Making Cents: Even more questions and answers from our readers

Question
Liam, I’m sending you the details of an investment that I’m being offered where the guaranteed return is 5.45% per year for 3 years. That’s 16.35% which is great and I’m going to go ahead with an investment of €50,000. Do you think it’s a good account and rate?

Answer
No I don’t, it’s a scam.
When things appear too good to be true, they normally are and unfortunately this is what’s happening with this account.
I was notified recently of a fraudulent entity purporting to act as J.P. Morgan and attempting to sell bonds.
And I’ve seen the brochure you sent me and whilst the document is sophisticated and uses details of the legitimate entity, it’s a fraudulent document.
So, needless to say, do absolutely nothing and under no circumstances continue any dialogue with whoever sent you this and I’d report it to both the Central Bank and the Competition and Consumer Protection Commission.

Question
Liam, I’ve been made redundant but I’ve been offered the opportunity to continue with the death in service policy I had with my previous employer. It was paid by them, but I can continue with it, I just have to, cover the cost myself. I’m 46, female and a non-smoker and the level of cover I can continue with is €450,000 at a cost of €73.43 per month. My questions are, is it a good idea to continue with the cover and is the premium good?

Answer
The big advantage to converting this death in service benefit to a personal policy is being able to do so without the need for medical underwriting.

You are automatically accepted by the insurer regardless of any underlying medical condition. Without this ability to convert and if you had to arrange it yourself, it could impact the cost and whether you may even get cover.

So, exercising this option is excellent and certainly one I would be taking advantage of, if you need to have cover in place that is.

Assuming you do, just some other things you need to be aware of.

First, the term of the policy can’t be longer than whatever your normal retirement age was with the company you’re leaving. Which means the term of this policy if you exercise the conversion option will be for 19 years.

Secondly, the life cover continuation application form you have to complete typically must be completed and signed within 30 days’ of leaving service, so don’t forget to do it.

And finally, I checked all the providers in the market and the premium you’ve been given is good.

I’ve looked at all the various providers in the marketplace and the best premium is coming in at €72.64 per month.

The difference between it and what you’re being offered is just €0.79c per month. But if you choose the lower premium and other provider, your application would involve full underwriting which could mean you’d have to complete a medical and there’s no certainty that you’d end up with a lower premium than what you’re being offered, in fact it could end up being much higher, or you might be refused cover altogether.

So, long story short, my advice is to exercise the option and know the premium you’re being charged is excellent.

Question
Liam, I’m wondering if in the future, one of my parents ever have to go into a nursing home, how will they or I, be able to finance the cost? They have a weekly income of c. €650, their house is worth c. €250,000 and they have €85,000 in savings. If they applied to use the fair deal scheme, what impact would it have on their savings, income, and house?

Answer
Under the scheme, everyone has to make a contribution towards the cost of their care, with the HSE paying the balance. Your care needs are first assessed and then your finances are reviewed to see how much you can pay.

And if you are deemed to have enough resources to pay the cost yourself, you’ll receive no support, but if your ability to repay are less than the cost of the nursing home, the HSE will pay the rest.

For a married couple they will always have to pay 40% of their combined assessable income, less some allowable deductions, along with 3.75% of their combined cash assets i.e. shares and cash and 3.75% of the value of their non-cash assets i.e. land or property.

In relation to savings/shares, the first €72,000 of their savings are exempt from the assessment and their home will only be included in the financial assessment for the first 3 years they are in a nursing home. This means that in this instance they won’t pay more than 11.25% (3.75% x 3 years) of the value of their home.

So, if one of your parents had to go into a nursing home and the cost of nursing home care was for example €1,200 per week, the amount they’d have to contribute would be €449.67 with the HSE paying the balance.

And how I arrived at this contribution is as follows:

40% of their combined income amounts to €260 (€650 x 40% = €260)

3.75% of their properties value amounts to €180.29 per week (€250,000 x 3.75%/52 = €180.29)

And 3.75% of their savings amounts to €9.38 (€85,000 - €72,000 x 3.75%/52 = €9.38)

They could defer payment of the amount associated with their home i.e. €180.29 per week if they apply for what’s called ancillary state support (Fair Deal Loan Scheme). And this means the state will pay their portion and the amount linked to their property. They are effectively giving you a loan which must be repaid to them within a year of the person dying. However, it doesn’t have to be paid if a partner or adult dependent or child continue to live in the property.

If, your parents are looking at reducing their assessable assets, their timing needs to be right, because when their financial means are being reviewed, any gifts or transfers made in the 5 years before they make an application will still be factored in.

Question
Liam, I’m single and I was recently diagnosed as suffering from Coeliac disease. I was told by my GP that I may be able to claim tax relief because of my condition. Is this correct?

Answer
Anyone who suffers from Coeliac or any other dietary condition (e.g. diabetes) that forces them into altering the type of food they purchase, can claim tax relief on the cost of food at a rate of 20%.

And I think if you ask someone who has been buying gluten free food, they’ll tell you how expensive it is compared to food containing gluten, and how important this tax relief is. It probably doesn’t even compensate what the difference is. I read one study recently which uncovered that gluten free food products were 183% more expensive than regular products.

So, if you’re weekly shopping bill once cost for example €100, it could increase to c. €283 and you need to factor this into your monthly budget. By claiming 20% relief, you can reduce this new extra cost by €37. You’re still going to be paying much more than what you previously were, so the tax relief doesn’t compensate fully but it’s something at least.

In order to claim it back, you need a letter from your GP or consultant, confirming you are coeliac.

And when you submit a claim to Revenue, you can only claim for expenses you have receipts for. So, whenever you visit a shop to make a purchase, keep your receipts because you need to prove you purchased wheat free products.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmonics.ie