McCarthy Mar Newsletter - d1180117-1.cp.blacknight.com€¦ · McCarthy and Keith Finnegan. To have any financial questions answered during the debate you can telephone Galway Bay

www.financialconsultants.ie

WE PROVIDE A RANGE OF FINANCIAL SERVICES- Personal Financial Check- Investment Advice- Banking Advice- Share Transaction Service- Income Protection- Deposit Rates

General Financial Advice- Life Cover- Serious Illness Cover- Income Protection- Redundancy Advice- Retirement/Pension Advice

March 2011Volume 9 Issue 1

Inside this issue we take a look at:

• Deposit Guarantee Scheme• Deposits on the move• Household Policy Claims• Health Insurance• EBS to be sold• New EU ruling• Pension Review• Capital Guaranteed Investments• Investment Decisions• Loan Protection Plans• Deposit Rates• DIRT• Mortgage Rates• Regular Savings• Property Investors• Banking Advice

MoneyTalkTune into the weekly financial

debate called “MoneyTalk” every Thursday morning at 10:45am on Galway Bay FM with DavidMcCarthy and Keith Finnegan. To have any financial questionsanswered during the debate youcan telephone Galway Bay FMon 091 770077 or email yourqueries to [email protected]

Deposit Guarantee Scheme Clarification

Some confusion exists amongst some depositors about the guarantee scheme that is in place for deposits. We would like to clarify for our readers the current position: · Under the Deposit Protection Scheme, €100,000 per account holder, per institution is covered. This is an EU wide scheme with no finish date and applies to all banks operating in Ireland. It also applies to capital guaranteed term investments, where a bank provides a guarantee on the capital invested.· For amounts in excess of €100,000, there is a second scheme called the Extended Liabilities Guarantee Scheme (ELG). This is the blanket scheme brought in by the government, which is renewed by the EU every 6 months. It applies to all deposits in excess of the limit outlined above, for investment periods up to 5 years, if with an Irish Bank.

We believe that the schemes currently in existence do provide comfort to depositors and we would not be concerned about the safety of monies in any of the institutions operating here.

WebsiteWe would like to invite readers

to check out our websitewww.financialconsultants.ie

regularly for new updates. Tellyour friends and colleaguesabout us. We are just a click

away!

If you need assistance with any of the articlescovered in this issue we are here to help you.

McCarthy & Associates Financial Consultants Ltd. is regulated by the Central Bank of Ireland.

McCarthy & Associates Financial Consultants Ltd.



EU to ban gender

differential for Life

Assurance PremiumsThe EU in a ruling has decided that the differential premiums between male and female, which has always existed, should be abolished. In relation to Life Assurance, it has always been the case that women are considered to have a longer lifespan and accordingly attract a lower premium that their male counterparts. The EU has now ruled that this is inequitable and that the same premium should apply to both. Indications from the Life Assurance Industry suggest that this could lead to an interest in premiums for new policies by December 2012.

Review your Pension FundConsiderable evidence exists that individuals with Personal Pension Plans rarely review how their monies are invested. This is because there is a perception that you cannot move from one Pension provider to another or change the fund that you have. A considerable number of people usually continue up to retirement age without ever reviewing it.

The financial world is continuously changing and as a result you should review your Pension every 5 years and where necessary either change the fund or possibly consider moving to another Pension provider who can offer you a more attractive product.

Prior to making any decision with regard to your Pension you should

obtain professional advice.

“…you should review your Pension every 5 years and where necessary either change the fund…..”

our house policies at the time of renewal. It is quite clear that there is a concise attempt by insurers to invalidate claims where at all possible. This will result in us all having to do a bit more homework at the time of renewal.

Health Insurance

Costs SoarAs you will be well aware,

recent announcements from a variety of insurers has

resulted in major increases in premiums. It is advisable for policyholders to review the

plans that they currently have and look at ways of possibly

reducing your cover or changing to an alternative

provider.

Considerable confusion exists when comparing plans from one company to another, as each policy offers different

benefits. A handy website to assist you in reviewing your

health insurance, which has a useful comparative tool -

www.hia.ie

EBS to be sold?At the time of writing, the government are in negotiations with the Cardinal Consortium to buy EBS. The primary members of this group are a US based private equity firm. Assuming that the sale proceeds, this certainly can be seen as a possible vote of confidence in the future of this country, not alone for the economy but also for some potential that exists in the Irish Banking Sector.

After all, private equity firms have only one agenda and that is to make a profit on their investments. They certainly would not be looking to take a stake in an Irish Financial Institution if they did not see potential.

Householders experiencing

claims difficultiesAs we are aware the last 2 winters have

seen an increase in claims against house

insurance policies. Some claimants are

experiencing difficulties with their claims. We

have outlined some of the problem cases

that we recently encountered:

• Policyholder submitted a claim for

€6,000 of water damage. The insurer

informed them that they would only

cover half of the claim as they

maintained that the house was under

insured. This came about due to the

fact that the policyholder, at the time of

renewal, estimated the rebuilding costs

of their house, and accordingly they

reduced down the buildings cover. The

insurance company informed them that

this figure was lower than their

guidelines and accordingly would only

pay half of the claim for the water

damage. This case is ongoing.

Another policyholder submitted a claim for

jewellery stolen from their home. Whilst the

insurer agreed to pay the claim, they would

only offer it in the form of a voucher for a

designated jewellery shop. Usually in such

circumstances a claim would be settled

through a monetary payment.

• Policyholder submitted a claim for

substantial water damage as a result of

a burst pipe. In this case they had

moved out of the house for a couple of

days while the renovation work in the

kitchen was carried out. It was proven

that the burst pipe problem had nothing

to do with the renovation work; however,

the insurer is attempting to invalidate

their claim as they state that they should

have been informed that renovations

were going to be carried out on the

house. Obviously, policyholders are not

aware of the detail of their policies in

this regard. The case is ongoing.

All of the above and a litany of others point to the fact that we need to look closely at

Householders experiencing claims difficultiesAs we are aware the last 2 winters have seen an increase in claims against house insurance policies. Some claimants are experiencing difficulties with their claims. We have outlined some of the problem cases that we recently encountered: Policyholder submitted a claim for €6,000 of water damage. The insurer informed them that they would only cover half of the claim as they maintained that the house was under insured. This came about due to the fact that the policyholder, at the time of renewal, estimated the rebuilding costs of their house, and accordingly they reduced down the buildings cover. The insurance company informed them that this figure was lower than their guidelines and accordingly would only pay half of the claim for the water damage. This case is ongoing. Another policyholder submitted a claim for jewellery stolen from their home. Whilst the insurer agreed to pay the claim, they would only offer it in the form of a voucher for a designated jewellery shop. Usually in such circumstances a claim would be settled through a monetary payment. Policyholder submitted a claim for substantial water damage as a result of a burst pipe. In this case they had moved out of the house for a couple of days while the renovation work in the kitchen was carried out. It was proven that the burst pipe problem had nothing to do with the renovation work; however, the insurer is attempting to invalidate their claim as they state that they should have been informed that renovations were going to be carried out on the house. Obviously, policyholders are not aware of the detail of their policies in this regard. The case is ongoing.

All of the above and a litany of others point to the fact that we need to look closely at our house policies at the time of renewal. It is quite clear that there is a concise attempt by insurers to invalidate claims where at all possible. This will result in us all having to do a bit more homework at the time of renewal.

Health Insurance Costs SoarAs you will be well aware, recent announcements from a variety of insurers has resulted in major increases in premiums. It is advisable for policyholders to review the plans that they currently have and look at ways of possibly reducing your cover or changing to an alternative provider.

Considerable confusion exists when comparing plans from one company to another, as each policy offers different benefits. A handy website to assist you in reviewing your health insurance, which has a useful comparative tool www.hia.ie

EBS to be sold?At the time of writing, the government are in negotiations with the Cardinal Consortium to buy EBS. The primary members of this group are a US based private equity firm. Assuming that the sale proceeds, this certainly can be seen as a possible vote of confidence in the future of this country, not alone for the economy but also for some potential that exists in the Irish Banking Sector.

After all, private equity firms have only one agenda and that is to make a profit on their investments. They certainly would not be looking to take a stake in an Irish Financial Institution if they did not see potential.

EU to ban gender differential for Life Assurance PremiumsThe EU in a ruling has decided that the differential premiums between male and female, which has always existed, should be abolished. In relation to Life Assurance, it has always been the case that women are considered to have a longer lifespan and accordingly attract a lower premium than their male counterparts. The EU has now ruled that this is inequitable and that the same premium should apply to both.

Indications from the Life Assurance Industry suggest that this could lead to an interest in premiums for new policies by December 2012.

Review your Pension FundConsiderable evidence exists that individuals with Personal Pension Plans rarely review how their monies are invested. This is because there is a perception that you cannot move from one Pension provider to another or change the fund that you have. A considerable number of people usually continue up to retirement age without ever reviewing it.

The financial world is continuously changing and as a result you should review your Pension every 5 years and where necessary either change the fund or possibly consider moving to another Pension provider who can offer you a more attractive product.

Prior to making any decision with regard to your Pension you should obtain professional advice.

“…you should review your Pension every 5 years and where necessary either change the fund…..”


Capital Guaranteed Investments attracting

depositors?With interest rates at such low levels, considerable evidence exists to show that many individuals are moving funds from a Bank Deposit into a Term Investment that has Capital Guarantees attached. Moving to a Capital Guaranteed investment will not expose you to any greater risk than a bank deposit

but offers the potential for enhanced returns. A considerable variety of these investments are currently available which also have deposit elements attached to them. These range in periods from 3½ to 5 years. Contact us if you wish to obtain further details.

Mortgage rates increasing despite no change in ECB rateIt is understandable that some people will find it hard to understand why the interest rate on variable mortgages is increasing when there has been no change in the ECB rate. Unfortunately, the background to this relates to the financial position of Irish lenders, who are attempting to increase their interest rate margin on mortgages. It is a painful and unwelcome development in banking, where mortgage holders are now paying for the poor financial performance of these institutions over the last few years. As we speak it looks as if there is no intention either by the Central Bank or Government to curtail increases imposed by the banks. The worrying aspect of this is that these rate increases will be exacerbated when the ECB starts to move their rates.

Banks – Do they give advice?Many bank customers have experienced approaches from “advisors!” within their bank. This generally occurs when they are trying to get you to move some monies on deposit into one of their investment products.

It must be remembered that this is not “advice”, but rather “sales”. This is because they are only offering you products from their institution and not providing you with all the options that are available in the marketplace.

Let’s Keep In Touch!We have taken an initiative to obtain as many email addresses as we can for further mailshots, however, if you don’t remember getting a call from us please email or phone us.

Do you have a Loan Protection Plan?There is an incorrect perception amongst borrowers in relation to Loan Protection Plans. A Loan Protection Plan is an Insurance Policy taken out in respect of the repayments for either a Term Loan or a Mortgage.

The problem that exists is with the terms which apply to claims under these policies. For many years there has been a very high incidence of declined claims as the terms & conditions are so stringent.

If you have an existing plan it is advisable to review the terms & conditions under which you can make a claim, and if you are not satisfied you should consider cancelling it. The cost of such a plan is considerable and we strongly advise anyone considering taking out a new policy to think very carefully before they do so.

“if you have an existing plan it is advisable to review the terms & conditions….”

Property InvestorsLife Cover Scare

As we are aware many people bought investment property during the boom. A large number of lenders did not insist on Life Cover for these loans, as the mortgage market was so competitive.

These property investors may now be facing a considerable problem if they did not independently decide to take out Life Cover themselves.

Considering that a lot of these properties are now in negative equity, the problem arises on death. The lender may decide to pursue other assets held within an individual’s estate after their death, to recoup the shortfall on any loan balance outstanding.

It is important to have an adequate Life Policy in place to cover all your borrowings.

Call us for advice ondeposit rates

Currently the most attractive rate available is generally 3.5% gross for a period of 1 year. However there can be variations on this rate with different institutions and also alternative terms for different deposit periods. For an update on deposit rates, kindly contact us.

Over 65’s – DIRT Exempt?There is a perception that just because you are over 65 that you are not liable for DIRT on deposit interest. To qualify for an exemption from DIRT, your main income must also be below the following thresholds: Single/Widowed: €18,000Married: €36,000



These property investors may now be facing a considerable problem if they did not independently decide to take out Life Cover themselves. Considering that a lot of these properties are now in negative equity, the problem arises on death. The lender may decide to pursue other assets held within an individual’s estate after their death, to recoup the shortfall on any loan balance outstanding.


“…It is important to have an adequate Life Policy in place to cover all your borrowings …..”

Property Investors-Life Cover Scare

Do you have a

Loan

Protection

Plan?There is an incorrect perception amongst borrowers in relation to Loan Protection Plans. A Loan Protection Plan is an Insurance Policy taken out in respect of the repayments for either a Term Loan or a Mortgage.



Mortgage rates

increasing

despite no

change in ECB

rateIt is understandable that

some people will find it

hard to understand why

the interest rate on

variable mortgages is

increasing when there has

been no change in the

ECB rate. Unfortunately,

the background to this

relates to the financial

position of Irish lenders,

who are attempting to

increase their interest rate

margin on mortgages. It is

a painful and unwelcome

development in banking,

where mortgage holders

are now paying for the

poor financial performance

of these institutions over

the last few years. As we

speak it looks as if there is

no intention either by the

Central Bank or

Government to curtail

increases imposed by the

banks. The worrying

aspect of this is that these

rate increases will be

exacerbated when the

ECB starts to move their

Capital Guaranteed Investments attracting depositors?With interest rates at such low levels, considerable evidence exists to show that many individuals are moving funds from a Bank Deposit into a Term Investment that has Capital Guarantees attached. Moving to a Capital Guaranteed investment will not expose you to any greater risk than a bank deposit but offers the potential for enhanced returns. A considerable variety of these investments are currently available which also have deposit

elements attached to them. These range in periods from 3½ to 5 years. Contact us if you wish to obtain further details.

Call us for advice on

deposit rates

Currently the most attractive rate available is generally

3.5% gross for a period of 1 year. However there can be variations on this rate with

different institutions and also alternative terms for different

deposit periods.

For an update on deposit rates, kindly contact us.

Over 65’s – DIRT

Exempt?There is a perception that just because you are over 65 that you are not liable for DIRT on deposit interest. Your exemption from DIRT, if you are in this age category only applies if your main income is below the following thresholds: Single/Widowed: €18,000Married: €36,000

Banks – Do they

give advice?Many bank customers have experienced approaches from “advisors!” within their bank. This generally occurs when they are trying to get you to move some monies on deposit into one of their investment products.


Let’s Keep In Touch!We have taken an initiative to

obtain as many email addresses as we can for

further mailshots, however, if you don’t remember getting a call from us please email or

phone us.



These property investors may now be facing a considerable problem if they did not independently decide to take out Life Cover themselves. Considering that a lot of these properties are now in negative equity, the problem arises on death. The lender may decide to pursue other assets held within an individual’s estate after their death, to recoup the shortfall on any loan balance outstanding.


“…It is important to have an adequate Life Policy in place to cover all your borrowings …..”

Property Investors-Life Cover Scare

Do you have a

Loan

Protection

Plan?There is an incorrect perception amongst borrowers in relation to Loan Protection Plans. A Loan Protection Plan is an Insurance Policy taken out in respect of the repayments for either a Term Loan or a Mortgage.



Mortgage rates

increasing

despite no

change in ECB

rateIt is understandable that

some people will find it

hard to understand why

the interest rate on

variable mortgages is

increasing when there has

been no change in the

ECB rate. Unfortunately,

the background to this

relates to the financial

position of Irish lenders,

who are attempting to

increase their interest rate

margin on mortgages. It is

a painful and unwelcome

development in banking,

where mortgage holders

are now paying for the

poor financial performance

of these institutions over

the last few years. As we

speak it looks as if there is

no intention either by the

Central Bank or

Government to curtail

increases imposed by the

banks. The worrying

aspect of this is that these

rate increases will be

exacerbated when the

ECB starts to move their

Capital Guaranteed Investments attracting depositors?With interest rates at such low levels, considerable evidence exists to show that many individuals are moving funds from a Bank Deposit into a Term Investment that has Capital Guarantees attached. Moving to a Capital Guaranteed investment will not expose you to any greater risk than a bank deposit but offers the potential for enhanced returns. A considerable variety of these investments are currently available which also have deposit

elements attached to them. These range in periods from 3½ to 5 years. Contact us if you wish to obtain further details.

Call us for advice on

deposit rates

Currently the most attractive rate available is generally

3.5% gross for a period of 1 year. However there can be variations on this rate with

different institutions and also alternative terms for different

deposit periods.

For an update on deposit rates, kindly contact us.

Over 65’s – DIRT

Exempt?There is a perception that just because you are over 65 that you are not liable for DIRT on deposit interest. Your exemption from DIRT, if you are in this age category only applies if your main income is below the following thresholds: Single/Widowed: €18,000Married: €36,000

Banks – Do they

give advice?Many bank customers have experienced approaches from “advisors!” within their bank. This generally occurs when they are trying to get you to move some monies on deposit into one of their investment products.


Let’s Keep In Touch!We have taken an initiative to

obtain as many email addresses as we can for

further mailshots, however, if you don’t remember getting a call from us please email or

phone us.


Investment decisions made out of fear!

There is a general rule of thumb in the financial world, that if you make an investment decision as a result of “fear”, then generally you are making the wrong one. This has been the case over the last couple of years where individuals have taken a rash decision to move monies, generally from a safe deposit, into an alternative investment without considering the potential consequences. For example:

• Perception that gold is a safe investment. Gold is a commodity and fluctuates considerably in price. Accordingly it is considered to be a high risk investment and has the potential, if the price moves against you, to result in considerable losses. Commodities, including gold, should only be considered by very sophisticated investors.

• Like gold there is an incorrect perception that purchasing currencies such as the US Dollar or Sterling will safeguard your funds. Once again currency comes with a health warning similar to gold, in that there are continuous movements in exchange rates every day. If you do not fully understand how this market operates, then the potential for losses are considerable.

• Some depositors have had a kneejerk reaction to events over the last couple of years and moved their monies into other jurisdictions. In particular some of the monies have been transferred to the UK. Taking this step exposes your monies to unnecessary risk, as you are now taking a gamble on exchange rates. People who have taken this step are usually highly conservative in their outlook to risk, and it is contradictory if they expose themselves to the fluctuations of the currency market.

If you are a depositor and you have undertaken any of the above or are considering to-do so, please remember that the Deposit Guarantee Scheme structure in relation to your monies provides the security that may be causing you to be fearful. Details on the Bank Guarantee Schemes are outlined elsewhere in this newsletter.

A Home for Regular Savings

Statistics from the Central Bank show that the level of regular savings in Ireland has increased over the last few years. Historically a lot of these monies have been put into Unit-Linked Savings Plans with Life Assurance Companies. It has been our experience, however, that a lot of these plans perform poorly, and should only be considered for periods in excess of 7 years.

An alternative is to use the Regular Savings Deposit Accounts available from most banks which earn in the region of 4% gross. Depending on the level of monthly savings, once the balance of your savings reaches €5,000 p.a. or more then you should look at moving this lump sum into a capital guaranteed investment over 3-5 years. This type of system allows you to manage your money in a more efficient way than commencing a Savings Plan with a Life Assurance Company.

Anglo Irish Bank/Irish Nationwide Deposits on the

move!It was announced recently that the Deposit Books of Anglo Irish Bank and Irish Nationwide have been sold to AIB and Irish Life & Permanent respectively. This has come about as part of the winding down process of both banks.

Depositors will have been informed of the move and also the fact that you do not need to take any action as a result of this change.

We would however suggest that if you have a term deposit, when it comes up for renewal with either of these institutions that you contact us to check the most competitive rates available.

Disclaimer/CopyrightThe contents of this newsletter remain the property of McCarthy & Associates Financial Consultants Ltd and accordingly cannot be reproduced without permission. Views expressed are not recommendations and the company is not liable for any losses as a result. We recommend our readers to seek professional advice before undertaking any financial decision.

Weekly Blog Coming Soon…If you wish to receive our Blog,

please email us.

If you wish to receive this newsletter viaemail, please email us at:

[email protected]

Documents

McCarthy Mar Newsletter - d1180117-1.cp.blacknight.com€¦ · McCarthy and Keith Finnegan. To have any financial questions answered during the debate you can telephone Galway Bay