Donnellan & Co.

02/08/2018

Anything that helps participation in pensions is a good thing in my opinion. This article talks about allowing access to your pension for purchasing a family home. Something similar is already at work in New Zealand. Worth a try?

Large numbers of Irish people are not saving for retirement, and the Government is taking the very sensible step of ensuring that, from 2022, workers are automatically enrolled into a p

25/07/2018

Strong words from Karl Deeter in this article in the "Sun" today. I think I have been pointing this out for quite a while now......

KARL DEETER There’s a serious s**t-storm brewing and it’s called public sector pensions.

One in every seven workers gets to eat a steak meal every day that they can’t afford while the other six pick up the tab for the borrowing that pays for it.

IMAGINE you are out to dinner — this is the only time you will have a chance to eat so you have to eat now or not eat at all.

Now you look at the menu. There are lots of choices, some cheap, some expensive, but you really want the steak dinner, and it costs €25 but you only have €15.

So you decide to put the balance on a credit card, paying the €15 in cash and effectively borrowing the rest. This is no big deal — you only did it this once and after all, everybody has to eat, right?

The next step is to imagine that this is repeated every day, every single day you want to eat a dinner that is outside your budget and every day you borrow for it.

This is what the Irish State does every day in order to pay its way and feed itself.

We borrow, even though the economy is good and unemployment is low. Silly? Of course it is!

What most people don’t realise is that our official debt has a far scarier, dark side. When you make a promise to pay somebody it’s the same as a debt.

It may not be an actual debt but it becomes one, in effect.

If I promise to buy my son a car when he turns 18 it doesn’t show up on my credit bureau but do you think for a second that he isn’t going to call in that promise, and that if I renege it won’t cause massive problems? Promises that involve money are effectively debts.

I have covered this exact story before but recent figures warrant covering it again.

You see, we have a s**t-storm in the making in the form of our public sector pensions.

Public sector workers will defend this saying they ‘pay’ for their pensions. But they don’t, not in the sense that there is a tangible reality involved. They get a BMW for the price of a Fiat and these pensions are very costly.

Public sector pensions cost €3.4billion a year. By 2025 it will rise to €5.3bn and yet they’ll only be paying in €1.6bn the entire time.

The rest has to be made up by Joe Taxpayer — also known as ‘the fool’ to those in power.

By 2040 the cost will have risen to €7.3bn and because of the outright fear the Government has of pushing change on incumbent workers there is nothing we can do to change this. There are new rules for new entrants, though.

That’s the typical Irish solution — shaft the young. We saw the unions and Government do that to the new teachers and now they talk of all this need for ‘solidarity’.

Where was it when they signed up to the Croke Park agreement?

The total pension liability to Government workers — this doesn’t factor in regular State pensions which are also huge — is well over €100bn.

It’s insanity. Without devolving into whataboutery, it’s worth noting that the regular State pension is also a joke.

Someone who collects dole their whole life gets the same State pension as someone who worked hard.

Fair? Only if your idea of equality translates into ‘equal outcome’ and not ‘equal opportunity’.

What needs to happen — and what no politician has the requisite neck to do — is to say ‘look, we can’t afford this, you are all going to be given a certain value for your work so far and after that you join a scheme like any other worker where the State contributes in the here and now as do you’.

Until we do, that pension apartheid will remain, as will a bill we can’t afford.

But for now one in every seven workers still gets to eat a steak meal every day that they can’t afford while the other six pick up the tab for the borrowing that pays for it.

20/07/2018

Good piece on financial planning.

Time for a financial plan?
Financial planning isn’t just for the wealthy, it’s for everyone and the best time to start it is right now.

The subject of financial planning raises its head at this time every year, but if you kick the year off with a solid plan, you could be amazed just how much further your money goes and how quickly you can get your financial goals on track.

Here are five practical steps to help bring your plans to fruition.

Step 1: Build a clear picture
Building a financial plan - calculate net worth

Roll up your sleeves, print your bank statements and get real about the money flowing in and out of your accounts. This should include what you’re earning, spending, saving, investing and contributing to a pension. Look at assets like property too and don’t forget and the villain of the piece, debt.

The aim is to build a picture of what you’re worth and consider the changes you can make today, to plan for tomorrow.

You can even calculate your net worth using this simple sum:


Everything you own (e.g. equity in your home, savings or pension pot)
Minus
Everything you owe (e.g. any debt or outstanding mortgage)
Equals
Your financial worth


It might take a little time and effort to pull everything together, but’s a crucial first step and you’ll feel better once everything is more organised and all your important documents are in one place.

Step 2: Decide where you want to be
Building a financial plan - explore the options

Setting financial goals requires honesty, because you need to think about what’s most important to you and be realistic about how your future plans will be supported financially.

It’s quite likely you won’t be able to finance everything you’d like to, which means prioritising your ambitions and in some cases, making a few tough calls.

Primary goals might include, being mortgage-free by 50; funding your children’s college education, buying a bigger house, retiring early or starting your own business.

The very exercise of ranking your goals will help you focus and decide what matters most. It will also create momentum and take you one step closer to making them real.

Step 3: Cost your goals
Do your research and give your goals an accurate price tag. If college fees rank highly find out how much annual fees, accommodation and living costs are at some of the colleges your children have talked about and assume the costs will increase gradually over time.

If buying your ‘forever home’ is your top priority, find out how much it would cost to buy it or build it now. That way, you’ll know what the deposit, build costs, timescales and monthly mortgage repayments look like and you can make a call on whether it’s feasible or needs to be shelved for now.

If retirement is front of mind for you, think about how you want to spend it, and work out what it would cost to make it happen.

It’s only when you know how much you need, that you can work out the best way to get there. There are lots of great savings calculators out there and the Irish Life pension calculator could prove helpful.

Step 4: Plan to get there faster
You will get it eventually

Brainstorming ways to make and save money isn’t just good fun, it could actually prove incredibly fruitful.

Asking for a pay increase, taking on a second job or selling things you no longer use start to free up money to save and invest, or finance a new venture that would allow you to do both more successfully.

Look for obvious wins like the interest rate on your savings account and fees and charges that could be eating up any interest you’re making.

Remember, the higher the rate and lower the costs, the quicker your savings will grow, so don’t settle for an account that ends up costing you money after inflation has been factored in.

Step 5: Consider the alternatives and talk to an expert
Financial plan - expert advice

If you want to think beyond low interest deposit accounts, investing might be an option for better growth. Remember, investing doesn’t have to be high- risk, there are funds designed to satisfy every appetite and multi asset funds can give any investor affordable access to a diverse portfolio.

Check out: Saving and investment tips for any age

A financial advisor can help you create a plan that looks after your short-term needs and long-term goals, with practical steps and realistic milestones.

Give us a call for help with any plans you want to put in place at 091-871613.

16/07/2018

Good take on putting financial plans in place by Jill Kerby.

Do you make wishes or plans
By Jill Kerby, Personal Finance Journalist

‘Don’t forget to make a wish’ we say, as children blow out the candles on their birthday cake year after year.

As a child I wished for a cat, despite the fact my Dad was allergic. I wished for blonde hair like my Mother and sister, and to be an opera singer like my Great Aunt Alice.

Alice ended up marrying a millionaire admirer but alas, no operatic voice or blonde hair ever arrived for me and I got my own cat when I moved into my first apartment.

As a grown up, we know simply wishing for something to happen, won’t make it so and if a child asks us to make a wish now, we don’t automatically say we want to fly or live on ice-cream. We’re more likely to pause and think about how we’d use that wish, so it’s not wasted.

That’s a good reaction and one we should try to adopt more, because taking the time to really think about what it is you’d like to have, is so important. Things like a university education, a new career, a bigger home or a career break don’t just happen. You need to make realistic plans and do something to make them possible.

It’s the same story with building personal wealth. Ideally, it starts with good money habits from an early age and leads to a job that allows you to save, invest and let the real magic - compound interest – do its thing to help grow your money. Kick that process off early enough and two of the most common wishes of young people and their parent’s - home ownership and early retirement - are genuinely possible.

No one wishes for ‘Haphazard ever after’
finance sheet
It’s important however, to understand the difference between genuine financial planning and sporadically buying financial products like life and income protection insurance, investment funds and pensions policies.

A haphazard approach to your finances can be counter-productive and without proper planning, there’s no guarantee they’ll provide the long-term benefits you need them to deliver.

Financial advice can help
sign saying ask
With the help of a good financial advisor, you can look at your overall financial position, think about the bigger picture and consider the options around insurance, income protection, a pension and will.

A financial advisor can help you buy products with features and benefits that match your goals, ambitions and time frames. They can adjust it along the way too, as you reach key milestones and your priorities change.

Just like a trusted family doctor or solicitor, they can be a reliable source of information and advice as you move through life.

Getting started
book on a table
Inertia is the arch rival of wealth creation and financial planning isn’t everyone’s forte, but if you can’t commit enough time or attention to your finances, my advice is to get someone who can, or your money will never work as hard for you as you do for it.

There might be more exciting things you can think of doing, but once your insurance, pension or investments have been put in place, they’ll work away on their own for the most part and you can do the things you like most, safe in the knowledge that you and your loved ones will be well looked after, in the future.

The truth is, middle age creeps up on a person faster than they ever expect it to and with improved life expectancy putting pressure on state and corporate pensions that are already struggling, I believe a high percentage of the people reading this blog will be forced to fend for themselves by the time they reach retirement age.

For those of us who are close to, or have reached that landmark already, it’s a sobering thought, but one many of our young people are dismissing too easily. Leading management consultancy Mercer picked up on this a few years ago and reported that as many as seven out of 10 young people in Ireland choose not to join the occupational schemes offered by their employers, leaving millions of company pension contributions left on the table every year. That trend hasn’t improved unfortunately.

Source: Mercer.ie Newsroom article 15 April 2014
If you’re offered a pension, grab it with both hands!
street art saying yes!
When you join a pension scheme, you usually have an opportunity to ask questions, so it’s worth finding out if your company provides access (or even good contacts) to financial advice or a broker service. That way you can talk to someone trustworthy and find out more about things like insurance and investing.

You don’t have to buy every financial product that’s put in front of you, but knowledge is power and with good information you’ll be able to make well-informed decisions that could benefit you for the rest of your life.

In my experience, the best financial advisors understand the need for flexible, affordable plans that grow with you, allow for a few bumps along the way and maybe even a little wishful thinking.

27/04/2018

Pay and File – ROS extended deadline confirmed as 14 November

The extended Pay and File deadline for taxpayers who file and pay income tax via ROS has been confirmed as Wednesday 14 November. This deadline also applies to CAT returns and payments made via ROS, for gifts or inheritances with valuation dates in the year ended 31 August 2018.

PAYE taxpayers who are required to file a Form 12 for 2017 and opt to use the eForm 12, can also avail of the extended deadline.

18/04/2018

Article by Sinead Ryan in the Independent today. Spend, save, invest or lend? Depends on your life stage/risk profile!

While mortgage holders are fretting over a possible rise in interest rates signalled by the European Central Bank, savers are hoping it will materialise, as they’ve been sitting on non-

16/04/2018

Article by Charlie Weston in the Irish Independent. I think the thinking here is probably widespread. What is the alternative to property? There are alternatives, but in Ireland we appear to be focused solely on property. What do you think?

The lady was not for turning. She was adamant that property was the best investment, despite the country having recently emerged from one of the worst property crashes in the western world.

She was talking to me after I had spoken at a lunch-time seminar on ways to control household spending. The seminar was for staff at one of the larger investment firms, an outfit with a focus on consumers.

This means the woman has access to plenty of good advice on investing. But she wasn't listening when she came up to me after the seminar. It was one of those situations where someone asks a question when they are not really interested in the answer.

I insisted that property has a role in an investment portfolio, but stressed that a diversified investment strategy is crucial. She wasn't listening. She had a buy-to-let property and was planning on acquiring a second one.

No doubt she will have been cheered by the move by ICS Mortgages, which is owned by Dilosk, to offer 15-year, interest-only, buy-to-let mortgages. Fianna Fail finance spokesperson Michael McGrath has raised concerns about the interest-only mortgages, which he said posed very serious risks.

Dilosk is a regulated lender which bought the ICS Mortgages brand from Bank of Ireland in 2014. Its chief executive, Fergal McGrath, has said he is not concerned about the interest-only product. He said, under rules set out by the Central Bank, people seeking a buy-to-let mortgage have to have a deposit of at least 30pc of the property's value.

But the fear is that even more ordinary people will be encouraged to take out buy-to-let mortgages when they can avail of the likes of an interest-only option. This is despite our toxic history in this area. Around 30pc of investment mortgages are in arrears.

Property investment fans will argue that there are few alternatives. Banks and credit unions are paying little or nothing in interest on deposits. And anything that is earned is taxed at a steep rate of 38pc in Dirt tax.

The exit tax on investments sold by life insurance and investment firms remains at 41pc. Banks have lobbied in the past to ensure the juicy tax-free interest rates that were paid on State investments available through An Post have been decimated.

The big danger is that more people will be encouraged to take on buy-to-let mortgages because of interest-only options such as those offered by ICS.

Two things should happen to counter this risk - the Central Bank should ban interest-only investment mortgages, and interest paid on An Post State Savings should rise. If people had a decent alternative, they might not be so keen on property.

12/04/2018

To save or spend?

Spending by consumers in the Irish economy is set to break through the €100bn level this year, according to the Central Bank.

09/04/2018

Good take on life assurance and protection by Karl Deeter on the independent.ie website yesterday.

How ready are you for uncertainty? A recent survey by Irish Life found that half of people working in Ireland feel they are just three paydays away from financial uncertainty.

Half of adults overall claim their household would struggle financially if they suffered a long-term disability or died.

So much of what you hear about in financial news has virtually no impact on you, but what does have a massive impact are the real-life events of you and your loved ones.

Financial news headlines are a distant second to trying to find consumer solutions to real risks, so here are a few ideas.

The first obvious one is life cover, if you are single and have no dependents it's not so important, but if you do have dependents then it is.

Level-term policies are cheap and any good broker can show you how to get further discounts on them.

Even without dependents you may want to cover for the financial impact of serious disease or long-term disability with things like serious illness cover and permanent health insurance (PHI).

The former pays a tax-free lump sum if you have certain illnesses, non-communicable diseases being the biggest (cancer, stroke, heart attack), the latter pays you a monthly income after a certain deferred period.

You could engineer a PHI policy to just cover your mortgage, which is often a person's greatest outgoing. If you had a loan that was costing €1,500 a month then a policy that paid out about €20,000 a year would cover that and a typical house insurance and life insurance.

The monthly cost is about €40 but you get tax relief on that, so it could be more like €32 after you factor that in.

Insurance is all about acknowledging a risk and choosing to mitigate it at the lowest possible price.

If one in four will have a non-communicable disease prior to age 60 when life expectancy is 76 for men and 81 for women then it shows that those diseases are statistically more likely than death and yet we often insure for death and not for events that happen in life.

This is a mistake, if you don't want to insure against uncertainty you can try to create a savings which you keep aside to deal with the unknown.

But the problem there is that savings of after-tax income take time to build and once they are used up they are gone.

I have yet to meet a person who likes paying for insurance, but I have met many who were damn glad they had it when something went wrong.

is a financial adviser and compliance manager atmortgagebrokers.ie

04/04/2018

Some useful advice about providing for retirement.

Saving for retirement years isn't easy for anyone, especially with low interest rates, inflation creeping back up, and what can feel like a challenging investment backdrop.

29/03/2018

Interesting piece on investing and the behaviour/emotion.

Is it really that difficult to go against the herd? In a nutshell, yes

14/03/2018

Zurich Life are offering €100 to ex-Rabo Direct customers to switch.

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