - your lender decides to add 2 or 3% on to your interest rate to boost their own margins and you can do nothing about it because no lender will accept switchers...

Let's hope that not all lenders follow this lead. A market without competition is not a good place to be.

Bye Bye Bank of Scotland

2010-02-15T12:22:00.003Z

Although banks are generally an easy target for criticism, I'm genuinely saddened to hear of the withdrawal of Bank of Scotland Ireland and Halifax from Ireland, for two primary reasons: -

(1) Bank of Scotland's entry really did shake up the Irish mortgage market. When they arrived here, they undercut Irish banks' mortgage rates across the board and forced the incumbents to compete. The Irish customer won as a result of this competition, through lower repayments.

(2) At a personal level, it's a difficult time for the 740 or so staff who are losing their jobs. This is not a good time to be looking for a new job in banking or financial services and I genuinely wish them well.

Yes, policies do pay out.

2010-02-12T10:24:00.003Z

I sometimes hear criticism levelled at the insurance industry in general that insurance companies will do their level best to wriggle out of paying claims. In my experience, a reputable insurance company won't attempt to wriggle out of a genuine claim, where the client has kept fully and honestltly to their side of the contract.

So I watch the actual claims statistics published by the various insurance companies with interest - not a ghoulish interest but rather as a reminder of what insurance is really all about.

In 2009 Irish Life paid out a quarter of a billion euro in death, specified illness and income protection claims to five thousand Irish Families. That's just one company, albeit a BIG one in terms of market share. But there's nearly a hundred families a week that were undoubtedly glad that they didn't reject the idea of insurance as a waste of money.

Public Servants should consider retiring now

2009-12-22T17:41:00.003Z

I recently looked at a pension projection for a 61 year old hospital consultant, working for a HSE hospital. The projection gave him details of his pension and lump sum from the superannuation scheme should he retire now, as well as the projected figures if he stays to age 65.

The twist, however, is the fact that the projections take no account of the 15% salary reduction to which he will be subjected, as a result of Budget 2010. Because public service pensions are based on a percantage of final salary, if your salary is reduced by 15%, your pension will be also.

But in the Budget, a window of opportunity was provided. "To ensure that any increase in the number of retirements can be managed, the legislation on pay reductions in the public service will provide that any retirements in 2010 would be on existing, pre-cut pay terms." So any Public Servant retiring in 2010 will have their pension based on 2009 salary level.

Given that Public Service pensions accrue at a rate of 1/80 or 1.25% of final salary for each year of service, a higher earner facing a pay cut of 15% would take 12 years to build up the lost pension entitlement, unless pay increases come back into fashion during that period. Someone facing a pay cut of 8% would take over 6 years to build up the lost pension entitlement.

So if you're a Public Servant and within sight of pension age, you might do well to consider retiring now. Which is presumably a deliberate move by the Minister.

Deadline approaches for pension contributions

2009-11-03T10:33:00.004Z

If you're filing your 2008 tax return and paying your tax online using Revenue's online service www.ros.ie you have until November 16th to do so. You can reduce your tax bill by making a pension contribution before you make your tax return and backdating the tax relief on the pension contribution against your 2008 tax liability.

For high earners, this is the final opportunity to claim tax relief on pension contributions up to the 2008 income ceiling of €275,239. The income ceiling has been reduced for the 2009 tax year to €150,000.

Pensions - you can go your own way

2009-10-12T18:29:00.003+01:00

I was at a Standard Life presentation today and one of the speakers noted that since Standard Life launched their Synergy platform in 2006, they now have over 1,200 Stocktade accounts containing an average of €45,000 each.

Stocktrade is Standard Life's chosen stockbroker for their self-directed pension contract. Using the Standard Life / Stocktrade platform, we can set up pension plans for clients allowing them to mix their fund between managed funds, cash deposits, direct property (which they choose) or shares, ETFs and bonds of their own choosing.

Interesting that Irish pension clients have chosen to entrust €54 million via Stocktrade into shares, ETFs and bonds of their own choosing. Far from being a niche product for the High Net Worth customer, self-directed pension funds are now coming into their own as something open to everyone - Personal Pensions and Buy Out Bonds included.

Claims - It could be you

2009-10-09T15:48:00.004+01:00

For a bit of light reading, I was just reading over Irish Life's claims statistics for 2008. An insurance company's claim-paying record is hugely important.

In 2008 Irish Life paid out over €220 million in claims, broken down roughly as follows: -

• More than €134 million in life cover claims to over 2000 families
• More than €34 million in Specified Illness claims; and
• More than €52 million to over 3,000 Income Protection claimants

Considering that this is one company, albeit the largest in the country, these are sobering statistics. No doubt each claimant thought they would never need the cover when they took it out.

Poor response to second-home tax

2009-09-30T08:09:00.003+01:00

I blogged earlier this month here about the €200 tax on second homes. Today is the final day for payment of this tax. According to RTE, only €15 million has been collected to date. That's 75,000 houses out of a potential 200,000.

Anyone eligible who doesn't pay this faces penalties.

New style of pension tax relief

2009-09-12T13:34:00.003+01:00

Credit where it's due to the Commission on Taxation for taking a long-term view on reform of pensions legislation, rather than concentrating on how money could be saved in the short term. Many of their proposals on pensions are largely focused on making pension planning more attractive, rather than cutting costs. Given the changing demographics of our country, this is very welcome, especially since short-term cost-cutting might have been an easier sell to the Government in the current climate.

One of their more interesting proposals is that the idea of "tax relief" on pensions should be replaced with a more transparent system, whereby for every €1.60 an individual contributes to a pension plan, the Government adds €1.00. For the first five years, the Government would match contributions €1.00 for €1.00.

This system would deal with the age-old perceived inequality that our current system offers more benefit to higher-rate taxpayers than to those on the lower rate. It is the equivalent of offering 50% tax relief for five years, then 38% relief thereafter. To take an example of a pension plan that exists for 25 years, that's the equivalent of an average rate of tax relief of over 40%. This is lower than what many high rate taxpayers currently enjoy but higher than what low rate taxpayers are currently offered.

Perhaps more importantly, it's simple. The idea of the Government putting money into your pension plan directly somehow sounds more appealing than the current tax relief system, even though tax relief is also the Government adding money to your pension plan - just expressed in a different way.

Let's hope Brian Lenihan pushes this one through. Radical pensions reform can tend to take an age to implement, as I've said before, even though Charlie McCreevy proved that it doesn't have to.

The pensions section of the Commission's report can be read here.

Don't forget to pay the €200 levy on second properties

2009-09-01T15:10:00.005+01:00

The Local Government (Charges) Act 2009 introduces a €200 annual charge on non principal private residences, payable by the owners to the local authority in whose area the property concerned is located.

The final date of payment of this charge is the end of this month, i.e. 30th September 2009. It's your responsibility to pay this charge - you won't be receiving any reminders in the post.

Full details (including how to pay it) can be obtained at http://www.nppr.ie

Investment thoughts from Anthony Bolton

2009-08-28T19:14:00.004+01:00

I was invited on to a conference call this week by Irish Life, featuring guest speaker Anthony Bolton, stock market commentator and President of Investments for Fidelity. For 28 years Anthony managed the Fidelity Special Situations Fund which became the UK's most successful mutual fund since its launch. He is a popular columnist for the Financial Times and his views regularly appear in investment media.

The conference call covered a wide range of topics but centred on Anthony's view on what sectors would lead the next bull market. His belief that we are entering into a multi-year bull market will be a welcome insight to existing investors who have experienced large losses over the last year and a half and investors sitting in cash who are looking to re-enter markets.

He also spoke about using a phased investment strategy over the next year to limit the volatility which will persist in stock markets.

If anyone wants to hear the recording, it's about half an hour long and the MP3 file can be accessed by clicking here. The slides to accompany the call can be accessed here.

Thanks to Irish Life.

Till debt do us part

2009-08-19T08:32:00.004+01:00

I wrote a short piece recently for the Curious Wines blog's wedding series with a few financial tips for those about to tie the knot. Here's the link: http://ow.ly/ktKa

Pensions Apartheid: Public vs Private Sector pensions

2009-07-27T10:49:00.003+01:00

Well-known independent actuary Tony Gilhawley recently wrote a report for the Professional Insurance Brokers Association on the differences between Public Sector and Private Sector pensions. It makes for fascinating reading.

You can download it in MSWord format from here.

Permanent TSB raises variable mortgage rates

2009-07-24T09:13:00.002+01:00

I see that Permanent TSB is set to raise its Standard Variable Rate for mortgages by 0.5% from next Monday, thus reversing the effect of some of the recent European Central Bank base rate cuts. They have blamed the high cost of funds and tightening margins in the lending market.

Even before this rate increase, Permanent TSB's Standard Variable Rate was nowhere near the most competitive in the market.

I sympathise with any Permanent TSB mortgage customer with a loan of more than 92% of their property's current value. Such customers (including those in negative equity) have no option but to remain with Permanent TSB.

Anyone below 92% at least have the option to move to another lender.

What to do with your pension when you leave a job

2009-07-15T11:28:00.002+01:00

As I've been getting an increasing number of queries on this topic recently, which I suppose is a sign of the times, I wrote the following article for the Sunday Business Post as a sort of FAQ.

http://archives.tcm.ie/businesspost/2009/06/28/story42723.asp

New lower variable rate from KBC

2009-06-12T11:09:00.004+01:00

Another downward rate change this week, which is always welcome.

KBC just launched a new variable rate 2.59% (APR 2.62%) for new business - re-mortgages, trader uppers & FTBs. Max LTV 80% for FTBs & trader-uppers and 60% for re-mortgages.

Not the best variable rate in the market but KBC do offer the facility to re-draw overpayments - you can make regular or ad-hoc overpayments but can ask for them back at any time, which is a nice feature.

They'll also do some refinancing of existing debts on re-mortgages, which AIB won't.

New fixed rate for First Time Buyers

2009-06-11T11:57:00.003+01:00

ICS have announced a new two-year fixed rate at 2.75% (APR 2.7%) which is available only to First Time Buyers. AIB already have a two-year fixed rate just five basis points higher at 2.8% (2.84%) for all mortgage customers, First Time Buyers, trader-uppers, those switching lender etc.

At around €410 per month per €100,000 borrowed over 30 years before tax relief, these rates seem like a reasonable bet for someone who wants a bit of security for the next couple of years.

That said, I will repeat two of my old mantras about fixing - (1) Don't fix in an attempt to beat the variable rate, unless you really believe you know more than the bankers. Predicting the long-term movement of variable rates is well-nigh impossible. Fix if you want the peace of mind of knowing what your repayment will be and then forget about it. (2) Don't Don't DON'T give up on a good tracker variable rate to avail of a fixed, unless you're very close to the end of your mortgage term. Chances are you'll never get your tracker rate back and the variable rate options at the end of your fixed period may be far higher than the tracker you have now.

Tax Relief on Life Assurance

2009-06-11T09:23:00.002+01:00

I'm surprised that life assurance companies don't spend more money advertising this, but if you want something done, you might as well do it yourself! There is a form of life assurance policy that can qualify in full for tax relief at your highest rate, which can therefore knock up to 41% off the cost. In some instances you can also claim back Employee PRSI relief on the premium.

Such policies are available to the self-employed and those in non-pensionable employment (i.e. in employment but not in an Occupational Pension Scheme.) One fact that is not widely known is that if you contribute to a PRSA, you are deemed by Revenue to be in non-pensionable employment, even if your employer contributes to your PRSA. So you would still be eligible to hold a tax-efficient life assurance policy.

Some points to note about life assurance policies on which you can claim tax relief: -

(1) They only provide cover on death and have no value except on death.

(2) They cannot be assigned so you can't use them as security for a mortgage or other loan.

(3) You cannot have a joint policy, although if you and your partner are both self-employed or in non-pensionable employment you can each have such a policy.

If you're eligible and are seeking to protect your dependents at a reasonable cost, this is definitely worth enquiring about.

AIB display prudent lending policies

2009-05-22T15:46:00.003+01:00

I see that AIB have now started "stress-testing" mortgage applications at 5%. Stress-testing is a process by which a lender evaluates an applicant's ability to repay a loan if interest rates increase.

Given that their actual variable rates for new customers vary between 2.25% and 2.65% they are factoring in potential future rate increases between 2.35% and 2.75% in assessing a customer's ability to repay. This is well in excess of the Financial Regulator's guidelines on stress-testing and AIB are to be commended for it. It may result in their losing business to competitors who will stress test at a lower rate, but recent events have shown that being the lender who will offer the biggest loan isn't necessarily a good thing.

Negative Equity explained

2009-05-22T15:23:00.004+01:00

Article from the Irish Independent explaining the impact of negative equity on homeowners, with contributions from yours truly.

http://www.independent.ie/business/personal-finance/property-mortgages/homeowners-stuck-in-a-trap-1743504.html

Irish Nationwide - Burgess was right

2009-05-13T09:14:00.002+01:00

It was heartening to hear Brendan Burgess receiving repeated applause when speaking at the Irish Nationwide AGM yesterday. Brendan had been a long-time critic of many Irish Nationwide policies and of its former Chief Executive, Michael Fingleton. I had attended two previous AGMs where he was heckled for speaking out while Mr. Fingleton was praised for bringing in profits to the society. Now that we all have seen the costs of these profits and the unacceptable risks taken to achieve them, at least the members have accepted that Brendan Burgess and his fellow dissident member, Shane Hogan, were right to criticise the board. It's only a shame that they weren't listened to before the society was brought to the brink of destruction by the actions of their board and former chief.

It's not as publicly known, but Messrs Burgess and Hogan also forced Irish Nationwide to drastically improve their treatment of borrowers in arrears and many Irish Nationwide borrowers may have avoided repossession because of this work, whether they realise it or not.

Related links: -

RTE News

Irish Independent

Irish Times

More good news from the European Central Bank

2009-05-07T12:57:00.004+01:00

The European Central bank has today announced a further rate drop of 0.25%, to bring the main refinancing operations rate down to 1%. This reduction will knock about €12.50 per month per €100,000 off a 25 year mortgage IF your lender passes the cut on in full.

It won't, of course, do anything for you if you're in a fixed rate.

More on breaking out of fixed rate mortgages

2009-04-28T15:41:00.004+01:00

I blogged on 9th April here about the possibility of a once-off amnesty for fixed-rate mortgage holders being introduced, allowing them a once-off opportunity to revert to variable without penalty. Charlie Weston of the Irish Independent has published a piece on this topic today. You can read it here.

Government-backed investing in Ireland Inc.

2009-04-23T15:49:00.002+01:00

For those of you with a low tolerance for taking risks with your money, the options for investing your cash are thin on the ground. You can leave your money on deposit, but with interest rates falling, so are your anticipated returns. There are a handful of Tracker Bonds out there but you need to make sure you understand the participation rate, what's being tracked and the final year averaging clauses before parting with your hard-earned.

A new option has surfaced recently - investing in Government Bond funds. Such funds effectively loan money to the Irish Government on pre-arranged terms, i.e. at a fixed rate. As long as the Irish Government can honour their commitment, your money is secure.

Eagle Star were first to market with two such funds - the Irish Government Bond 2012 fund, which should return 12.1% on 5/3/2012 and the Irish Government Bond 2016 fund which should return 38.1% on 18/4/2016.

New Ireland followed with the 2014 Government Bond Fund paying a 4% coupon and maturing on 15 Jan 2014 and the 2016 Government Bond fund paying a 4.6% coupon and maturing on 18 April 2016.

All quoted returns are before deduction of charges and tax (if applicable) so make sure you buy from a broker who offers competitive deals on charges. (Like us!)

Investments can be made with lump sums or by way of a lump sum pension contribution or Approved Retirement Fund.

Be careful with annual house insurance increases

2009-04-20T10:50:00.003+01:00

Your home insurance may well include a clause that increases your level of cover by a fixed amount, or perhaps by the Consumer Price Index (CPI) each year. This was appropriate when the cost of building was rising steadily. However, a recent review by the Society of Chartered Surveyors suggests that the cost of rebuilding a home has actually dropped by up to 5% recently.

So when your house insurance is up for its next renewal, check that the rebuilding cost is still a reasonable estimate of how much it would take to rebuild your home.

Two points of caution, though - (1) many people under-insure their homes, grossly underestimating the rebuilding cost of the property. Manke sure you're not one of them. (2) Many policies link the value of the contents to the rebuilding cost, e.g. contents insured for 20% of rebuilding cost. If you choose to amend the rebuilding cost on your house insurance, make sure the contents cover is still appropriate.

Bank of Ireland are reviewing their policy of automatic annual increases. See here.

Make your pension contribution early

2009-04-15T16:31:00.003+01:00

There has been some confusion over the Supplementary Budget's 1% levy on life assurance policy premiums, which takes effect on 1/6/2009. It's not 100% clear whether or not this applies to pension contributions as well as life assurance premiums. We are awaiting clarification on this.

Got a note from Hibernian Aviva today - "Hibernian Aviva Life & Pensions Ltd is working with the Irish Insurance Federation and other life assurance companies to clarify the impact of the proposed levy and we are seeking to mitigate its effect on customers.

We want to assure you that we will be doing everything we can to lobby the Department of Finance to re-think the imposition of this proposed levy and to convey to them the potential damage that it will have on the Life & Pensions industry."

I fully support their efforts, as adding a levy like this to a pension product is simply a reduction in the tax relief by another name.

However, if this is going to be the case, there's a strong argument in favour of making pension contributions prior to 1/6/2009 and thus avoiding the 1% levy. This would be especially relevant to the self-employed who would normally pay their annual pension contributions in October or November.

Should banks allow penalty-free breaks from fixed rates?

2009-04-09T08:36:00.002+01:00

As anyone with a variable or tracker variable rate mortgage will gleefully tell you, the European Central Bank (ECB) have slashed interest rates repeatedly since October 2008, down to their current low of 1.25%.

But this will be of no use to someone who is on a fixed rate mortgage, where the repayments are fixed for an agreed period of time. If you attempt to break out of a fixed rate, you must pay a substantial penalty, which generally renders the exercise worthless.

I usually hold the opinion that if you enter into a contract with your eyes open, you must deal with the consequences if it doesn't go your way.

But on this issue, I feel there is some merit in a proposal for a once-off amnesty where owner-occupier mortgage-holders get a brief "window" of time to break out of a fixed rate entered into prior to October 2008 without penalty.

In Brian Lenihan's Budget speech, he said "The Government has decided that from the 1st of May, Mortgage Interest Relief for principal private residences should only be available for the first seven tax years of the mortgage. I believe this move is justified given the significant recent reduction in interest rates and in house prices."

He is using the rate decreases as a justification for a reduction in TRS, but those on a fixed rate don't benefit from such decreases.

The ECB rate cuts were designed to stimulate the economy, but this aim will be diluted by all those on fixed rates.

As has been said before, these are unprecedented times - perhaps there is scope for one more unprecedented action?

What will this Budget achieve?

2009-04-08T13:38:00.003+01:00

I'm struggling to find too many positives about yesterday's Budget.

I do accept the need for tax increases and spending cuts in the current climate.

But the overall strategy of this budget baffles me. He reduces incentive to save money, by increasing DIRT tax, CGT and Exit Tax on investments. This at a time when interest rates are very low anyway and most other investments are going through a very volatile period.

So if he doesn't want us to save, maybe he wants us to go out and spend instead, thus putting much-needed money back into the economy, right?

Wrong - he increases levies and reduces reliefs so that people will have less money to spend.

So what does he really hope to achieve?

Fear of Budget good for business

2009-04-01T10:25:00.002+01:00

Although the r-word hasn't exactly been good for business, there have been two noticeable trends of recent days and weeks: -

(1) Self-employed people deciding to invest money in Personal Pension arrangements this week, in case the April 7th Budget changes rules on tax relief.

(2) Older people deciding to draw their pension benefits this week, in case the April 7th Budget imposes tax on lump sums with immediate effect.

It seems reasonable to assume that there will be some changes to pension legislation in next week's Budget, though only Brian Lenihan and a select few know what form they will take. But if the fear factor causes a bit of a rush, who am I to complain?

Pension tax cuts in the Budget?

2009-03-24T09:34:00.002Z

Everyone has their predictions about what will happen in next month's Mini-Budget, which is likely to be more juggernaut than Mini. Some possibilities are discussed in today's Irish Independent here.

The Minister needs to tread very carefully if considering reductions in tax relief available to those seeking to fund their pensions. Confidence in pension funds is at a low point at the moment, given the recent downward trend in fund values. This confidence will inevitably return when values start rising again. But if the Minister picks this point in time to announce cuts in tax reliefs, it could cause many people to simply scrap their pension plans altogether. This, of course, would be a bad thing for people's long-term futures and would render wasted all the millions spent on pensions awareness campaigns of recent times.

That said, tax savings are inevitably required. Here's one for the Government to consider - introduce a low rate of Capital Gains Tax and/or tax on dividend or rental income on pensions. Currently, neither tax exists within pension funds. At a rough estimate, funds under management in Ireland total over €55 billion and that's after all the recent falls. Even if there is a recovery of 5%, that would add €2.75 billion. A tax of 10% on gains alone would add €275 million to the Exchequer coffers, while still leaving pensions an attractive form of investment.

I'll only take 1% commission on tax savings for this idea.

Permanent TSB service levels

2009-03-20T13:02:00.002Z

I hear that Permanent TSB are currently processing mortgage applications with a delay of about sixteen days. In other words, if you send something to them in connection with a mortgage application today, it may well be the first or second week of April before it gets looked at.

If I assume that this is not because the property boom has suddenly restarted while I was sleeping, it's presumably because they cut staff numbers.

But in a time when there's less mortgage business to go around, wouldn't you think that it would make more sense to improve service to help win business, rather than go the other way?

New mortgage rates from AIB

2009-03-18T10:26:00.002Z

AIB announced new mortgage rates today - Standard Variable down to 2.75% (APR 2.79%). Fixed for two years at 2.8% (APR 2.84%) or three years at 3.1% (APR 3.14%). Other fixed rate options available but those are the ones that caught my eye.

Ulster Bank and National Irish Bank withold some of the ECB rate cut

2009-03-06T18:31:00.002Z

Ulster Bank and National Irish Bank have announced that they are only passing on 0.25% of the European Central Bank's 0.5% rate cut announced this week. This applies to their Standard Variable Rate products only - Tracker Variable customers will get the full rate cut, but only because they have a contract that compels the bank to do so.

This is bizarre logic - if you've got a Standard Variable Rate mortgage with Ulster Bank for example, this rate cut may bring your rate down to 4.69%. Depending on the value of your home, you could get a variable rate from AIB from 2.75%. That's a huge difference and if your mortgage is anything more than about €200,000 the savings on interest would recoup the cost of switching in under a year.

So what exactly are Ulster Bank and National Irish Bank trying to achieve? Encourage their Standard Variable Rate customers to switch lenders? So that all they'll be left with are those who can't switch because they no longer qualify for the size of mortgage, have a bad credit rating or are in negative equity?

Answers on a postcard please...

Repossessions still at a very low level

2009-03-05T09:20:00.002Z

Guess how many houses were repossessed by the banks in 2008? One in every hundred mortgages? One in every thousand? Nope - 96 in total, or one in every 10,000 mortgages issued, according to figures released yesterday by the Irish Banking Federation.

While that's of cold comfort to you if you happen to be one of the 96, it does display that actual levels of repossessions in this country are low. The rate in the UK is 35 times higher.

Ireland's first Euribor tracker mortgage

2009-03-03T17:10:00.005Z

Leeds Building Society have announced a new tracker mortgage product which tracks Euribor rather than the European Central Bank (ECB) base rate so beloved of previous tracker mortgages, which are now rarer than hen's teeth.

The Euribor rate is more representative of the rate at which banks lend to each other. The ECB rate and the Euribor rate used to follow each other closely. Then came the credit crunch - the Euribor rate went sky-high while the ECB rate didn't. So banks quickly withdrew ECB trackers from the market because they were borrowing at Euribor but their customers were only paying back at a small margin over ECB. In effect, they were losing money on a lot of their more competitive ECB tracker mortgages.

This new Euribor tracker rate takes that unsavoury possibility away for the banks. It's good for customers in that it means they aren't at the mercy of bank management who decide not to pass on rate cuts. But it's a risky punt too because the Euribor rate has shown that it can spike upwards from time to time which would be painful if your mortgage tracks it.

In any event, the Leeds offering is expensive at Euribor + 3% but then Leeds aren't targetting mass-market business. However, it's an interesting start which will hopefully be picked up on by other lenders. Euribor tracker with a ceiling anyone?

I'm taking all the credit for the idea, by the way...I mooted the possibility of a Euribor tracker in The Sunday Tribune here back in December. Royalty cheques in the post to the usual address, please, Leeds!

Standard Life rating upgrade

2009-02-27T16:32:00.002Z

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.

New ICS First Time Buyers Mortgage package

2009-02-23T17:22:00.005Z

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

2009-02-23T09:04:00.002Z

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.

Public Service Pension Levy - some sense prevails

2009-02-12T19:00:00.002Z

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.

Eagle Star Zurich - a good news story

2009-02-09T16:54:00.002Z

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.

Public Service pension levy

2009-02-06T14:45:00.002Z

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!

Thinking of reducing your pension contributions?

2009-01-30T14:23:00.002Z

I know of some people who have reduced and in some cases stopped their pension contributions recently. Some did so due to external circumstances - job loss, slowdown in business etc. Others did it because the value of the fund had dropped recently. For those in the latter category, have a read of the following article from the Motley Fool / Yahoo! Finance - The Move You're Going to Regret

It's a US-centred article, but the principles apply to Ireland and anywhere else.

AIB cut variable & fixed rates

2009-01-27T14:44:00.002Z

I see today that AIB have cut variable rates on residential mortgages in line with the most recent ECB rate cut. Standard Variable is now 3.25% (APR 3.3%).

Fixed rates have been cut also - two year fixed is now 3.00% (APR 3.04%) which suggests that the powers that be are predicting a further cut in the variable rate in the not-too-distant future.

Veronica Ferguson R.I.P.

2009-01-27T14:39:00.004Z

One more personal post before getting back to business.

Again - a word of thanks to colleagues, clients, friends & family for their support and sympathy on the death of my mother, Veronica Ferguson on 15th December 2008.

It has, of course, been difficult to lose both parents within such a short period of time, but I believe it's how they would have wanted, as they were inseparable for many, many years.

So thanks for all the messages of sympathy and support and a final thanks to my parents for doing such a wonderful job - if I can do half as well with my own kids, I'll consider myself a good parent.

Denis Ferguson R.I.P.

2008-12-10T12:30:00.003Z

A quick personal note to thank all clients, industry colleagues and friends who expressed sympathy with me in various ways on the death of my father, Denis Ferguson on 21st October 2008. Your support is greatly appreciated.

Dad was very ill for some months and particularly so in the last few weeks of his life, so I suppose we were as prepared as we could be. But nothing prepared me for the overwhelming sadness I felt when he eventually died, or how much I miss him even after just a few short weeks.

That said, I feel lucky to have enjoyed a great relationship with Dad and how long I did have with him, given that he was unusually old when I was born. The fact that he lived to see and know all his five grandchildren was also a bonus. I'm tremendously proud of his many achievements in life and the very positive influence he had on mine.

Government's sub-prime lending

2008-12-10T11:50:00.002Z

I had a look at the Government's new Home Choice Loan initiative. Mortgage brokers were invited to apply for an agency to arrange these mortgages on behalf of clients for commission.

Frankly, I think the whole scheme is a bad idea. One of the conditions that a customer must meet before applying for one of these loans is that they can "provide evidence via a broker that they could not obtain sufficient finance from two banks or building soceties".

Let's be clear - if two banks or building societies decline you for a mortgage, it's because they don't think you can afford it, or might have trouble affording it in the future. You might want to take heed of that and wait until a property comes along that you can afford.

The Government is effectively becoming a sub-prime lender. Such lenders specialised in offering loans to people who had been declined by "High Street" prime lenders. We have seen that sub-prime lending in the US was a major contributory factor to the current credit crunch. Why on earth would the Government be entering this market now?

We decided not to even apply for an agency to distribute these loans on behalf of the Government, on the principle of it.

Walls Street Journal bullish on Irish stocks

2008-10-31T14:50:00.002Z

Respected US publication the Wall Street Journal published this piece yesterday entitled "Ireland's Battered Stocks Deserve Investors' Attention".

http://online.wsj.com/article/SB122531416450181339.html

Nice to see that not every overseas commentator is downbeat about Ireland Inc.

Report Published on the Pensions Green Paper

2008-10-19T12:19:00.003+01:00

We made a submission to the Government last June on the future of Irish pensions, as part of the Green Paper submissions process. See here.

All the submissions have now been received and examined. The Consultation Report has now been published and can be viewed here. Warning - it's a 3.2MB download, so only recommended for those with faster internet connections unless you want to nip off to have a cup of tea while it downloads.

Nice to see some of our suggestions featured in the report.

Article by Warren Buffett on why he is investing now

2008-10-19T11:58:00.002+01:00

Here's a link to read an article by Warren Buffett, originally published in the New York Times on Friday 17th October 2008. In it he details why he's actively buying US shares at present and if valuations continue at their current level, why he'll have 100% of his personal net worth invested in US equities shortly.

This is a man who has over 60 years' investing experience and who has accumulated a fortune that makes him the wealthiest man on the planet.

It might give some food for thought to anyone who's thinking about suspending their pension contributions or switching to cash due to the current market turbulence.

http://www.cnbc.com/id/27231171/

More investment wisdom from Anthony Bolton

2008-09-29T16:07:00.002+01:00

Here's some more words of wisdom from Anthony Bolton, President - Investments at Fidelity.

"The events of this week will be remembered for a while. But I feel we are entering the final phase of the bear market. It started with the downturn in financials, then consumer cyclicals and the next stage was the industrial companies. The last stage will see commodities affected, a process which we have already started to see. I felt that until commodities got broken the bear market could not end. While commodities have suffered some retrenchment in the last few months, I believe they are still over-owned and that there is some way for them to fall before their valuations are justified.

While this is the second bear market of this decade, there are some key differences between them. The TMT boom was all about valuations but the one we have recently experienced was all about return on capital and earnings expectations. However, we are still in a phase where earnings expectations are too high and that has to change.

I believe that some of the most oversold areas of the market, financials and consumer cyclicals, could offer the most potential as the market recovers. However, a focus on balance sheets will remain vital. This year and next year it will be essential to own well financed companies; those companies which have a lot of debt will find it very difficult to renew their arrangements.

Unfortunately, investors tend to get sucked in when prices are high and shaken out when prices are low. If you are going to invest in equities, you have to be prepared to wait it out. I certainly do not believe investors should be selling in these conditions.

Finally, for investors who are thinking of entering the market I think it is important to remember that the market is likely to recover before the economic indicators improve. Therefore, if you wait for the economic indicators you may miss out on the strong rebound that often heralds the start of a new bull run."

Bolton’s opinions are not to be taken lightly. From 1979 to 2006, he ran Fidelity’s UK Special Situations Fund, which returned 20.3% per annum, versus the FTSE All-Share return of 7.7%.

There's a further piece by Bolton here.

Pensions Green Paper

2008-06-13T20:19:00.002+01:00

The Government invited submissions to its Green Paper on pensions from interested parties. Here's ours.

Pearls of wisdom from Warren Buffett

2008-02-29T09:31:00.003Z

I'm a fan of Warren Buffett, billionaire investor and philanthropist. Here's a link to another blog with transcripts from a recent Questions and Answers session he did for a group of university students. When a man who's arguably the world's most consistently successful investor offers seome investment advice, it's worth a look.

Click here.

A view on the stock-markets

2008-01-23T10:04:00.000Z

This is an extract from a recent statement by Anthony Bolton, Managing Director of Investments at Fidelity. Anthony is someone for whom I would have huge respect as he's a very successful, very experienced and very level-headed investor.

“In my three decades of stock-market investing, I have experienced many economic cycles and extraordinary events. The circumstances behind the current volatility might be unique, but investors’ reactions to them have many parallels to those I have witnessed in the past. The market falls around the middle of 2007 were clearly prompted by concerns over financial liquidity in credit markets. Six months on, the credit crunch is now taking its toll on growth in the broader economy, in Europe, the United States, Japan, and other parts of the world.

The actions of central banks may help to restore stability to stock markets, and I remain optimistic about the long-term prospects for equity investing. Investors should be prepared to ride out these fluctuations and take a longer-term view. Today’s volatility comes at the end of a bull run for world stock markets that has lasted much longer than the average. There is no reason to suggest that another bull run won’t follow at some point.”

How Independent is your broker...really?

2008-01-09T17:02:00.000Z

Happy New Year to all our customers and friends.

That time of year again - reviewing business for 2007 and wondering where it will all come from in 2008.

In January last year I published details of where the mortgage business went to in 2006. See this post. This year, I've done the same exercise and expanded on it.

In 2007, we placed mortgage business with six lenders and no one lender got more than 32% of our overall mortgage business. In the same year, we placed life/pension/investment business with eight companies and no one company got more than 44% of our life/pension/investment business.

While many brokers will claim independence, the acid test is how many can confirm that they actually placed business with fourteen different financial institutions on behalf of clients in a business year? Be wary of so-called brokers who only place business with two or three companies - you've got to ask why.

Are Tracker Mortgages dying out?

2007-12-06T15:57:00.000Z

Permanent TSB today announced that they are withdrawing Tracker Mortgage guarantees in the New Year. For those who don't know, a Tracker Mortgage is one which is at a variable rate, but the margin over the European Central Bank (ECB) rate is fixed for the life of the loan. Permanent TSB's news now means that they are only guaranteeing the margin for one year. Effectively this is no longer a Tracker Mortgage in the commonly accepted sense.

The stated reason is the cost of funds. I wonder if other lenders will follow suit. If you've been considering switching to an attractive tracker mortgage deal, maybe now is the time.

Merry Christmas from the ECB

2007-11-08T15:54:00.000Z

Looks like borrowers can breathe a brief sigh of relief in the run-up to Christmas, following today's ECB meeting. At the meeting, the ECB decided to leave interest rates alone for November and gave no hints that they would be increasing rates in December.

Interpreting the hidden meanings of ECB President, Jean-Claude Trichet's speeches has become something of a science in recent years. Imminent rate increases have been flagged by use of the words "strong vigilance" in the preceding month. There was no mention of "strong vigilance" today, which would seem to indicate no rate rise in December.

Are lenders to be punished for greed?

2007-10-23T11:17:00.001+01:00

There has been some speculation in the media recently that solicitor Michael Lynn or companies controlled by him borrowed €26 million this year alone and there have been suggestions that some of these transactions may not have had full security for the respective lenders.

How is it that small borrowers can be made jump through hoops by lenders when they want to borrow relatively modest sums in the hundreds of thousands to buy homes, while this man apparently got access to €26 million?

It wouldn't possibly be that the size of Michael Lynn's borrowing and the resulting profits to me made could have dazzled the normally cautious bankers? Time will tell.

Here's one of the many articles on this topic.

A little less conversation on pensions please

2007-10-23T10:32:00.000+01:00

The Government's long-awaited Green Paper on pensions was finally published last week, having been postponed since March and September. You can see it here.

It's frankly disappointing that there's not one hard proposal in it - just an invitation for submissions and debate. This has been done before. Check out this link from the Pensions Board about the National Pensions Policy Initiative. The objective of the Initiative was to facilitate national debate on how to achieve a fully developed national pension system and to formulate a strategy and make recommendations for actions needed to achieve this system. It was started in October 1996.

After eleven years, can we have a little less conversaion and a little more action please?

I've expanded on this theme in the Sunday Business Post here.

All this uncertainty is creating a property blight

2007-04-23T08:54:00.000+01:00

I read that Michael McDowell has now promised to abolish Stamp Duty for First Time Buyers and bring down the Duty for other buyers by charging the higher rates only in respect of the portion of the price that exceeds the relevant limit.

For example - there's a Stamp Duty threshold limit at €381,000. Under current rules, anyone who buys for €380,000 pays the lower rate on the whole purchase price. Anyone who buys for €382,000 pays the higher rate on the WHOLE €382,000. Under the PD proposals only the €1,000 excess over the limit would be charged at the higher rate, with the remaining €381,000 payable at the lower. I use this example just to illustrate the principle - the thresholds may well be changed under a new administration also.

Michael has also pledged that if the PDs are returned to Government the Stamp Duty reforms will be brought in before the Summer Recess, rather than at some unspecified point in the future.

This is all very well. It seems Stamp Duty has become a major election issue for all parties. So it's beginning to look like there will be reforms no matter who gets elected.

BUT

Very few people are going to buy a house between now and the election. Who wants to be the poor sap who pays a big chunk of Stamp Duty, only to hear that a few days later it was abolished for his size of house?

Bertie - please call the election now and let's get it over with.

Mortgage business quieter this year...good!

2007-03-15T17:58:00.000Z

I read in a recent article by Davys that mortgage brokers are reporting a slower year than previous boom years. The article itself can be read here. http://www.davydirect.ie/other/pubarticles/mortgage20070226.pdf

While obviously not wishing hard times on any of my financial services colleagues, I believe this to be a good thing for the consumer. The previous boom years in the mortgage market had meant that customer service had reached all-time lows as lenders struggled to keep up with the volumes of business coming in. Furthermore, there was less pressure on lenders to compete with each other.

If there's less business to go around, hoopefully lenders will be better able to service it. In addition, expect plenty of competition for slices of the pie.

Changes to Exit Tax for policies sold after 1/1/2001

2007-02-26T17:16:00.000Z

Irish tax is payable on any investment returns made on a life insurance policy. Tax is paid at the rate which applies for customers of life insurance companies (currently 23%). This tax rate is equal to the standard rate of income tax (currently 20%) plus 3%. Where the charge applies, the life insurance company deducts any tax due from the value of the policyholder’s investment and pays it to the Irish Revenue. The life insurance company then pays the policyholder the after tax amount.

So what has changed?

Before the new tax rules came into effect, Irish tax was payable on investment returns:
· if the policyholder made a withdrawal (full or partial) from their investment;
· if the policyholder took an income from their investment;
· if the death benefit was paid;
· if the policyholder transferred all or part of their investment to somebody else (although there were some exceptions to this).

After the new rules came into effect, Irish tax is now payable in all of the above circumstances and on every eighth anniversary of the policy.

This means that, from now on, tax will automatically be deducted from the value of the policy on each eighth anniversary. The tax paid on each eighth anniversary will reduce the amount invested in the fund from that date onwards.

Where tax is deducted from the policyholder’s fund on each eighth anniversary, this tax can be offset against any tax that is payable on a subsequent full encashment. Therefore if the policyholder decided to cash in their investment on, say, the ninth anniversary then the amount of tax due, based on investment returns over the nine years, would be reduced by the amount of tax they already automatically paid on the eighth anniversary.

The new rules affect all categories of life insurance, including savings, investment and linked protection.

These changes were brought into law as part of the 2006 Finance Act. They apply to all policies sold on or after January 1st 2001. This means that the first actual deduction of tax won’t take place until January 1st 2009.

Stage Payments on Housing Estates to be abolished

2007-02-23T09:38:00.000Z

Junior environment minister Noel Ahern has announced that the practice of stage payments in housing estates is to be ended. Stage payments are common practice for once-off self-build houses, i.e. you're building a house on your own site and instead of getting your mortgage cheque all at once you get it in stages as work progresses on the build.

But in certain parts of the country (rarely in Dublin for some reason) developers building housing estates were asking for stage payments from purchasers, so you'd end up paying a partial mortgage before your house was near completion. This practice is now being abolished where contracts are entered into from June 30th 2007.

Stage payments for people building their own homes will not be affected.

This is good news - it always struck me as cheeky that a developer could end up getting interest-free development finance for a housing estate - it was the purchasers who paid interest on the stage payments.

Switch your equity SSIA to cash if you're getting out soon

2007-02-03T10:43:00.000Z

The vast majority of SSIAs will be maturing in April 2007, the final month of the scheme. A portion of these (admittedly not a huge portion) are equity-based Managed Fund SSIAs. If too many of these equity-based SSIAs are actually cashed in at the same time, it may cause a dip in the funds or cause the fund manager to impose a Market Value Adjuster (MVA) - a sort of penalty for cashing in at that point. Some SSIA providers have already done so.

To avoid this possibility, I'd recommend that equity-based SSIA holders who intend to cash in during April 2007 should ask their provider if they can switch funds now to cash to avoid such a penalty. You may miss out on any fund growth during the final months, but you'll certainly miss the penalty.

Of course the alternative is to defer cashing in your SSIA for a few months.

At last a mortgage price war

2007-02-03T10:34:00.000Z

AIB yesterday announced cuts in their tracker mortgage rates, with rates as low as ECB + 0.45% for the first year and ECB + 0.6% for all subsequent years. This is seen as direct competition for National Irish Bank's recent competitive tracker offering.

As National Irish Bank don't distribute through mortgage brokers, the other lenders have to date held off cutting rates to see what effect on the market the NIB move would have. But AIB do distribute their mortgages through brokers, so I'd expect that AIB have started a rate war, as mortgage brokers are likely to be far less prone to inertia than the general public who National Irish Bank target.

Roll on some more rate cuts in the next few weeks...

We really are independent mortgage brokers

2007-01-24T15:50:00.000Z

First of all - a belated Happy New Year to all readers, friends and clients.

Just been doing a review of the mortgage end of the business for 2006.

We have always been keen to illustrate the advantage of going to a mortgage broker is that you'll get a choice of lenders, at no extra cost to yourself. To prove the point, I'm happy to publish that last year we actually placed business with seven different lenders and no one lender got more than 27% of our overall business.

I would be wary of anyone calling themselves a mortgage broker who actually only places business with one or two lenders or who places a majority of all their business with one lender. You'd have to question if they were really independent, unless there was an unusual commercial reason for this.

Dodgy mortgage brokers and estate agents

2006-12-13T12:30:00.000Z

I watched the Prime Time Investigates programme on Monday night with interest. (You can download it from RTE - requires RealPlayer.)

Sadly, I can't deny that some of the practices that were mentioned do occur, specifically the ones referring to mortgage brokers illegally sharing confidential information with estate agents to whom they are affiliated. I had personal experience of being introduced to a mortgage broker at an industry Christmas lunch last year who was proudly able to announce the address of a property I was buying at the time, in front of all present. It wasn't any great secret that I was buying the property, but the principle was that I hadn't given any consent for the estate agent to pass my details over to the mortgage broker.

Obviously the issues raised in the programme were far more serious - the mortgage broker passes back confidential financial information about the client to the estate agent who then knows what the budget of the potential purchaser is, and tailors bidding to suit.

As is so often the case, the programme will probably do damage to the image of the mortgage broking industry in general even though any mortgage brokers of my acquaintance are honest professionals who are doing an excellent job for their clients.

I would have the following advice for any potential purchaser:

Don't use a mortgage broker or solicitor who is offered to you by the property developer or estate agent. Choose each ideally from personal recommendation. Most firms are professional enough to keep a distance from each other, but as the programme proved, there is the potential for conflict of interest.

When you're dealing with a mortgage broker, ask initially which lenders the broker represents. You should be looking for a list of at least half a dozen as anything less doesn't really offer a wide enough choice.

When a mortgage product is recommended, don't be afraid to ask why that product is better for your needs than that of another lender.

For all your mortgage needs, come to Ferguson & Associates! ;-)

Budget changes to Mortgage Interest Relief

2006-12-06T18:11:00.000Z

In today's Budget, Brian Cowen announced increases to Tax Relief at Source (TRS) for mortgage customers, with the biggest increases for First Time Buyers.

The current annual ceiling on the amount of interest that can be allowed on a mortgage is being doubled for first-time buyers from €4,000/€8,000 single/married to €8,000/€16,000 single/married. The increased relief will be available to all first-time buyers who are in the first seven years of their mortgage.

The ceiling for non-first-time buyers is also being increased, from €2,540/€5,080 single/married to €3,000/€6,000 single/married.

For a couple buying their first home, the new €16,000 limit means that their maximum allowable relief is €16,000 at 20% or €266.66 per month jointly in a full tax year, provided that they pay at least €16,000 in interest in that year. Assuming a sample interest rate of 4.5%, their mortgage would need to be in excess of ~€350,000 to qualify for maximum relief.

The increase to €6,000 for a married couple on an existing mortgage (i.e. not First Time Buyers) is less generous - in a full year a couple paying at least €6,000 in interest will now get €100.00 per month TRS jointly, up from €84.66 per month.

Budget changes to Stamp Duty on mortgage deeds

2006-12-06T18:06:00.000Z

Brian Cowen today announced that he is abolishing Stamp Duty on mortgage deeds with effect from tomorrow, 7/12/2006. This was a Stamp Duty that was payable on all mortgages above €254,000 at a rate of 0.1% of the mortgage amount, with a maximum amount of €635.00. It was collected by the solicitor. So someone obtaining a €400,000 mortgage or re-mortgage used to have to pay €400.00 Stamp Duty on the mortgage deed.

Now that's abolished. Good news for house buyers and re-mortgagers.

Extension to SSIA into pension scheme

2006-12-04T18:22:00.000Z

The Revenue have extended the deadline date for people who want to re-invest some of their SSIA in a pension and avail of the special incentive scheme. The extension applies to those whose SSIAs matured in May, June, July or August 2006 - all such people have until 31st December 2006 to avail of the new scheme. Anyone with an SSIA that matures from September 2006 onwards has three months in which to avail of the scheme.

Under this scheme, a qualifying applicant can re-invest up to €7,500.00 of their SSIA maturity into a pension plan and the Government will top it up by 1/3 to a maximum of €2,500.00. Certain conditions apply and these are detailed on the Revenue leaflet available on the Revenue website here.

We have some interesting deals available to those who want to avail of this incentive. Ask for details.

Mandatory pensions

2006-11-28T18:45:00.000Z

I was at an interesting pensions workshop last week, hosted by Eagle Star with a handful of other brokers. The topic was mandatory pensions and it's likely to be something we'll all be hearing plenty more of.

Hard mandatory pensions are one option - where everyone simply has no choice but to be part of a pension plan of some sort. I don't see this as a viable option. Apart from anything else, it's opponents would easily torpedo the idea as being simply an increase in taxation. If the Government is introducing legislation that says that you and/or your employer must hand over extra money, even if it's for your own future benefit, it would be hard to claim it wasn't a form of tax. If it walks like a duck...

Clearly, soft mandatory pensions are a preferable solution. The idea here is that everybody is automatically enrolled in a pension scheme, but they then can choose to opt out. I reckon that would be a huge success. Inertia is still rife in the Irish financial services world - why else would many people still be paying uncompetitive Standard Variable mortgage rates when they can switch to better rates for free? This inertia would be to the advantage of Soft mandatory pensions - many people would simply not bother opting out.

It would also have the advantage that if someone is automatically enrolled in a pension scheme at the start of their employment, they won't get used to having the extra money. As we all know, if you never had it, you won't miss it.

I would say that it would be important that the Government introduces strict controls on the type of pension scheme that would be available under a Soft mandatory system. It would be an embarrassment if people were automatically enrolled in a pension scheme by Government decree and the scheme they were enrolled in turned out to be a rip-off. As such, Standard PRSAs would seem tailor-made for the job - with statutory caps on charges and a Default Investment Strategy for those who don't want (or don't have sufficient information) to choose their own funds.

Brendan Johnson, Pensions Director of Eagle Star, made an interesting point about ways to increase pension coverage. It wouldn't be sufficient to simply introduce a tax credit system and hope that the simpler structure alone would encourage more people to sign up, although it would certainly be a help. Many people believe the current system of tax relief on pensions is too complicated and should be replaced by a SSIA-style creidt system, where people can see clearly the benefit of the tax and PRSI relief as a top-up to their pension fund. But although the SSIA scheme is touted as proof that such a simple scheme would work, approximately half of all SSIAs were taken out in the final month of the scheme. What does that tell us? That all these people would never have gotten aroun to taking out a SSIA if it wasn't for the deadline, regardless of how attractive or simple it was.

Canada Life improvement to ARF & AMRF

2006-11-28T11:45:00.001Z

I see Canada Life have made a few tweaks to the charging structure of their Approved Retirement Fund (ARF) and Approved Minimum Retirement Fund (AMRF) contracts, making them more attractive from a charging perspective. The main improvements are for funds of €150,000 or more.

Welcome to my blog

2006-11-27T21:27:00.000Z

Welcome to the first entry in my blog. I'm a somewhat reluctant entrant to the world of blogging, as I'm still bothered by the notion that blogs are only for people with an inflated sense of their own importance. In other words, people who like the sound of their own voice and believe that other people will actually want to read their opinions and musings.

Still, I'll try to keep the ego in check and will try to keep the entries down to snippets of general interest.