It can all change in a moment

Today I spoke with my friend and client John (not his real name) in Wexford. John is 40, married and has 2 young daughters. I have known him 15 years during which time his career has had its ups and downs, he has had problems with his mortgage payments and  debt but right now he’s on the way back up. He started a new business 6 months ago and it’s starting to blossom. Perhaps nobody’s life is perfect, but his is pretty good.

John had a near death experience yesterday. In a moment everything changed.

Driving to Cork for a business meeting at 5km over the speed limit (sound familiar?) he suddenly lost control of the car. A greasy road after the warm spell or perhaps oil, who knows? The car careered towards the ditch as John wrestled frantically with the controls. For a moment he had it but then lost it again. The car spun violently, then slid over the road into the path of an oncoming truck. “Game over”, he thought, as he was flooded with images of his daughters growing up without him.


The driver of the truck did his best to avoid hitting John but it all happened just too fast. David and Goliath collided head on. The car was propelled violently backwards and was killed by the impact in a crescendo of screaming tearing metal followed by complete silence. The truck was overturned off the side of the road and the car behind John was driven into a wall to avoid the main players. The world stopped and the air was full of fuel and burnt rubber. And then came the miracle.

All three drivers walked away from their cars without any obvious injury among them. As a precaution John was taken away by ambulance and then it really hit home. How would my family have coped without me? Within minutes he was starting to come back to himself and with a wry inner smile he remembered the life assurance policies I had “sold” him. Today on the phone he said he now knows what my business is really about – Looking after families.  

Good Financial Housekeeping

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NPPR Bites Landlords

Landlords – Beware of the Non-Principal Private Residence (NPPR) charge, or its late payment penalties more to the point. This charge has been payable since 31/07/2009 and at only Euro 200 per annum per property, it doesn’t sound too bad. Wrong!

The penalties for late payment are Euro 20 per month per year of charge per property and it is up to the owner to register for the charge. This is not made easy by the website as you have to type in illegible words that appear on the screen just to log in. Staff have been told many times that this was the reason a landlord didn’t register for the charge. After the initial charge for 31/07/09, all future due dates were 31st March. If you are only now getting around to paying the charges for the first time you will see that the penalties equate to an extortionate rate of interest

31/07/2009 Was 200 – now 820

31/03/2010 Was 200 – now 660

31/03/2011 Was 200 -now 420





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Income Protection article from

Income protection How IP works

hospital bedIncome protection will cover you if you are unable to work due to accident or  illness

Millions of us have policies like critical illness, private medical insurance  and payment protection, sold to us over the years by salespeople who convinced  us we needed protecting. However, whilst they were right about the protection,  they were wrong about the policies.

The one protection policy every working adult in the UK does need is the very  one most of us don’t have – income protection (IP).

What is IP?

IP is an insurance policy which provides you with a regular tax-free income (In Ireland the benefit is subject to income tax, but the premiums attract tax relief) if you can’t work because of illness or disability. The benefit paid is up to a  maximum percentage of your earnings – often 50% or 60%. (Note that in Ireland the maximum benefit is 75% of earnings, less Social Welfare. )

Policies pay out after you have been off work for a period of time known as  the ‘deferred period’, and will continue to pay out until you can get back to  work or until the end of the policy term – usually retirement.

You can choose a deferred period of four, 13, 26 or 52 weeks, (In Ireland some companies are offering shorter deferred periods) depending on  how long you may be able to survive on any savings or how long you receive sick  pay from your employer.

The longer the deferred period, the lower the cost – for example, with some  policies a four week period would cost more than twice as much a month than a 26  week deferred period.

Do I need it?

Ask yourself the following questions. If your answer is no to all three, then  you need some form of IP:

  • Will your employer continue to pay you a percentage of your salary  indefinitely if you are off sick?
  • If not, and you are part of a couple, could you pay all the bills and live  on your partner’s income indefinitely?
  • If not (or you are single) do you have savings you could live off  indefinitely?

Remember: Illness, accident or disability can happen to  anyone. Currently (in the U.K.) 2.2 million people of working age will be off work for at  least six months because of sickness and disability, and more than 2.6 million  people are claiming incapacity benefit.


Which policy should I go for?

There are three main types of policies you can choose from; guaranteed,  age-related and reviewable.

Guaranteed: The amount you pay stays the same throughout the  policy term. The premium will only go up if you increase the cover. Most cost  slightly more to start with, but we believe they are best if you can afford the  extra cost.

Reviewable: These policies are reviewed by the provider  after a set number of years, typically every five, at which point the premium  may go up. However they tend to start off cheaper than guaranteed policies.

Age-related: These policies are good for people in  higher-risk jobs or for women and smokers because these factors aren’t always  taken into account when deciding the premium. Starting off cheaper than  guaranteed and reviewable policies, the catch is that the premium will go up  each year as you get older.

What will it cost me?

Premiums can vary hugely and cost is based on your gender (women pay more  than men); occupation; general state of health; whether you smoke and the level  of cover you need.

For example, a non-smoking man aged 30 in an administrative job could pay  between £17 and £36 a month for a policy that paid out £1,000 a month benefit  after 26 weeks. However a painter and decorator of the same age could pay  between £35 and £112 a month, depending on the provider. (These are U.K. figures but provide a reasonable guideline.)

Age-related policies don’t take gender, occupation or whether you smoke into  account.

Good Financial Housekeeping

How your job affects what you pay

Your job can affect how much you pay for a policy (except with age-related  schemes).  Most insurers group jobs into four categories of risk, though  some have more.

We asked income protection providers to tell us how they grouped jobs, and to  give us examples of jobs in each class.

Here are some examples, but be warned – the same job may be treated  differently by different providers.

  • Class 1: Professional, managers and administrative staff.  Limited business mileage. Admin clerk, computer programmer, secretary
  • Class 2: Some workers with high business mileage over  20,000 miles a year. Limited light skilled manual work. Engineer, florist,  shop assistant
  • Class 3: Skilled manual workers and some semi-skilled  workers. Care worker, plumber, teacher
  • Class 4: Heavy manual workers and some unskilled workers.  Bar person, construction worker, mechanic

Good Financial Housekeeping

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ECB interest rate reduction expected today

Mortgage holders are expecting that Super Mario will announce an ECB interest rate reduction today of at least 0.25%.  A reduction of  Euro 104.17 interest per month (Euro 1,250 p.a) on a Euro 500,000 mortgage would be very welcome, especially now that we have had a chance to appreciate how Budget 2011 will impact on our income and expenditures. Some people are expecting a full 0.50% cut, but most seem to think that will be something to look forward to for early 2012.  Of course, only tracker rate mortgages are guaranteed to fully benefit from any rate reduction, although it seems likely that “government sponsored” AIB and Permanent TSB will be encouraged to pass on any reduction.

Permanent TSB continues to charge variable rate customers very high rates in an attempt to subsidise losses on their tracker mortgages. If you are on such a variable rate, it may be worth closely examining your loan documentation including any letter you signed when the lender issued choices following the expiry of a fixed rate.  Did the lender warn you that a particular choice of rate might mean never having access to a tracker rate in the future? Let the games begin.

The Loan Arranger

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Property in Irish December 2011 Budget

Investor Issues

In 2010 the FF/Green government announced its plans to bring the property incentive schemes to an end. Given the serious mortgage arrears situation with investors (official figures are that 37,000 of investor loans are in arrears of 90+ days), the current government has decided not to proceed with any part of the previous plan in this area.  Bear in mind that a large number of these investors are “ordinary people” who were incentivised by Irish governments to help rejuvenate areas such as Dublin city. It is hard to believe that a government could encourage people into buying the properties on the basis of tax incentives and then try to remove those incentives years after the investor had entered into a long term commitment. These people would have released equity from the family home and borrowed the balance of the purchase price by way of a mortgage secured on the investment property. When values rose, many would have released further equity and bought more units. With interest only mortgages, the plan was to sell some of the properties at the end of the mortgage term and hopefully be able to hold on to one or two, so that the rental income would be a pension. In these cases it is unlikely that the investors ever made a taxable profit to date, but having the Section 23 Allowance would mean that sometime in the future there would be something to offset against a rental tax liability when rents rose sufficiently.

There are however a few points to note:

-If you earn over €100,000 and avail of property incentives, then that part of your income relieved from tax will be subject to 5% surcharge.

– If you are a PAYE worker, then your rental income will be subject to PRSI from 2013 onwards.

 – If you have invested in accelerated allowance schemes like crèches, hotels or multi-storey car-parks, then the carry forward of these reliefs beyond the tax-life of the building concerned is abolished. This has the potential to impact more on those with lower income levels, but the schemes were generally targeted in a more focused way at high earners so potential impact is minimal, i.e. €25 million (after 2015) according to Budget estimates.

– There are no further restrictions on mortgage interest relief for investors. 75% of the interest paid continues to be allowable as a deduction, although originally this was 100% when people bought their properties.

 In fact, if you are interested in investing in property, there is some really good news here:

  1. Rates of stamp duty on commercial property have now been reduced to a flat rate of 2%. (This is good news for the very wealthy who can pick up good commercial properties very cheaply and achieve high yields.)
  2. Any property bought between now and the end of 2013 which is held for 7 years will be exempt from capital gains tax.  No reference has been made to the residence of the purchaser, potentially leaving this open to the non-resident market as well as major property investment funds. (Even better news for the very wealthy!) 

Given that property is considered by many to be the root of all our current economic woes, and property investors in particular, kick-starting this sector is certainly an unexpected move. However, with the banks still reluctant to lend, these changes will benefit those who have cash available to buy, severely limiting the potential upside. (Expect the very wealthy to make a killing. Plenty of our property stock will be bought at rock-bottom prices by cash from America and China.)

Occupier Issues

Mortgage interest relief is increased to 30% for First-Time Buyers who bought their homes between 2004 and 2008. This is estimated to cost in the region of €52 million.

Current rates of mortgage interest relief will be extended into 2012 both for first-time (at 25%) and non first-time (at 15%) buyers. The abolition of mortgage interest relief from 2018 has also been confirmed.

For people in difficulty with their home mortgages, the Minister has promised a formal announcement ‘shortly’. We’ll wait and see. If you are in trouble and the property is not your home, then you’re on your own. The existing Mortgage Arrears Resolution Process introduced in 2010 and modified in 2011 is only concerned with homeowners. Fortunately our firm has been working in this area for some time, so feel free to contact us at Good Financial Housekeeping/Lucas Mortgage Finance, if you need help.

Good Financial Housekeeping

The Loan Arranger

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Pensions from former employments

In Ireland we expect to change employers several times over our working lives. Each time we leave we are faced with some options on the defined contribution staff pension scheme:-

– Transfer to the pension scheme with the new employer

– Transfer to a personal retirement (Buy-out) bond

– take a refund of own contributions, less income tax, where less than 2 years contributions have been made.

For most of us, we defer any decision and just leave the money there until we feel we are settled in the new job. However, life is changing all the time so often several years can pass before any thought goes into the old pension scheme.

During that time former staff members may not receive any updates on the scheme and consequently don’t know what’s happening to their share of the fund. It is important to find out what is happening and to consider taking more control over this investment. For example, some schemes automatically switch former staff members to cash holding accounts when they leave the employment. These funds will not lose money but will never make any either. This could be a shock after 20 years!

Ask yourself:

1. How can I get accurate and timely information on fund performance and any costs being incurred?

2. What investment fund switching options are available to former staff members?

3. Is my personal attitude to risk consistent for instance with the level of equity exposure in my fund?

4. Is there any ongoing investment advice available to me?

If you are unhappy with the answers and want to take more control, a personal retirement bond may be the answer. As well as having multiple investment fund choices and a known cost structure, many brokers can offer to transfer your funds from the former scheme with 100% allocation. This means that nothing is taken out by the receiving life assurance company on the transfer. More importantly the experienced broker will be happy to arrange for 6 monthly reviews of your pension fund performance and ongoing fund choices. This should be invaluable.

Good Financial Housekeeping

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Life Assurance Market Research

One of the life assurance companies has representatives calling to our doors in the evenings for “market research”.  I have been asked me about this, given that I have operated as an independent life assurance and mortgage broker in the industry for many years.

1. The idea of the research is purely to generate sales leads. This is not a bad thing given the relatively low level of family protection cover in Ireland and the poor level of adequate pension provision. If you do agree to an appointment, make sure you get a detailed review of your current position, which should include the financial implications on the family of a premature death or illness.

2.   When faced with proposed solutions, bear in mind that the representative can only offer the most suitable products from that one insurer. Is there a better way?

Traditionally the word “broker” for life assurance means a regulated intermediary which has at least 5 life assurance company agencies. For instance, we have agencies with Aviva, Caledonian, Canada Life, Friends First, Irish Life, New Ireland, Standard Life and Zurich Life. Any life assurance member of P.I.B.A. (Professional Insurance Brokers Association) can offer such independent advice. We are listed on the website as “The Loan Arranger Ltd t/a Lucas Mortgage Finance”.  We also trade as “Good Financial Housekeeping” which better describes what we do these days.

The Loan Arranger

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ECB reduction is good news for mortgage holders

Well done Super Mario for yesterday’s ECB interest rate cut. That’s a saving of €2,500 per annum for those unlucky enough to have €1 million on interest only.

Another cut by December could be on the (Christmas) cards!

Good Financial Housekeeping
The Loan Arranger

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Cutting telephone and broadband costs

I have had 2 traditional phone lines and a DSL broadband facility in my home office for several years, but have been paying too much. After helping clients to reduce costs on many monthly items of expenditure, it was about time I looked at the one item of my own which I hadn’t bothered to review. I overcame my natural reluctance to risk service disruptions in changing my phone and broadband suppliers and made those changes.

Before the change:

Imagine fixed line rental  €25.36

UTV fixed line rental + voicemail + free national calls €33.86

UTV Internet 7.6mb broadband + unlimited download €29.98

Total fixed cost = €89.20 per month.

After the change (to UPC):

Fibre power broadband 25mb   €35.00

Phone with Anytime World        €10.00

Additional phone line                   €6.00

Total fixed cost = €51.00 per month

Monthly saving = €38.20

I was happy with this saving, but also better off having improved my real broadband speed from 4mb to about 23mb. In addition, I now have 400 minutes per month to foreign landlines at no extra cost!

Although I had not planned to look into the UPC television service, I then wondered whether it was time to say goodbye to Sky. Not wanting to be too hasty, I decided to try out UPC by opting for the Digital Select Extra TV package in one bedroom. The UPC bundles can be a little confusing on the website, but the net result was that my revised total package comes to €76 per month. I have still saved money and now have an additional TV service, as well as fast broadband. My next step will be to get rid of the Sky TV monthly bill of €48 for 2 rooms and replace it with UPC for just €10 per month! (UPC charges €5 per additional room, provided you already have their TV service installed.) My total savings on this project will then be €51.20 per month comparing before and after. Not bad!

By the way, the changeover was pretty smooth too and the UPC customer care staff were very helpful with my queries. Neither I nor my company has any kind of business relationship with UPC, so unfortunately there was no gratuity forthcoming. If only I could say something nice about the banks….

Paul Lucas

Good Financial Housekeeping

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Bruised, battered and bewildered by the banks

Extract from CONOR POPE Irish Times 05/09/2011:

Last week, the realisation that mortgage debt was a massive problem seemed to dawn on the Government for the first time with the Minister for Finance Michael Noonan saying he now intended to make the issue “a priority”. Such a statement is long overdue. According to figures released by the Central Bank last Monday, the number of people in arrears of 90 days grew by 5,000 in just three months and it is only likely to get worse in the months ahead. A report by a group of civil servants and bank representatives on mortgage debt is to be published later this month and it may recommend some class of debt relief scheme for struggling mortgage holders. The problem of huge and unsustainable debt is causing untold stress for tens of thousands of people, not just those in arrears.  While the banks claim to be engaging constructively with hard-pressed borrowers, many of the experiences would suggest they could be doing a lot more to resolve the difficulties people find themselves in. 

Conor’s article then quotes many individual stories from readers and from callers to the Today FM Ray Darcy radio show. The unsatisfactory responses from the lenders in these stories are disappointing, but it’s clear to me that people need help when dealing with their mortgage lenders under such stressful circumstances.  Having an experienced professional dealing with the banks on your behalf will take away a lot of the stress and is likely to produce a better solution on a more timely basis. Our sevice is a fee-based one, but for people who can’t pay a fee, there is a free service available from MABS, including its website which has a lot of useful information.  

Make contact with your lender as early as possible, is my suggestion. Depending on the initial response you get, decide whether you want to deal with the bank yourself with the assistance of MABS or if you may be better served by working with people experienced in this area.

The Loan Arranger

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