We are very conscious that affordability and the consumer’s ability to pay are at the forefront of people’s minds in the current economic climate. That’s why we here at Quintas Wealth Management urge our clients to constantly review their policies to seek out competitive premiums in this very challenging and uncertain market. We seek to provide the best possible service and range of options to suit all our customers at the most competitive and sustainable price.
But what has shopping got to do with your financial health? There is a direct relationship between how well one shops and one’s wealth. Bluntly, good shoppers will always be substantially better off.
Savvy shoppers will compare prices to ensure they are not paying a penny more than you have to. It requires perseverance and patience but the payoff is that you can save or make a small fortune.
Shopping well is really all about value for money. ‘Value for money’ means more than paying the lowest possible price for something you want to buy. If you want to have money to spend on what is really important to you, it is vital that you shop sensibly.
The impact of the EU Gender Directive implemented in December 2012 has effected life and income protection policies for males and females due to the gender neutralisation of life premiums. Changes in the government health policy and the implementation of new pension legislation reiterates now more than ever how vital it is for each individual to review their existing policies to ensure that they are receiving correct value for their premiums.
Ways to save money
Do you run out of money before pay day? Are you extravagant with your money? Do your current financial circumstances require a complete overhaul of your lifestyle and spending? Almost every item of expenditure should be queried - do you need it and, if so, are there better or cheaper alternatives?
For any business dealing with consumers, the recent environment has been difficult. This is particularly true for financial service providers selling retail financial products such as pensions, life insurance and investments, which are correctly regarded as areas of discretionary spend. Discretionary spending in particular has been badly affected. Therefore consumers are being urged to review their policies and shop around. Take for example, mortgage protection policies; new findings suggest prices for such products can differ by 300%.
According to a recent study by Caledonian Life, the cost per month for protection cover for a €300,000 mortgage can differ wildly depending on the provider. A recent consumer agency survey indicated that many people may be paying too much for their mortgage protection cover today. The fact that people are now living longer combined with huge competition between insurer’s means that the cost of their cover has fallen dramatically. This means that many boom buyers may be paying way over the odds for cover they took out during the property bubble.
Shopping well isn’t just about saving your money, it is about saving your time and effort; therefore a useful exercise for people to engage in is recording a financial budget checklist each month. This financial tool provides guidance/tips to help people manage their outgoings and identify the amount you need to put away each month to meet the bills and run your home.
I am now going to give you a brief outline on the benefits of shopping around to minimise your exposure to bank charges, get the most competitive premium for your life and health insurance and receive the best return on the market for your hard earned savings.
Check your bank charges on a regular basis, and cut down on your banking bills
There is only one truly free current bank account in Ireland – and that is offered by Ulster Bank. The other banks make you satisfy certain criteria to qualify for fee free banking.
There are too many cases of overcharging from all the banks to accept that your bank is not one of them! Sometimes, these charges can be waived at the discretion of the manager- if you don't ask, there'll be no waiving. Try and avoid exceeding your overdraft permission if you have an overdraft. The surcharges and fees are punitive. You should also operate online bank accounts- which offer better deals, easier to operate, no waiting on queries, saves on time and travel expense. Check out An Post's BillPay or www.mybills.ie for alternatives to current accounts and for current account comparisons, log on to www.nca.ie
When and how do I pay?
Typically, banks will deduct current account fees on a quarterly basis direct from your current account. You might get no written notice of this money being taken from your account. Bank of Ireland deducts fees on a quarterly basis, with customers receiving a fee advice notice about two weeks before the sum is debited. However, this notice is sent only where the deduction exceeds €12.70. With AIB, a fee advice notice is sent at least ten days in advance where the fees exceed €10.
Tips to reduce fees
There are easy ways to cut bank fees. For example, when using your debit card to make a purchase, request cash back as part of the transaction, and avoid a trip to the ATM. You then pay for only one transaction, rather than two. Typically, online transactions are cheaper than those carried out in a branch, so bank online as much as possible to keep costs down.
Switching
If you plan to switch to an alternative bank, there are protocols to make it easier. The Central Bank of Ireland introduced its code of conduct on current account switching in 2010, building on a previous voluntary code established by the Irish Banking Federation.
But a 2011 review by the Central Bank of Ireland confirmed that the level of current account switching in Ireland was very low. During the review period just over 6,000 current account holders switched to another provider. According to the Central Bank of Ireland, of the four banks inspected, this represented just 0.16 per cent of all current accounts.
Choosing a new bank
Before you decide on a new bank, consider how much it charges. It's also important to think about convenience. Where is the nearest branch? How good is the internet banking service?
Transaction fees are more common now, but a host of other charges could also apply. For example, how much will it cost to get a replacement ATM card? Do penalty charges apply if a cheque is returned unpaid? Is there a facility fee for an overdraft?
Think Smart with your surplus Cash
Interest rates on the latest State Savings products, offered to the public through An Post and the Prize Bond Company, are down, but still competitive.
New issues of the State Savings products were launched just before Christmas with interest rates sharply down on the older issues. But despite the reduction the schemes still offer competitive returns for those liable to DIRT. Those not liable for DIRT can get better returns elsewhere. State Savings is the brand name used by the National Treasury Management Agency (NTMA) for the range of savings products offered to the public through An Post and the Prize Bond Company. They were better known in the past as An Post Schemes.
The money invested goes straight into the state coffers. There is no limit or end-date on the Government’s obligation to repay that money. State savings offers a long established range of medium to long term investment products. These include Instalment Savings, Savings Certificates, Savings Bonds and the newer four and 10 year Solidarity Bonds. Savings can be accessed at any time on seven days notice. The changes don’t apply to those who invested in the savings scheme prior to Dec 16th last. They all continue to get the higher rates until the certs or bonds mature. But the change applies straight away to An Post deposit accounts. Since Dec 16th the rate on the basic An Post deposit account was cut from 1% to 0.25% while the rate Deposit Plus account, that requires one month’s notice of withdrawal, was cut from 3% to 1%. Both of those deposits are subject to DIRT as is some of the return from National Solidarity Bonds. There is no tax on the returns earned on Savings Certificates, Savings Bonds and Instalment Savings.
The message is to shop around. Security is, of course, a consideration but all of the deposit taking banks are covered by the deposit guarantee of €100,000 per person per institution.
Various Bank Savings Offerings:
AIB
AIB has both a standard and an online regular saver option, with the online option paying a more attractive interest rate. Since April 9th, a rate of 2.95 per cent applies. However, a rate of 0.75 per cent applies to balances above a set monthly savings threshold. An AIB spokesperson commented, "The maximum monthly threshold increases month on month, rising from €1,000 until it reaches €12,000 in month 12. In month 13, the threshold reverts back to €1,000 and the 12 month online saver period starts again".
Bank of Ireland
The bank's Custom Saver account pays 2 per cent on regular savings up to €12,000. But the best rate offer from Bank of Ireland in terms of regular savings is currently its 365 monthly saver account, which is available online. It pays 2.2 per cent on savings up to €9,999.
EBS
Family Savings Account pays a fixed rate of just over 3 per cent on savings of up to €1,000 per month. A spokesperson for EBS commented that, "The fixed rate means savers have the comfort of knowing what their money will earn at the end of each one year term".
KBC
The KBC regular saver offers a rate of 3.5 per cent for savings between €100 and €1,000 per month, with funds available on demand. The account offers a feature whereby a joint account can be set up and funded from two different sources, meaning a couple can pool their savings.
Permanent TSB
The bank's online regular saver account pays 3.5 per cent on balances up to €50,000. This will fall to 3 per cent in the coming weeks. The rate drops to 1 per cent once the balance exceeds €50,000. There's a maximum lodgement of €1,000 per month.
Ulster Bank
Special interest deposit account pays 2.5 per cent on savings of up to €1,000 per month, up to a balance of €15,000. A lower rate of 1 per cent applies on the remainder of the balance above €15,000.
Other offers
Some banks do not have an account specifically geared at regular monthly saving, but do have accounts that could be used for this type of saving. For example, Rabo's online savings account pays 2.45 per cent on balances up to €20,000. This will drop to 2.25 per cent in early May.
Danske bank's eSaver account also provides instant access to savings. It offers an "active rate and a reward rate", which means when you leave the money untouched or add to it, you earn 2 per cent. If you make a withdrawal, you earn 1 per cent. However, since April 15, the eSaver reward and active rates will drop to 1 per cent and 0.5 per cent.
The Irish arm of Nationwide UK has an instant access "Easy Access Savings Account" that pays 2.5 per cent on balances between €2,000 and €2 million. Six withdrawals are allowed each year.
Lump sums:
There are a lot more variables at play in this section of the savings market. The interest rate you get will depend on the amount you wish to save, the term you choose and the access you want.
Savers can earn varying returns depending on the account they choose. For example, the Nation Consumer Agency comparison tool reveals that a saver with €20,000 to deposit could earn anywhere from €2 gross interest to €600 gross interest annually, based on an instant access account.
Health Insurance Comparison
With only four health insurers in Ireland (VHI, Aviva, Laya and Glohealth), it is really important that you continually update yourself on the best deal for you. The Health Insurance authority does an excellent comparison of all four - check out www.hia.ie. As health insurance costs spiral, families face tough choices about their cover.
Affordability is the single biggest issue in the health insurance market at the moment, according to Kevin Kinsella, head of healthcare consulting at Mercer who commented that, "People are considering if there is an opportunity to reduce costs by switching plan or provider, and looking at taking on excesses".
According to Mr Kinsella, people are trying to hang on and maintain some level of cover. However, he said thousands are dropping out of the system each month.
Research published by Laya last week revealed that one in three private health insurance customers with children planned to cancel their cover this year. The study found that almost half of all young families with children admitted they were unhappy about the forthcoming increase in the government levy, and would review or downgrade their health cover to more basic benefits as a result.
Mercer advises companies which provide health insurance for employees, and Mr Kinsella said corporates were also trying to strike a balance between "managing cost and maintaining access for employees". Typically, big employers provide health insurance cover, not just for employees, but also for their spouses and children. However, Mr Kinsella said some employers were reconsidering this, and looking at options such as 100 per cent cover for employees and a percentage of cover for their dependants.
In Mr Kinsella's view, further increases in health insurance costs look very likely. "The single biggest issue on cost is the threat of increased charges for private beds in public hospitals," he said. "I don't see us getting away from double-digit inflation in the health insurance market."
Health insurance: five issues you need to consider
Costs are rising
All four health insurers - VHI, Aviva, Laya and the newest entrant, GloHealth - have recently announced price increases. Thousands of consumers are cancelling their cover because they can no longer afford it.
Excesses are becoming more common
Consumers are looking at ways to maintain their cover in the face of rising costs. One possibility is opting for a larger excess on the policy. The excess is the first part of a claim, which you must pay. But take care when opting for a larger excess, as you could end up paying a lot more for a small claim. When taking out cover, make sure you understand what excesses apply and when. For example, is it a daily excess or a per claim excess? The difference between the two could be substantial for a lengthy stay in hospital.
Consumers are changing the type of cover they have
The most popular plans are those that provide cover for semi-private accommodation in a private hospital. However, experts said that the number of people opting for day-to-day cover seemed to be declining, as consumers strip back their policies to provide only hospital cover. Assess the market properly before you switch to an alternative product or provider. If you do choose a cheaper plan, establish exactly what cover you are losing. The Health Insurance Authority's website (hia.ie) has a tool to make it easier to pick a plan that is the best fit for you and your family, and allows you to compare the benefits and cover on different plans.
Monthly payments could cost you more
When faced with a big annual bill, it can be tempting to spread the cost over the year, rather than paying it all at once. However, this could cost you more. VHI, Aviva and GloHealth do not charge customers extra if they pay for their insurance in 12 monthly instalments, but Laya customers face a 3 per cent credit charge for monthly payments.
Health insurers are introducing more restrictions
For certain types of procedures, such as orthopaedic and ophthalmic operations, some insurers have begun to introduce restrictions. In some cases, customers could face a hefty co-payment for a restricted procedure. Check that your health insurance product provides the cover that you need, otherwise you could face a nasty surprise when making a claim
Pension Charges
Recent changes in the pension laws have again caused concern for people to shop around ensuring they receive the highest allocation, lowest annual management charges and lowest policy fee to ensure their pension premium amounts are being invested to their highest potential and all fees and charges are made as transparent as possible and explained thoroughly by a pension trustee, pension provider or financial adviser. You should ask that your pension information be explained to you in plain language. It is important to understand how your pension savings are being invested, the type of strategy and the level of risk involved.
Conclusion:
Shop around and take the time to get quotes from a range of insurance providers. Get the best out of your banks by seeking the best return possible for your surplus monies. Focus on the benefits versus the costs associated with health insurance, pensions and life insurance and always ask yourself is there a better and cheaper alternative.
Quintas Wealth Management can assist you in the following areas:
- Independent Financial Assessment
- Financial Planning Services
- Personal & Executive Retirement Planning Solutions
- Investment Portfolio Advice
- Personal and Family Protection
- Business Protection & Advisory Services
We are currently offering FREE no obligation financial reviews so if you are interested in availing of this offer please contact Anne O'Dwyer at aodwyer@qwm.ie
