You could continue to repay at the same rate and pay off the loan early 4.5 years earlier or
Re-invest the saving which would give you a future sum of €78,246.
Personal pension holders who consult a financial advisor at least once a year, have pension values 75% higher than those who do not.
The average pension value for those who were regularly advised was
€87,563 (excluding company contributions) compared to €49,819 for those who did not seek regular reviews.
Personal pension holders who consult a financial advisor at least once a year, have pension values 75% higher than those who do not.
The average pension value for those who were regularly advised was
€87,563 (excluding company contributions) compared to €49,819 for those who did not seek regular reviews.
Source: The Value of Advice Ireland 2013 PIBA/Standard Life.
This will determine your next steps. Are you saving for a mortgage, a trip, a change in career, to buy a car, go hack to college, start a business, early retirement………Each needs a different spending plan and strategy.
Prepare a plan – decide your goals/objectives for your money?
3 to 6 months of net income
If you can do more, do more! If you’ve a specific goal in mind this will be easier to achieve.
Saving every payday – Once they’re gone, they’re out of sight.
Short term (savings such as rainy day funds) Medium term (Investments with a time horizon of 7 years + and Long term (Pensions and Investment Portfolios). Each should consider your risk profile, costs, taxation and accessibility.
Take control with a Financial Plan
We’re all different…..
…. but advice should always fit !
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What’s Happened on Markets in the Last Week?
The Roller Coaster continued and on foot of the governmental stimulus packages, especially the expected sign off by President Trump of the US package, markets recovered some of the falls by Friday’s close. Despite this individual stock markets are still significantly down on their opening values of 1st January.
| In Local Currency LastWeek Year toDate | ||
| UK Equities | 6.5 % | -28.0 % |
| US Equities | 10.3 % | -21.3 % |
| European Equities | 7.1 % | -27.1 % |
| Japanese Equities | 13.7 % | -15.2 % |
| Hong Kong Equities | 3.0 % | -16.7 % |
| Emerging Market Equities | 4.9 % | -24.4 % |
As I write this update at 5.30 pm Irish time, the US Markets have added another 2% gain by this stage having been followed, somewhat meekly, by Europe. Australia has had its rebound today which was just mimicking that of the US and Europe on Friday which happened after hours for them. In the meantime, South Africa has finished in positive territory.
An Update on the Medical Situation
As the infection and mortality rates gather considerable pace, each country’s population has a heightened awareness of its own statistics. Nevertheless it’s worth thinking about the possible projected figures for the US by Dr Tony Fauci, especially in the light of its importance in the global economy. Dr Fauci is a leading American immunologist who, amongst other roles, serves as a member of the White House Coronavirus Task Force, and has been the one to correct many of President Trump’s “mis-statements” on Covid-19. In his estimate issued over the past weekend, the US could experience as many as 200,000 deaths due to the virus. The UK for its part, based on its similar lack of initial urgency in dealing with the problem, could possibly see over 40,000 deaths on a proportionate population calculation.
To put that into perspective the number of “Winter Flu” deaths in the US over a 6 month period would normally be circa 62,000 while the total deaths of US military in its 17 year involvement in the Vietnam conflict came to 58,318 (with over 150,000 wounded that required hospital care).
In terms of managing the impact of the virus if a large percentage of your population hasn’t had the virus, but you still have people who are infected that aren’t identified or isolated, then the virus will continue to spread. In the short term, lockdown measures will most likely increase in severity in most countries and even when the worst may have appeared to have passed in terms of infections and deaths, the need for social distancing will restrict the broad economy, especially in tourism and hospitality. All this means is that a “back to work” strategy is probably going to have to co-exist with distancing measures for far longer than anyone and any country might want.
What’s The Economic Impact, Now And Going Forward?
Oil has now fallen to $20 a barrel (partly due to a disagreement between OPEC and Russia about reducing production) and there is now a genuine concern that oil producers will run out of storage space for oil which cannot now be put to direct use due to closures of factories as well as global travel restrictions. The price of copper has fallen 27% year to date underlining, if it was ever needed, the major slowdown in global economic activity which is becoming more obvious as each day passes.
The US economy is now entering recession and with it all the other economies in the world. Initial jobless claims (a measure of the number of new filings to receive unemployment benefits) rose to 3.283 million for the week ending 21 March. The speed and magnitude of the move higher highlights how US businesses have had to let staff go in the face of the sudden coronavirus shutdown. There were, up to recently, 29 million people employed in travel, leisure and hospitality in the US, so the jobless numbers are going to soar in the next few days and weeks. Similar statistics are also appearing globally with similar proportionate numbers for each country. As a point of reference, the US unemployment rate in the 1930s Depression period was 25% of the workforce.
In recognising the gravity of the situation, the world’s central banks have been full-on in their support of liquidity and borrowing. This is, as was the case in the Global Financial Crisis, a knee jerk reaction to keep economies afloat where the cost of providing business supports and “helicopter money” has stored up problems for the long term as far as each country’s debt is concerned. The reality is that the cost of servicing all these debts is being handed down to several generations to come.
One of the major impacts from Covid-19 is likely to be in the area of globalisation. Goods made cheaply in the Far East may be re-categorised in terms of their importance to each country’s economy. It is likely that we will see less reliance on, in particular, the Chinese supply of goods as products are sourced closer to home or even made at home. This will bring, over the long term, changes in product innovation and employment as well as investment opportunities.
What Should Investors And Pension Holders Do Now?
Nobody knows how the economic situation will play out in the coming year and, by extension, we don’t know how stock markets will play out. The likely scenario of a major death rate in the US, while already known, is most likely not fully priced into markets. I expect that the fear and uncertainty of health at an individual level will most likely spill over, in the short term, to further falls in stockmarkets in the coming weeks. This, in itself, will lead to a major investing opportunity for those who have cash holdings or new monies awaiting investment either personally or in their pension funds.
Of course, some people who might have switched out a few weeks ago at the start of this recent problem may decide to wait for a lot longer before they dip their toe back in. In my experience when people switch into cash they often stay in cash for years afraid to come back into the market and therefore miss the upswing.
And finally, I repeat my previous advice :
Block B, Maynooth Business Campus Maynooth, Co Kildare
Tel 01-541 3702
Colm Nolan & Associates Limited is a private company limited by shares registered in Ireland 653843
The following is a summary of the tax changes announced by the Minister for Finance and Public Expenditure and Reform. Changes are effective from 1st January 2018 unless stated otherwise.
The tax credits and tax bands changes are in bold.
| Tax Credit | 2017 € | 2018 € |
| Single Person | 1,650 | 1,650 |
| Married or in a Civil Partnership | 3,300 | 3,300 |
| Employee Tax Credit | 1,650 | 1,650 |
| Earned Income Tax Credit Max | 950 | 1,150 |
| Widowed Person or Surviving Civil Partner (without qualifying child) | 2,190 | 2,190 |
| Single Person Child Carer Tax Credit | 1,650 | 1,650 |
| Incapacitated Child Credit Max | 3,300 | 3,300 |
| Blind Tax Credit: Single Person
Married or in a Civil Partnership – One Spouse or Civil Partner Blind Married or in a Civil Partnership – Both Spouses or Civil Partners Blind |
1,650
1,650
3,300 |
1,650
1,650
3,300 |
| Widowed Parent: Bereaved in 2017
Bereaved in 2016 Bereaved in 2015 Bereaved in 2014 Bereaved in 2013 Bereaved in 2012 |
– 3,600 3,150 2,700 2,250 1,800 |
3,600 3,150 2,700 2,250 1,800 – |
| Age Tax Credit:
Single or Widowed or Surviving Civil Partner Married or in a Civil Partnership |
245 490 |
245 490 |
| Dependent Relative | 70 | 70 |
| Home Carer Tax Credit | 1,100 | 1,200 |
|
Tax Rates and Tax Bands
The exemption limits for persons aged 65 years and over remain unchanged:
| Personal Circumstances | 2017 € | 2018 € |
| Single or Widowed or a Surviving Civil
Partner, 65 years of age & over |
18,000 |
18,000 |
| Married or in a Civil Partnership, 65 years of age &
over |
36,000 |
36,000 |
The above exemption limits are increased by €575 for
each of the first two dependent children and by €830 for the third and subsequent children.
Marginal Relief may apply, subject to an income limit of twice the relevant exemption limit.
Relief is extended to existing recipients for a further three years on a tapered basis. Qualifying interest applies for each of the three years at the following rates:
| 2017 | 2018 | 2019 | 2020 | |
| Qualifying Interest | 100% | 75% | 50% | 25% |
The interest ceilings are also reduced for each of the three years as follows
| First time buyers | ||||
| 2017 € | 2018 € | 2019 € | 2020 € | |
| Single (unmarried or not in a civil partnership) | 10,000 | 7,500 | 5,000 | 2,500 |
| Married, in a civil partnership, widowed, or a surviving
civil partner |
20,000 | 15,000 | 10,000 | 5,000 |
| Non-first time buyers | ||||
| 2017 € | 2018 € | 2019 € | 2020 € | |
| Single (unmarried or not in a civil partnership) | 3,000 | 2,250 | 1,500 | 750 |
| Married, in a civil partnership, widowed, or a surviving
civil partner |
6,000 | 4,500 | 3,000 | 1,500 |
No relief will be available from 1 January 2021.
A new share option scheme will be introduced for employees of unquoted Small and Medium Enterprises with effect from 1st January 2018, subject to EU approval. Under this new scheme, any gain realised on the exercise of a qualifying share option, granted in the period
1st January 2018 to 31st December 2023, will be exempt from Income Tax, USC and PRSI, provided certain conditions are met.
Any gain on the subsequent disposal of the shares acquired under KEEP will be subject to Capital Gains Tax (CGT) in the normal way.
A new deduction is being introduced for pre-letting expenses of a revenue nature incurred on a property that has been vacant for a period of 12 months or more. The expenditure must be incurred within the 12 -month period before it is let as a rented residential premises.
A cap on allowable expenses of €5,000 per property will apply, and the relief will be subject to claw back if the property is withdrawn from the rental market within four years. The relief will be available for qualifying expenses incurred up to the end of 2021.
| USC Thresholds | |||
| 2017 | Rate | 2018 | Rate |
| Income up to
€12,012 |
0.5% | Income up to
€12,012 |
0.5% |
| Income from
€12,012 to €18,772 |
2.5% |
Income from
€12,012 to €19,372 |
2% |
| Income from
€18,772 to €70,044 |
5% |
Income from
€19,372 to €70,044 |
4.75% |
| Income above
€70,044 |
8% | Income above
€70,044 |
8% |
Reduced Rates of USC
| USC Thresholds | |||
| Individuals aged 70 years or over whose aggregate income for the year is €60,000 or less.
Individuals (aged under 70) who hold a full medical card whose aggregate income for the year is €60,000 or less. |
|||
| 2017 | Rate | 2018 | Rate |
| Income up to
€12,012 |
0.5% | Income up to
€12,012 |
0.5% |
| Income above
€12,012 |
2.5% | Income above
€12,012 |
2% |
Note 1. ‘Aggregate’ income for USC purposes does not include payments from the Dept. of Employment Affairs and Social Protection.
Note 2. A ‘GP only’ card is not considered a full medical card for USC purposes.
Exempt Categories remain unchanged.
| 2017 | 2018 |
| Where an individual’s income for a year does not exceed €13,000 | Where an individual’s income for a year does not exceed €13,000 |
| All Dept. of Employment Affairs and Social Protection payments | All Dept. of Employment Affairs and Social Protection payments |
| Income already subjected to DIRT | Income already subjected to DIRT |
The surcharge of 3% on individuals who have non-PAYE income that exceeds €100,000 in a year remains unchanged.
PRSI Contribution Rates
| PRSI | A1 | S1 | B1 |
| Employee | 4.0% | 4.0% | 0.9%* |
| Employer | 10.75% | Nil | 2.01% |
The VAT rate on sunbed services will be increased from 13.5% to 23% with effect from 1 January 2018.
A compensation scheme is being introduced for charities which are unable to reclaim VAT on inputs. A capped amount will apply to the scheme, with pro-rata payments made where the amount claimed exceeds the amount available. Details of the scheme will be made available when complete.
Accelerated capital allowances for energy-efficient equipment
The accelerated capital allowances scheme for energy- efficient equipment is being extended for a further three years until 31st December 2020.
A cap of 80% will apply in respect of the amount of capital allowances for an intangible asset, and any related interest expense, that may be deducted from relevant trading income arising from the intangible asset in an accounting period.
The cap applies in respect of expenditure incurred on intangible assets on or after 11th October 2017.
Details will be included in the Finance Bill.
Sugar Sweetened Drinks Tax (SSDT)
Subject to formal approval by the European Commission, the SSDT will be introduced, in April 2018. It will apply to first supplies in the State of water and juice based drinks with added sugar and a total sugar content of 5g or more per 100 millilitres.
| Sugar content
(per 100 millilitres) |
Rate |
| between 5g and 8g | 20 c per litre |
| 8g or more | 30 c per litre |
Drinks supplied in concentrated form will be assessed on the basis of the sugar content of the drink at the dilution level intended for consumption.
CGT incentive for land and buildings held for minimum period of seven years
An amendment will be made to section 604A of the Taxes Consolidation Act 1997.
The amendment will provide that gains in respect of land or buildings that were acquired between 7 December 2011 and 31 December 2014 will be exempt from CGT if they are sold after four years and within seven years from the date they were acquired.
Leasing of agricultural land for solar energy production – CAT agricultural relief and CGT retirement relief
Amendments will be made to CAT agricultural relief and CGT retirement relief so that the leasing of agricultural land for the production of solar energy will not affect entitlement to the reliefs, where the area of the land which is leased for that purpose does not exceed 50% of the total area of the land concerned.
Further details will be included in the Finance Bill.
Exempt Class Thresholds
Despite expectations that the CAT thresholds would be increased, no change was announced in the Budget, so therefore the current thresholds will apply unchanged for 2018:
| Threshold
Class |
Applies to | Threshold |
| A | Children inheriting
from parent |
€310,000 |
| B | Inheriting from other
blood relatives |
€32,500 |
| C | Inheriting from
strangers |
€16,250 |
The CAT rate stays the same at 33%.
Transfer or conveyances of non-residential property
The stamp duty on the purchase or transfer of non- residential property (including land) is increased from 2% to 6%. The new rate takes effect for conveyances or transfers of such property that are executed on or after
11 October 2017. Stamp duty is payable by the purchaser.
A stamp duty refund scheme will be introduced in relation to commercial land purchased for the development of housing. Developers will need to have commenced the relevant development within 30 months of the land purchase to qualify for the refund.
The consanguinity (blood relative) rate of stamp duty was due to expire on 31 December 2017 but is to be extended for another three years. On or after 11 October 2017, it is to be charged at 1% of the consideration instead of being set at half the rate of stamp duty that applies to non-residential property. This means that the amount of stamp duty payable will remain unchanged.
This relief applies to transfers of agricultural property between certain blood relatives where the transferee is a young trained farmer who intends to farm the land or lease the land to someone who farms the land for a period of six years.
From 1st January 2018 to 31st December 2018, where an employer provides an employee or director with an electric car or van, no taxable benefit will arise for them.
This exemption is limited to cars or vans which derive their motive power solely from electricity (no exemption is available in respect of hybrid cars or vans).
DIRT
Last year’s Budget provided for a phased reduction in the DIRT rate from 41% in 2016 to 33% by 2020:
DIRT Rates
2016 2017 2018 2019 2020
41% 39% 37% 35% 33%
In 2018 the DIRT rate will therefore fall to 37%.
Exit tax
The Budget speech made no mention of a reduction in the exit tax rate from its current 41%.
Social Welfare
State Pension increases by €5 pw from end March 2018
There is a general €5 pw increase to all Social Welfare pensions, including the State Pensions (Contributory and Non-Contributory) from the end of March 2018.
The new maximum State Pension (Contributory) from March 2018 will be €243.30 pw, or €12,695 pa.
The Minister made no reference to changes in private pension tax reliefs or taxation of benefits despite significant discussions in recent weeks.
Income Tax Relief on Personal Contributions
|
Age attained during year |
% of Net Relevant Earnings (max
€115,000) |
| Less than 30 | 15% |
| 30 – 39 | 20% |
| 40 – 49 | 25% |
| 50 – 54 | 30%* |
| 55 – 59 | 35% |
| 60 and over | 40% |
The Finance Bill will be published on 19th October 2017.
Modern life is full of stresses and pressures but did you ever think that living too long could be one of them?
In the early part of the 20th century it would have been unusual for a person to live beyond their middle 50’s. (In 1910 the average life expectancy at birth was 54 years).
Now, as a result of improvements in infant care, immunisation, diet, health care and other scientific developments our life expectancy is increasing at the rate of 3.5 years in every 10. Within the next 50 years living to be 100 will be the norm.
So are we ready for this?
Hardly! We haven’t begun to consider or examine the potential implications whether social, economic or financial around living longer. One of the undoubted and obvious risks is the financial cost of living longer both for ourselves and our families but particularly where we need to enter some form of nursing home care.
Nursing home care is already costly with the Ombudsman reporting in November 2010 that some 23,000 of our over 65’s needed some form of long term nursing home care, representing 5% of that group. A subsequent report in October 2012 by Cardi estimated that an extra 2,833 people would need to avail of this care every year.
That’s a NET increase of c. 12% each year in the numbers needing long term nursing home care. And why are the figures not relatively static – well as any talking meerkat will tell you…”SIMPLES”. We’re all just living longer so it’s a natural consequence of longevity.
With an average annual cost of €55,000 per person each year, the current cost of Nursing Home care is c. €1.4 billion each year and is equivalent to 9% of the current health budget! And growing…… If you have a spare €½ million you could pay for yourself but what about your partner, or your Mum or your Dad and what about your Partner’s Mum or Dad? Now we’re up to €3million assuming nil medical inflation and they all only live for 10 years in need of nursing home care! Even if you’re receiving a Ministerial pension you’d find that difficult to manage!
So who’s going to pay this €1.4bn plus every year? At the moment the State subsidises the cost of nursing home care through direct subvention (for those who have inadequate income or means it meets 100% of the cost) or through a combination of direct supports and tax reliefs where the person and/or their family pay a part of the ongoing costs.
One such support comes in the form of the “Fair Deal Scheme” or to give it its correct title the Nursing Home Support Scheme. Under the “Fair Deal Scheme”, you’ve to give up 80% of your annual income and 7.5% of all assets every year while residing in a HSE approved Nursing Home. In return for this the State will (assuming you meet the care assessment and medical criteria) meet the balance of any cost.
Where you’re family home is one of the assets involved then the total annual contribution is capped at 3 years x 7.5% or a total of 22.5% of the value of your home.
The State also gives income tax relief on the costs we bear on certain health care. At the moment income tax relief is granted for the employment of a carer (limit is €50,000 each year) in a home setting or income tax relief at up to 41% in relation to nursing home costs we bear directly.
But with increasing numbers needing to avail of nursing home care and the high costs involves how much longer can we as a State continue to fund the NHSS and tax reliefs at their current levels?
Well if we have a reliable and broadly based tax base, then perhaps we could fund a scheme to meet the needs of a group of people who we’ve an obligation to look after and care for properly.
How do we build that base if approx. 22,000 of our young educated qualified people are emigrating to Australia and elsewhere each year thus rendering a substantial portion of our future tax base resident on the other side of the world? Unless we can retain these people or attract others to the country, our future demographic will be top heavy with dependant people with expensive healthcare needs.
There’s no philanthropic force out there writing cheques for nursing home or other health care costs. It’s the State – you and me, our children and grand-children who’ll have to pay this bill. So let’s start planning for the future rather than just arriving there.
After all there are now 3 certainties in life death, living longer and taxes….. Oh and by the way would anyone of tax paying age leaving the country please bring Granny and Granddad with you.
.