The budget and you

Finance The and what Budget it means to you

Sinead Ryan picks the bones out of the recent budget

Paschal Donohoe knows, as do the three party leaders in Government that meddling with the so-called ‘grey vote’ is done at any politician’s peril.

The annual budget usually has positive outcomes for seniors, and so it proved – in spades – this year.

Paschal Donohoe knows, as do the three party leaders in Government that meddling with the so-called ‘grey vote’ is done at any politician’s peril.

But this year, they went far beyond the usual ‘fiver for everyone in the audience’ and, given the extra billions they had to spend - largely excess profits from US multi-nationals - geared a fair share of it toward the over 66s.

Budget

The general increase in social welfare benefits amounted to €12 a week, double the normal increase and this of course applies to station contributory and noncontributory pensions. Given rampant inflation, the Minister had sought €15, so she should be fairly happy with that outcome.

They also threw in not just the normal double week at Christmas time, but one in October for good measure. Helicopter money, (the economic term for simply pumping cash into people’s bank accounts), is inflationary and generally ill advised, and a curious measure at a time of already high inflation, but the optics of the cost of living crisis called for an extreme response and it is not out of line with what our European neighbours are doing while the war in Ukraine continues.

For those on very low incomes, especially the pensioners in receipt of Fuel Allowance, an extra amount of €400 is being paid in a once-off measure. The numbers who will qualify for the allowance is being expanded at the same time as are those who will be entitled to a GP visit card.

The living alone allowance recognises that many older people have to heat a house even though they are alone in it. An extra €200 is coming their way.

These are very targeted measures which have been called for by the opposition.

It’ll be welcome, along with the €600 energy credit which will appear on three successive electricity bills between November and February.

This will be paid to every household, not just those at risk of fuel poverty. Hopefully it will be enough to stem the tide of rising fuel prices, but it remains to be seen. More of that anon.

All in all, as Mr Donohoe boasted on Budget Day, a single pensioner at the lowest strata of income, can expect to see an extra €2,375 in supports paid before the end of 2023.

Inheritance Tax

The issue of inheritance, particularly of property, is a burning one for many older people. It is a peculiarly Irish thing, that need to ‘pass on’ housing and land to the next generation.

The value of what you can leave, tax free, has been steadily whittled away over the years. In 2009 for instance, it had reached a high of €542,544 but currently, for the last number of years it has remained at €335,000. This is an accumulation of all gifts and inheritances from a particular group (e.g. parents) over their lifetime, so any money over €3,000 handed over to kids say.

Given Capital Acquisitions Tax, charged on anything over that amount is a hefty 33%, it is often the case that the very asset being left to a son or daughter must be sold to pay the tax.

All taxes are blunt instruments but CAT is particularly onerous on singletons and Dubliners. The former, because if you have a house worth, say €1 million, and three children, they can inherit equally without Revenue getting a cent. But a single child will be hammered for €219,450 in taxes.

The capital’s residents have disproportionately high house prices and so meet a lower bar for death duties. Tax avoidance, therefore, is the sensible solution for older people, who may have made a will when their children were younger, to revisit that instrument and update it reflecting their current financial position.

It’s as simple as a back-of-an-envelope calculation. Write down all the people you may wish to receive something after you (and your spouse) pass away.

Children obviously, grand-children possibly (each can inherit up to €32,500 before tax), but what about your in-laws (your children’s spouses can receive €16,250 each), god-children (if not related, then €16,250 also; if they are nieces and nephews, it increases to €32,500). You can consider favoured charities (make sure they are registered with the Charities Regulator), friends, neighbours or anybody else you wish to the value of €16,250. Adding all that up, if you don’t breach the total value of your estate then Revenue don’t get a look in. This kind of tax avoidance isn’t just for the rich and famous; everyone should consider it. It goes without saying that tax evasion is a completely different thing, and quite illegal!

Fuel

The biggest story of the year (and possibly next year too) is the energy crisis. We don’t yet know if we’ll experience blackouts, but rising prices are a given. With that in mind, and while politicians wrest with the financial outcomes, the regulator in this area – the Commission for Energy Regulation – has asked all suppliers to treat customers sympathetically. How this will translate in practice remains to be seen, but it’s not a good look for an energy provider to generate bad new headlines in this area. Anybody who considers themselves a ‘vulnerable’ customer, for instance if they need an electrical supply for medical devices, can register with their supplier to be so designated. It means no matter what, you will not be cut off during winter months.

Savings

If there’s any light at the end of the inflation tunnel it is that for the first time in over eight years savers may finally see some return for their prudence. With interest rates on the rise, banks will be under pressure not just to apply them to borrowers (which they do at speed), but to savers – the backbone of their coffers.

We’ve seen precious little movement just yet, except for the mega-wealthy where deposits of over a million euro were brought from negative territory to zero. But as rate increases roll on, this may change. However, the big elephant in the deposit account is that interest will never catch up with inflation. So for money that isn’t needed in the next five years or so for an earmarked purpose, it would be worth getting expert investment advice over where to put it. Older people, quite rightly, don’t like taking risk, but if you’re on the sprightly side of 70, there’s absolutely no reason you can’t tie up cash for 10 – 15 years and get a proper return on it. But there’s always a sting: DIRT tax remains at a stubbornly high 33% on all interest received, save for those over 65s who qualify for a refund, generally where your tax liability (including spouse income) is less than your tax credits or your overall income is below the exemption limits. You can find these on

citizensinformation.ie

The issue of inheritance, particularly of property, is a burning one for many older people. It is a peculiarly Irish thing, that need to ‘pass on’ housing and land to the next generation.

If there’s any light at the end of the inflation tunnel it is that for the first time in over eight years savers may finally see some return for their prudence

Sinead is Personal Finance Columnist with the Irish Independent and presents ‘The Home Show’ on Newstalk every Saturday at 8am.

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