Hot Topic #12 :The Cost of Education in Ireland

The Cost of Education in Ireland

We all want to give our children the best possible start in life and a good education is a top priority. However, this can be a lot more costly than you might realise.

The cost of putting just one child through school can easily run into tens of thousands of euro. If you have two or more children then you're going to have to dig even deeper to keep the educational roadshow up and running.

Latest research has revealed the cost of educating your children in Ireland, from your nervous goodbyes on their first day in primary school right through to your gushing pride on their college graduation day. Here's the breakdown of what you can expect to spend throughout your child's school years

Primary School Education

It all starts here; your child's first days at school are a big milestone. Their first day at school is also your first day of many years of (very worthwhile) expense and investment.

The average cost of sending a child to primary school each year is €490, with uniforms and books being the most substantial expenses. Capitation grants paid to primary and post primary schools have been reduced in recent years and parents have seen this reflected in the increased voluntary contributions they are asked to pay, now €90 on average in primary schools.

The total cost of 8 years' primary school education comes in at an estimated €4,000.

Annual cost €490;     Lifetime cost €3,920 (Source Barnardo’s School Costs survey 2015)

Secondary School Education

The cost of education gets even higher as your child moves into secondary school. The average annual cost of education for a child entering first year is €1,135. School books and transport are among the most sizeable expenses.

The move to secondary school also brings a greater number of 'other' expenses such as lunch money, sports gear, school trips and class essentials like ingredients for Home Economics or T-Squares for Technical Graphics.

If we allow for the fact that the bulk of school books will be bought in first and fifth year in the build-up to junior cert and leaving cert cycles respectively, the total cost of 6 years' secondary school education, extra expenses excluded is estimated to be €5,500.

Annual Cost €1,135;   Lifetime cost €5,510 (Source Barnardo’s School Costs survey 2015)

Third-Level Education

Whilst the average cost of sending a child to primary school and secondary school may seem excessive, the expense associated with third-level education leaves both in the ha'penny place. All "free-fees" third level institutions charge a mandatory student contribution of €3,000 per year for 2015/16 with no sign of easing in the medium-term.

Unfortunately, this student contribution is just one of the costs likely to be incurred when putting your child through third-level education, although they may well be able to help out with tuition fees by undertaking some part-time work by this stage; at least to cover some of the costs associated with their blossoming social lives!

Living at Home     Annual cost €3,495;  Lifetime cost €12,495

Living Away          Annual cost €6,726;  Lifetime cost €24,906

(Source:  DIT Student Cost of Living guide 2014/2015)

Given these figures, we estimate the minimum cost of education for children in Ireland from primary school to college graduation is €34,000*.

*Source Zurich Life based on data published in 2014/15

Don't leave it too late to plan!

Hot Topic #11: Annuities - update 11th May

Annuities

If you are at the stage in your life when you are thinking about retirement, or reducing your hours at work, you might want to consider how you can get more money from your pension. 

Why an annuity?

When you reach that stage in life when you want to start drawing on the money you’ve saved in your pension fund, a typical way to do this is to buy an annuity with money from your pension fund. An annuity provides you with a regular income for life, no matter how long you live.

When you are buying your annuity, you will normally be entitled to take a part of your pension fund as a tax-free cash lump sum. The remainder of your fund can then be used to buy an annuity. Alternatively, you can use your entire pension fund to buy your annuity.

There are a number of factors that will determine the amount of the annuity you are entitled to receive such as 

• age {50 to 80}, 

• have a qualifying medical condition, 

• are taking regular medication, 

• are overweight, 

• and / or are a smoker. 

This income may be higher than the income you could receive from a standard annuity.

Choosing the right option to provide an income for the rest of their life is a big decision. You don’t have to buy your annuity from the same company your pension is with so you are free to shop around and find the best policy and provider for You.

Shop around for the best deal.

 If you were buying a new house or car, it’s more than likely you would have a good look around the market to find what suits you and offers the best deal. You should do exactly the same when you start thinking about your income in retirement. This money is going to see you through the rest of your life, so it’s a big decision. It’s important to shop around because different companies will offer different rates for retirement income. The money from your pension fund has to stretch over a long time. Because of that, even the smallest difference in annuity rates can affect your pension income by hundreds of euros a year for the rest of your life. Compare quotes from different companies 

Your pension provider will offer you a rate for your pension income, through an annuity. Remember that you don’t have to take the first deal you’re offered. Your pension plan will likely include an open market option, which means you can shop around, looking at deals from other companies. Take some time with your Financial Adviser to get quotes from a number of companies and compare them against each other.

How much income will you receive? 

This question can only be answered when the Company have received certain information that they will use to calculate how much pension income you will receive. As the level of pension income you may get depends on your personal circumstances, it can vary from one person to the next.

They will look at all sorts of things to work out your pension income, including:

› The size of your pension fund 

› The annuity rates at that time

› Your age 

› Your health (if you’re applying for an enhanced annuity) 

› Whether you want to add your spouse/civil partner

› Your spouse/civil partner’s age

Hot Topic #10 - Income Protection – Income Security for your peace of mind

Income Protection – Income Security for your peace of mind

It makes sense to insure your home, your car and your family against the unexpected.

But what about your income?

What if you were to suffer an accident or long-term illness that prevented you from earning a living?

·         Would your employer pay you?

·         And if so, for how long?

Even if you are entitled to State benefits, you could still suffer a huge drop in income.

Income Protection is designed to provide you with an alternative income if you suffer an illness or injury, which prevents you from working.

It’s different from Health insurance – it's insurance for daily living.

You may also be entitled to claim Tax Relief on some or all of the premiums that you pay.

When illness or injury leave you unable to work you need the financial security of a product that keeps you on top of the bills that matter … mortgage payments, car loans, food bills, rent and more.

After all, your income pays for everything.  Income protection helps take care of your financial needs while you are focusing on recovery at a time when money worries should be the last thing on your mind.

Take a moment to think about how you would pay these normal household bills without an income.

‘I'm healthy - It won’t happen to me’

 It is easy to think that ‘it won’t happen to me’, but below we highlight a number of statistics that you may find surprising.  Illness or injury can happen at any time!

•          One in three people in Ireland will develop cancer during their lifetime.

Source: Irish Cancer Society, Central Statistics Office, June 2013

•          An estimated 30,000 people are living in the community with disabilities as a result of a stroke

•          While life cover pays out after you die, Specified Illness and Income Protection cover pay you while you are living.  You need the benefit of financial assistance at these difficult times, which is why they are often referred to as living benefits.

•          With medical advances, people are more likely to survive serious illnesses but this means that more people are likely to take prolonged periods off work for treatment and recovery.  This could have a huge impact on their ability to earn.

•          Even for those who have savings in the bank, a long term illness or period of time out of work could mean real financial hardship without a plan to replace earnings.

In a survey of Friends First claimants, all of them ranked Income Protection as the most important type of insurance to have over any other. 

If you would like to talk about this or need any other financial advice,

please call Michael on 086 8440541 or email info@mkfinancial.ie  to arrange an appointment.

Michael Keville T/A MK Financial is regulated by the Central Bank of Ireland

Hot Topic #9 : Protection for co-habiting couples

Protection for co-habiting couples

1 in 10 adults in Ireland are co-habiting.  Are you one of them?

Most people are aware that inheritances passing between married couples or registered civil partners are exempt from inheritance tax but this exemption only applies for “legal spouses” and “Registered Civil Partners”. 

All other co-habiting couples are treated as strangers for inheritance tax purposes.

• The 'stranger' tax-free threshold for Inheritance tax is €15,075.

• Inheritances (since 6 December 2012) that are in excess of €15,075 are subject to tax at a rate of 33%.

For example:

• John and Mary buy a home in joint names. They contribute equally to the deposit, the mortgage repayments and the joint mortgage protection policy. The home is valued at €300,000.

• John dies in the first year of their living together. The mortgage is cleared by the mortgage protection policy.

• Mary inherits 50% of the property, assuming it was owned as joint tenants.

• Mary's tax-free threshold is €15,075, with the balance of €134,925 taxable at 33% resulting in a tax bill of €44,525.

The belief was that the civil partnership legislation would fix inheritance tax and succession planning issues for unmarried couples, but it hasn’t.

Might you face an inheritance tax bill in the event of the death of your partner?

If you would like to talk about this or need any other financial advice, please call Michael on 086 844 0541 or email info@mkfinancial.ie  to arrange an appointment.

Michael Keville T/A MK Financial is regulated by the Central Bank of Ireland

Hot Topic #8: Agricultural Relief from Capital Acquisitions Tax

With effect from 1st January 2015 changes have been made to the conditions for agricultural relief from CAT which are designed to confine the relief to genuine farmers and ensure productive use of the agricultural property.

For gifts and inheritances taken on or after 1st January 2015 the beneficiary must satisfy the following additional conditions:

1•  Have an agricultural qualification (a qualification of the kind listed in Schedule 2, 2A or 2B of the Stamp Duties Consolidation Act 1999) or obtain such a qualification within 4 years and farms the agricultural property for a period of not less than six years on a commercial basis and with a view to the realisation of profits  … or …

2• Spend not less than 50% of his or her normal working time farming agricultural property on a commercial basis with a view to making a profit for a period of not less than six years commencing on the valuation date.

         

Alternatively, where the beneficiary leases the agricultural property, the individual to whom the property is leased must also satisfy condition 1. or 2 above.

·     • The relief only applies to "agricultural property" which is defined as "agricultural land, pasture and woodlands situated within a Member State and crops, trees and underwood growing on such land and also includes such farm buildings, farm houses and mansion houses (together with lands occupied therewith) as are of a character appropriate to the property." The relief also applies to stock and farm machinery.

· • Any milk quota attaching to lands will also qualify for reduction as part of the market value of the lands.

· • The relief only applies to agricultural property acquired by an individual, domiciled in the State, who after taking the agricultural gift or inheritance not less than 80% of his gross assets are represented by the value of agricultural property, including livestock, bloodstock and farm machinery. For gifts or inheritances taken on or after 1st February 2007 a donee is allowed to offset borrowings for the purchase, repair or improvement of on an off farm principal private residence against the value of the property for the purpose of the 80% test.

The relief is withdrawn in certain circumstances:

· •  If within 6 years of the ‘valuation date’ the beneficiary ceases to qualify as a farmer as set out above and does not lease the land to a lessee who will farm the land for the remainder of the 6 year period. Or if within six years after the date of the gift or the inheritance lands acquisition where the land was compulsorily acquired on or after 25th March 2002.

·•  If the gift or inheritance consists of development land and is disposed of in the period commencing 6 years after the date of the gift / inheritance and ending 10 years after the date there will be a partial claw back of the relief.

We advise our clients to see professional tax and legal advice as the information given is a guideline only and does not take into account client’s particular circumstances.

Information is correct as at April 2015 but is subject to change.

Michael Keville T/A MK Financial is regulated by the Central Bank of Ireland

Hot Topic #7 - Let the taxman help pay for your life cover!

Let the taxman help pay for your life cover!

When it comes to life insurance for small business owners and executive employees, there is a more tax efficient way to buy it … an Executive Pension Term Assurance Plan. 

With a suitable life policy, it is the employer that makes the payments not the person covered, so the premiums usually qualify for tax relief. 

If the employee dies before retirement, the lump sum amount can help their family survive without having the employee’s income to rely on.

The benefits of an Executive Pension Term Assurance plan are …

➤ It provides affordable life cover 

➤ It is normally paid for by the employer

➤ The employer’s contributions usually qualify for tax relief and are not a benefit in kind for the employee (under current legislation) 

➤ The employee’s family/estate receives a cash lump sum if he/she dies during the term of the policy

➤ It provides peace of mind for the employee and financial security for the employee’s family. 

Michael Keville T/A MK Financial is regulated by the Central Bank of Ireland

Hot Topic #6

Turning Company Profits into Personal Wealth

Pension Opportunities for Company Directors

Many business people are still not aware of the financial benefits arising from pension legislation.

The legislation offers owner directors with more than 5% of the voting rights, an opportunity to convert company profits into personal wealth, in a tax efficient way.  If you have made little or no provision for your retirement, then using company profits as contributions to your pension could be an excellent means of ensuring that you can maintain your lifestyle in retirement.

As a director with more than 5% of the voting rights, your company can make significant contributions to your company pension plan.  These contributions are not subject to income tax, PRSI or BIK.  Your company saves on corporation tax, and your pension fund will grow tax free.

On retirement you can take:

• A tax free lump sum

• An income paid for life

• Cash sums

• Or a continuation of investments through ARF’s (Approved Retirement Funds).

Questions & Answers

Why shouldn’t I take the profits as income?

• You could do this but it is far less efficient from a taxation point of view.  You would be liable to pay the marginal rate of 41% plus income and health levies, on everything you withdraw as income. 

• Why shouldn’t I leave the profits in the business?

Again this is an option, but company profits are subject to corporation tax at 12.5% and after the tax is paid, you will still not have access to the funds.