Another reason to be grateful for your Spouse……

Published August 17, 2010 Ask the Experts , Budget , Managing Your Money , Money Saving , Taxation , Uncategorized Leave a Comment

In times when money is tight and every envelope coming through the door seems to be another bill we are all looking to reduce our outgoings.

Did you know that the person you married may be the answer to reducing one of the more significant bills in your life?

Spousal Employment and Spousal Pension Funding can slash income tax bills for those of you who are sole traders as follows:

Income Tax Saving 1: Since individualisation was introduced in the tax code, a Spouse of a Sole trader can earn up to €24,700 and pay standard rate (20%) income tax only. This is irrespective of the earnings level of the first spouse.

Income Tax saving 2: A Sole Trader can establish an Executive Pension for a Spouse they employ in the business and contribute a significant amount to the employed Spouse’s pension, as an employer contribution.

Income Levies, health levy and PRSI Savings: An employer contribution by a Sole Trader will escape income levies, income tax, PRSI and health levy.

For example:

Scenario 1

• John is a 38 year old self employed butcher with Net Relevant Earnings of €150,000 p.a.

• John’s wife Mary (age 42) is a Home Maker and she is not employed in the business.

• John’s maximum pension contribution is €30,000 (20%), saving €12,300 in income tax (41%).

Total income tax saving in scenario 1: €12,300

Scenario 2

• John decides to employ Mary in the business and pays Mary a salary of €27,400 pa.

• He then establishes an Executive Pension for Mary and contributes another €27,400 p.a. under the maximum funding rules as an employer pension contribution.

• John saves income tax of €5,754 (21%) on Mary’s salary and €11,234 (41%) on the pension contribution.

• John’s own maximum pension contributions are now €19,040 on which he saves €7,806 in income tax (41%).

Total income tax saving in scenario 2: €24,794

Income levy, health levy and PRSI saving on the employer contribution: €3,562

Total Overall Saving: €28,356

Notes

1. John would need to register as an employer.

2. The salary level for Mary must be justifiable.

3. Mary must be paid under Schedule E and tax and PRSI must be deducted at source.

4. Employer contributions cannot be backdated.

-Niall O’Higgins

Time for Your Medicine

Published June 16, 2010 Uncategorized Leave a Comment

All right. We admit it. Saving doesn’t sound very exciting.  It’s a little like taking your medicine – it doesn’t always taste great but it is good for you.

Well, saving is the same.  It implies sacrifice – and nobody likes to give up any of the lifestyle that they currently enjoy.  But like medicine, it is good for you and it’s a question of priorities.  What matters most?  Maintaining your current expenditure?  Or ensuring that your financial goals in life are achieved.

Rediscover the savings habit…

 

Do you remember the SSIA?  It created a saving frenzy in Ireland.  Well, even though it may seem like a bygone era –the savings habit instilled by the SSIA is more important today than ever.

 
Some facts to ‘saver’…

 

  • Over 75% of the adults in Ireland are now saving regularly.
  • The average person saved €305 a month in 2009.
  • Annual savings out of disposable income are expected to be almost €10 billion higher in 2010 than they were in 2008.
  • With interest rates at an all time low – and likely to remain so for at least the coming year – people seeking a reasonable return on savings may need to consider an alternative to the traditional bank account
  • The experience of saving profitably in an SSIA has shown us that a 5-year savings period can make a lot of sense.

 

In fact, most of us realise that many of our financial goals in life – such as planning the holiday of a lifetime, extending and improving our home, putting money aside for University or school fees, or simply giving our children or grandchildren a flying start in life – can only be achieved through building up savings.

Some tips to help you get started

 

Set yourself a goal – It’s vitally important to know what you’re saving for or the amount you are trying to achieve. It will keep you focused and reward you in the end.

Keep long-term saving separate  – Don’t let your savings plan get confused with ad-hoc expenses that will always arise e.g. car maintenance. Before you set up your savings plan, ensure you have an emergency fund in place so that you are not tempted to ‘dip into’ your long-term savings.

Take responsibility for your own saving – Don’t leave having a ‘nest egg’ in the future to chance. Take control of building up that lump sum yourself, because unless you win the lottery, no one else will do it for you.

Make a habit of it - So often we think we can’t afford to save. But once you’ve started, you’ll soon get used to it and before long you might not even notice that regular saving amount going out each month.

-Brendan Lee

Is UK Property Still on the Up?

Published April 16, 2010 Investments , Irish Outlook , Money Saving , Uncategorized Leave a Comment

The scale and speed of the recovery in prime property values since the market nadir in the middle of 2009 has taken property investors by surprise, driven by the relatively high income yield, the perceived weakness of other asset classes, limited availability of stock and overseas interest fuelled by the weakness of Sterling.

This is best demonstrated by the boom in office lettings in London. More than 2m sq ft of office leasing deals were agreed in the first quarter of this year – the second highest total since records began in 1984 (source: CB Richard Ellis). Rents continue to rise (up 8% in the first quarter) against a backdrop of severe shortages in high quality properties as many big name firms are signing up for new headquarters. Banks refused to finance new developments during the credit crunch spelling good news for developers of new or soon to be completed buildings. Another factor is 15 and 25 year leases are coming to an end, triggering decisions to relocate.

If this type of activity is happening with our nearest neighbour is it only a matter of time before it spills over here??

- Steve Garavan

Is Now the Time to Invest in Equity Markets?

Published March 30, 2010 Ask the Experts , Investments , Irish Outlook Leave a Comment

With interest rates at historic lows around the globe it is very interesting to see the Economic and Market forecasts from the major investment banks for 2010. Set against the backdrop of the gloomy outlook of Irish investors at present the outlook in the US and Europe is decidedly more upbeat.

Already Global stock markets have performed extremely strongly since March 2009 with the MSCI World index up +60%. According to Goldman Sachs, the rally is going to continue in 2010 and is looking at 15%+ equity returns for the year.

JP Morgan is also bullish. It forecasts a +20% return for Developed Market equities and +30% return in Emerging Market equities. Merrill Lynch, are also equally bullish. They foresee a potential 30% upside in equity market in the year ahead. Expectations for corporate profits are at their highest level since late 2003.

European banks are slightly less optimistic. Barclays Capital expect a sharp rally for equity markets in the first half of the year followed by some sideways corrective behaviour in the latter half of 2010. Deutsche Bank believes that 2010 will be characterised by a gradual easing in stimulus and easy money policies. Momentum will begin to grow in the first half of 2010 which will allow policy makers to tighten interest rates around the globe. In this scenario, Deutsche Bank expects risky assets to continue to perform well.

Conclusion

Many of the large global Banks expect markets to perform well in 2010 as low interest rates, continued stimulus and strong earnings will continue to bolster risky assets. This has led to some very interesting forecasts with banks forecasting equity market returns in 2010 of between 15% and 30%. Will this lift the fear amongst some Irish investors?

-Steve  Garavan

You are not behind at all

Published March 25, 2010 Investments , Managing Your Money , Retirement Planning , Uncategorized Leave a Comment

When watching television the ads all make it sound as if 55 is a reasonable retirement age. In fact, for most of us it’s not. The average median retirement age in Ireland is 62 for men and 61 for women.

Who does retire early? In the past and by in large it was civil servants and government employees and the banking sector who on average give up employment before normal retirement age. You can credit their early departures to generous pensions that are indexed for inflation. 

If you look at the math behind retirement, you can see why most of us stick around the office a bit longer than we might like. For every year early that you retire, you pay three penalties: you lose a year of potential savings, you lose a year of growth for your retirement savings, and you gain one more year of retirement expenses.

Consider a professional lady who arrives at 55 in good financial stead, with no mortgage and €100,000 in savings. She can count on her savings to produce €4,000 or €5,000 a year in returns, but she’s too young to start collecting Old Age Pension or Pension Plan. Unless she resorts to desperate measures, such as selling her house or going through her savings, retirement is impractical.

But look at what a difference five years can make. If she plans for 60 and contributes €10,000 a year to her retirement fund during that period, and achieves a 7% annual average return, her savings in principal could double to €200,000. That plan can generate €8,000 to €10,000 a year in income as long as she lives. At 60, she can also start collecting the State Pension. If she combines those sources of income, retirement becomes quite practical and hopefully comfortable.

 Please consider the principle of retirement saving.

It will cost nothing more than an investment in time to check it out, speak to a Qualified Financial Advisor!

 -Boyd Scott

State Guarantee on Deposits – in (kind of) Plain English

Published March 10, 2010 Ask the Experts , Investments , Managing Your Money , Money Saving Leave a Comment

When being instructed on putting Blogs together, our mentor highlighted the need to keep the information in plain English. Sometimes it’s difficult – this is one of those times but it’s important so I will persevere and hope you will too.

The State guaranteed the deposits of the main Irish Banks with no limit up until September 2010. Many people have asked “what then?” Well, now we know!

First, it is important to highlight the Deposit Protection Scheme which covers up to €100,000 per Account per Institution. There is no expiry date on this Scheme.

Therefore, the question of what happens after September really concerns you if you have over €100,000 on deposit.

So, to be clear, the first €100,000 is covered under the Deposit Protection Scheme for most (but not all) Banks operating in Ireland.

Amounts in excess of €100,000 may be covered beyond September 2010 for up to 5 additional years provided:

  • The Bank has “signed up” to the Eligible Liabilities Scheme. For example, Bank of Ireland has signed up; Ulster bank has not.

 

  • You open an account after the date the Bank signed up. This could be a new account or the renewal of a term on the deposit.

 

  • This account is opened prior to 30th September 2010.

 

  • The account has a maturity date prior to September 2015.

 

To be covered your account should satisfy all of the above criteria. But, do not rely on this Blog for your information – click here for information on the Department of Finance website for a fuller explanation.

You can decide which is in the plainer English! If we can be of any help, please mail us on info@fbdfinancialsolutions.ie and put Attention Ian Cooke in subject line.

-Ian Cooke

‘Best before’ versus ‘Use by’ dates – know the difference and SAVE MONEY

Published March 10, 2010 Managing Your Money , Money Saving Leave a Comment

Picture the scene: I’m at home last Sunday morning feeling a little groggy and looking forward to my weekly ‘Full Irish’.  When I go the fridge I realise that the rashers, sausages, black pudding and eggs that were there the day before have vanished. 

While throwing the empty carton of orange juice into the bin a few minutes later, to my surprise I spot my uncooked breakfast.

On investigation, my wife explains that the ‘best before dates were for Saturday’.  So alas I had to content myself with the ‘healthy option’ of Bran Flakes and a banana and toast.  ‘No harm’ I hear those that know me say.

It did get me thinking about the difference between ‘best before’ and ‘use by’ dates, and the thousands of €’s that we needlessly throw away each year.

For the purposes of educating myself and my wife, I came across the following useful website by eatwell.gov.uk

I now have the definitions of ‘best before’ and ‘use by’ stuck to the fridge.

 

 

Brendan Lee

1% Levy on Unit Linked Funds could be extended to other investors.

Published February 16, 2010 Ask the Experts , Investments Leave a Comment

Last weeks Finance Bill cleared the way for a 1% tax on Unit Linked Funds. This charge will mean a tax of €99 on an investment of €10,000. This charge could be extended to funds from banks, stockbrokers and overseas investment providers if the insurance industries lobby is successful as they feel it is unfair to exempt these groups.

The Finance Bill lifted the fee from pension contributions as the government feared it would discourage people from investing for retirement.

The levy could be more than €700 for investors contributing €250 per month over a 15 year time frame and this will be in addition to the existing charges.

Now more than ever it is vital that investors get independent advice on the type of investment plan they go for as tax and charges are a constituent part of a much larger decision making process.

- Steve Garavan

Why use a Qualified Financial Advisor?

Published February 5, 2010 Ask the Experts , Managing Your Money Leave a Comment

There are many reasons why someone may use a qualified financial advisor.

One of the most common is that financial planning can be complex, particularly when considering retirement planning when tax issues arise.

 The rules and legislation surrounding this area of financial planning are constantly changing and it can be difficult to keep abreast of all the changes and how they can affect you or your retirement plan.

Even when your situation is not that complex very few people take the time to re-consider their goals, then develop or amend the appropriate strategy to achieve those goals. For couples, goals can be quite different and a QFA has a key role to play when advising clients through this.

There are certainly many people who are very aware and well read and are capable of managing their own financial affairs in relation to retirement planning. However some do not have either the inclination or the time to do so.

For example for someone in a very responsible or senior position, they often are time poor and value their leisure time.

For those who enjoy managing their own money guidance from a Qualified Financial Advisor is likely to be extremely valuable in checking whether your goals and financial arrangements are coming together. They should also ensure that you are using the most up to date tax allowances and exemptions. However engaging on an ongoing basis may not be necessary or appropriate.

It will cost nothing more than an investment in time to check it out!

-Boyd Scott

Personal Annual Budget Planner

Published February 2, 2010 Managing Your Money , Money Saving 1 Comment

If you’re feeling strapped for cash and wondering where all your salary is going then you might find our free Personal Annual Budget Planner useful. This is a spreadsheet we’ve put together that will help you to identify your personal and household incomings and outgoings and track them on a monthly basis.

Complete the planner now for the year ahead, but monitor and update it at the end of each month. Checking your bank statement can be a really useful way of pinpointing what is going on. After a few months you’ll have a much clearer picture of where all your money is going.

Download your Personal Annual Budget Planner – Click Here

If you’ve any questions/comments or ideas on how we can improve this, please leave a comment below.

- Brendan Lee

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