Finance Bill protects TDs

An Independent Trustee Company study has recently brought to light the huge costs of ministers’ pensions to the taxpayer but as if to add salt to the wounds this has been vindicated by a provision in the Finance Bill, which protects these generous ministers’ pensions.

An article in the Irish Sunday Times highlights a starring contradiction in the Finance Bill to the Budget.

Click here to view the article that appeared in this Business section of this week’s Irish Sunday Times.

Three strikes - are we out?

The Budget announced new provisions to withdraw property-related tax incentives. Before being introduced, an assessment will be carried out to look at the impact. The question is will it take into account the impact on NAMA bound properties as well as the full extent of unsold tax-incentive properties across the country.  

There really is so much more at stake here than a populist withdrawal of tax-relief from individuals. High-earners already had the annual benefits of these reliefs curtailed dramatically. If the changes are enacted, we will see many of the 'elite' property owning class find themselves in a situation where they simply cannot re-pay mortgages. 

Now, many landlords are facing further rent reductions, further hikes in interest rates and most likely reduced earnings as well. You would imagine that the only other thing that could possibly go wrong is for the tax relief to be withdrawn. But there's more. If the ability to pass on the tax relief to a new purchaser within the original tax-life of the property is also withdrawn, this will have a further significantly detrimental effect.

Who else will suffer?

Oh yes, the Exchequer, i.e. We the taxpayers. While the value of the reliefs may be saved (and this is a declining value every year as reliefs are exhausted), there will be:

• reduced stamp duty payments,
• reduced flow of VAT from sales of new properties,
• no corporation tax, and
• no capital gain tax as everyone in the supply chain loses money.

Hopefully the assessment will take full account of these figures too.

Secondly, we'll suffer even further as many of these properties find their way into NAMA, never to recover even close to what they cost.

And thirdly, we'll suffer even further, as the banks that we own, take massive further losses on small landlords. Even Joan Burton, one of few politicians fully on top of their brief at all times, fails to see that many of her own constituent class took this route as well.

So three strikes - can we recover from that? There are currently over 300,000 vacant housing units in the country. Is there any glimmer of hope at all?? Remember the closing of the stamp duty loophole for developers? Back in 2007? The one that was, well, never actually closed....................

Sonia McEntee

Canvassing Irish Government on Pensions Issues

Pension Adjustment Orders

The new standard threshold for pension funds introduced by Budget 2011 has caused some consternation among pension holders, particularly those who are near or above the €2.3 million cap and have not yet planned to retire. Apart from those concerns, the new threshold also brings into focus some of the rules for a pension scheme where a pension adjustment order (PAO) is in place.

A case I am currently dealing with involves a client (43), with a pension of €1.8 million, who is currently going through a divorce and where the court has indicated that 50% of the client’s pension benefits are to be awarded to the client’s estranged spouse. You would think that the client would then be allowed to fund for an additional €1.4 million to take the client’s fund up to the €2.3 million cap. But you would be wrong. Revenue’s view is that, for the purposes of the client’s funding, the estranged spouse’s interest must be taken into account. On the flipside, when calculating the estranged spouse’s funding levels, you ignore the benefits under the PAO. So the client will only be able to retire with a maximum pension fund of €1.4 million and the estranged spouse can legitimately retire with a maximum fund of €3.2 million.



This situation reminds me of a famous quote- “The difference between genius and stupidity is that genius has its limits”

Paul Gilmer

Definition of Madness...

Here we are again, the start of a new year.

What can we expect in 2011; we know about the Budgetary changes, we know there will be an election & we know that there will be a new government.

However we are still in a state of flux with our economy and planning 3-5 years out remains difficult. I suspect most of the general public are looking at their current financial situation & at a minimum are looking to learn from the past. Less consumer debt, more saving etc …

Clients we meet are far more aware of their financial world and what represents value for money. Despite this, the majority of the Irish public continue to invest with fund managers who average negative returns over 3 and 5 years. The average managed fund return is -4.1% per annum over the past three years. The five year returns to the end of December are mostly negative, with an average return of -0.6% per annum over this period.

This begs the question: where is the value for money in this relationship, particularly with an average annual management charge of 1% per annum?

Everyone is aware of the well worn definition of madness, doing the same thing but expecting different results. This also applies to pensions!

Michael Keyes