By Frances O’Hanlon

Nobody wants to think about what life would be like should disability or illness strike. God knows that the stress of an illness or injury is normally enough to deal with never mind financial strain down on top of it due to loss of income. But the reality is that 1 in 6 Irish people will be out of work for more than 6 months at least once during their career. It is surprising then that we protect ourselves against so many of life’s eventualities, yet so few of us protect our salaries.

We don’t usually think of our current income and our future earnings as an asset. However, if you take a moment to think about it, this is what pays for everything else – mortgage, bills, children’s education, insurance and so on.

If you think about how much your income provides for you and then what you would have to do without it, you are faced with a pretty frightening picture. In addition, if you think that you may never have that income again what is this picture like? But how much is income really worth? For a person, on the average industrial wage, working to age 65, this is more than €2 million; quite a substantial asset isn’t it? Never mind the earning potential of a self employed person.

In general, we tend to be overly optimistic about how we would manage if we were unable to work due to illness or injury. We over-estimate sick pay arrangements and the support provided by the State. Some employers will cover sick pay for the first 13 weeks; however, they are not obliged to. The State Illness benefit for 2008 is only just over €10,000 (for a single person) or €19,610 for a family of four. But if you are self-employed you don’t even qualify for this.

The reality for most people is that their level of “outgoings” either matches or exceeds their income. So, for a person who no longer is earning that income there will be a significantly negative impact on their lifestyle. But what can you do to protect your salary?

This is where an Income Protection plan is so important and is appropriate to anyone earning a salary, both the self-employed as well as employees, regardless of their age or stage of life. Income Protection provides a replacement salary in the event of a person being unable to work as a result of any illness or injury. This replacement salary can provide a person with up to 75% of salary (minus social welfare, where applicable), for the duration of that individual being unable to work or up to their selected retirement age.

So where do you go? What company offers the best cover? This is where you need to ensure you seek the advice of an independent financial advisor as there are numerous different offerings and variations on what is proper Income Protection out there. The bottom line is that the best analogy I can use here to highlight the difference between the best and worst offering is ‘silk purse and sows ear’!

Make sure it covers your income and your requirements, make sure it is flexible that it can be increased or altered as you and your income progress, beware small print, make sure it covers you for accident, illness and injury on your own occupation if possible, up to your selected age of retirement.

From a career of over 20 years in the Financial Services Industry I could give you hundreds of examples of people who needed Income Protection, the relief for those that had it and unfortunately the strain on those that did not.

It can sometimes take years for people to recover from loss of earnings, for even the more minor matters.

I discussed Income Protection with a client recently and he cited that the reason he would not take it was he could not afford it! I suggested this was overwhelming evidence as to why he should have it.

If you are self employed you can set up Income Protection as a Sole Trader which is a legitimate expense of your business and which also attracts tax relief at your own rate (subject to Revenue Commissioner maximums). If you are a Company Director it can be set up on an Executive basis again is completely offset table as an expense to the Limited Company and subject to tax relief (subject to Revenue Commissioner maximums), furthermore Company Directors can also include their pension contributions to be covered in the event of a claim.

Regardless of whether you are self employed or not it shows how seriously the Irish Government take Income Protection, as they give the same take relief’s to Income Protection as they do to Pensions.

When you take it out make sure you revisit it on a regular basis to ensure it is still relevant to your earnings.

Don’t mix up Serious Illness Cover and Income Protection! Serious Illness cover usually pays out a lump sum on diagnosis of a Specified Serious Illness, and it does not attract tax relief on the premium paid. Income protection is designed to pay you an income in the event you are unable to carry out your own occupation for accident, illness or injury, which would also include Serious Illnesses.

In summary, of all the various insurance products available, as an Independent Financial Advisor, Income Protection is the most important, in my opinion, above all else including pensions.
The statistics show that you have a 1 in 70 chance of dying during your working life but you have a 1 in 6 chance of getting ill.

I always say that Income Protection policies etc are like comfort blankets, in that you have the comfort of knowing you and your family are covered for eventualities. It could be a very cold experience, for you and your family, without them.

For more information, contact me on 052 6129487.

Frances O’Hanlon, Independent broker has this week highlighted the pressures that MABS (Money Advice & Budgeting Services) face due to the unprecedented demand for their financial advisory services. In doing so, she has put forward a solution to the crisis which now sees an eight week waiting list for financial advice from the government body.

“In recent months, there has been a dramatic rise in people seeking financial advice due to the pressures they are facing in recent times. Independent brokers are available to give relief to the overburdened MABS system. We are qualified, financial advisors who are ex-bankers. This ultimately means that we know and understand the business from a personal and commercial point of view.”

“In recent months I have personally approached two South Tipperary T.D’s regarding this matter. The Government has an obligation to assist with the financial crisis which Ireland is now immersed in and I am calling on my local representatives to put this forward to the Government as a matter of urgency.”

She added, “The MABS service available is an excellent facility and our professional services would only compliment theirs.”

Tipperary’s leading Independent financial advisor Frances O’Hanlon of Frances O’Hanlon Mortgages & Investments Ltd has announced details of her annual educational First Time Buyer’s seminar which will take place on Thursday, 5th March at 6.15pm at the Clonmel Park Hotel.

This seminar will give those of you who are building or purchasing your first home an insight into the purchasing process. Amid the current financial climate, there are certain areas to watch out for but there are also some opportunities which will be explained on the evening.

You will receive invaluable advice from leading experts in the field. All of your questions will be answered by a team of experts who will include Mr. Pat Quirke of P.F. Quirke Auctioneers, Mr. John Butler of Friends First, Claire McCarthy of Binchy Solicitors and Frances O’Hanlon of Frances O’Hanlon Mortgages & Investments Ltd.

With almost twenty years in the financial sector, Frances said, “Buying or building your first home is one of the biggest events of a person’s life. It can be a daunting process but we can assist with budgeting, protection and tailoring a mortgage package that’s right for the individual.”
Attendance is free and all are welcome to attend. Call 052 6129487 to book your place now. Whether you are buying or building your first home, this First Time Buyers seminar is not to be missed.

Frances O’Hanlon, Tipperary’s leading Independent Financial Advisor this week urged people who have suffered financial and employment loss not to delay in seeking independent financial advice.

She spoke following the recent employment loss to Tipperary and surrounding regions and the increase in people seeking her financial advice in recent weeks.

Frances said, “In these difficult economic times, it is people’s first reaction to bury their head in the sand. This is the worst decision you can possibly make. Meet with an Independent Financial Advisor, put your current financial situation on the table and allow her identify how best to move forward. There is light at the end of this economic crisis, you just need to be in the right position to survive it and be ready when it turns around.”

With fears of further cutbacks in all industries in the future, Frances advises, “With over ten years of a fruitful economy, we must simply return to budgeting and saving. We will show you where you can improve your financial status – Perhaps you need to combine your debts or it may be as simple as reviewing the life policy or various life policies you have.

Do you have what you need – Do you need what you have? Review, Budget & Save are the key words for all our futures”

For further information contact Frances on 052 29487 or log onto www.foh.ie for independent financial advice

Now the Budget of 2008 has been announced, despite very strong pre-budget rumours there was only a minor change in relation to higher earners.

The way things are at present with the turmoil in the World Markets, Banks etc., who could be blamed for thinking the sky is falling in, BUT, do not get distracted by the current mania, as serious as it is at present, there are certainties, things will recover and you will retire someday.

Frances O’Hanlon of FOH Mortgages & Investments Ltd advises, “Saving for your retirement is still important, if not more important than ever before and still a very attractive proposition due to the tax breaks.”

She continues, “I know people are afraid and some do not know where to invest but bare this in mind; if you want to play it safe you can do so with a 100% guarantee, and if you are more partial to risk for a potentially higher return, there is some fantastic value available. Remember, pensions are for your eventual retirement so you invest to suit the length of time left to your retirement and your attitude to risk.”

Frances emphasises that accumulating a retirement fund is crucial unless you think you will work forever. “A state pension of €223 per week is unlikely to be sufficient to your needs and it is unknown how much it will be worth when you do eventually retire. One must also bear in mind that the state pension only pays at age 65/66.”

Her advice is not to lose sight of your plans. “Yes, we are going through tough times. Yes, people are more mindful of what they are paying out, but do not discount how your spending power will be affected when you do eventually retire, if you haven’t saved. If you want to know how important a pension is, ask somebody who is retired.”

If you have accumulated a retirement fund already Frances suggests reviewing it. “Don’t stick your head in the sand because you think it has disintegrated in the current turmoil. Make sure you know what situation you are in and how your pension is working for you. – Seek independent advice.”

“Saving for your retirement must be for life.”

Sunday Business Post Article by Emma Kennedy – Contribution from Frances O’Hanlon

Novice investors need to take account of their age and their attitude in making investment choices.

Interest rates for savers are improving because of the current credit crunch, but rising inflation means your savings could be dropping in value. If you are a regular saver, now might be the time to consider becoming an investor in a bid to stay ahead of inflation. However, be aware that with increased reward comes increased risk.

Typical novice Irish investors are in their mid-50s and earn between €50,000 and €55,000 a year, according to Bernard Walsh, head of investments with Bank of Ireland Life. He said a lot of first-time investors of this age would have between €45,000 and €50,000 to invest, often accumulated through diligent saving, salary bonuses and inheritance.

‘‘We have also seen a new variety of novice investors in the last two years,” Walsh said. Many people who opened special savings incentive accounts (SSIAs) decided to invest some or all of the proceeds.

What prompts people to make the leap from saver to investor tends to be a desire to earn a better return on their money and to avoid spiralling inflation. ‘‘Inflation is at the forefront of people’s minds now. You see it at the petrol pumps, you see it in your electricity bill, you see it at the cash register,” he said.

If you decide that now is the right time to become an investor, Frances O’Hanlon, director of Munster-based independent financial advisor Frances O’Hanlon Mortgages and Investments, said the bottom line was to be true to yourself, your long-term financial goal and your comfort with risk. ‘‘Your age and your attitude to risk have a lot to do with the investment choices you make,” she said.

O’Hanlon said that cash was king at the moment, given the current economic circumstances. ‘‘But don’t be afraid to invest in other asset classes if your investment sight is medium to long term,” she said.

The choice of asset class – whether equities, bonds, property, commodities or alternative investments – depends on your personal circumstances and appetite for risk. However, beware of jumping in at the wrong time by backing a ‘talking point investment’.

‘‘An area where there have been phenomenal returns over the last three to four years may seem attractive, but usually you are looking at it from behind,” Walsh said.

Until a year ago, Irish investors were consumed by investment in bricks and mortar, according to Walsh. ‘‘Property syndicates were very popular then, but you couldn’t give it away today,” he said. Now attention among investors, novices and otherwise, has shifted towards equities, either through direct investment or via investment funds.

‘‘Value is screaming off the page at the moment,” said Walsh. ‘‘Some equities are at 20-year lows.” While equities may have further to fall and an immediate rebound is not evident, Walsh predicted that people would look back at current levels as good value.

Investing in equities can be a confusing business. Sean Kenzie, head of equities at Dublin wealth management company Custom House Capital, said: ‘‘There are so many ways and styles of buying stocks.”

He said a novice investor could buy shares directly, invest in an indexed fund to gain exposure to the market or pick an investment fund that followed a specific strategy.

‘‘The first thing investors should do is educate themselves about the methods of investing and then choose an investment strategy that suits them,’’ Kenzie said.

For novice investors looking to cash in on value in the equity markets, opting for direct investment can be a difficult route, as it can be quite costly and a large pool of capital is required to create a sufficiently diversified portfolio.

However, a fund can offer access to a mix of asset classes, such as equities, bonds, commodities and cash, and entry level investments tend to start from about €5,000.

Kenzie said buying shares directly could be challenging for novice investors. Someone else looks after the investment for you if you access equities via a fund, but Kenzie said it was still important for the investor to understand the underlying strategy behind the fund in which they invest.

For example, he said a fund that was following a growth-based strategy would opt for shares with very different characteristics to a fund with a long-term value objective.

‘‘A fund with a growth strategy would be looking at shares with earnings growing much faster than the market,” he said.

For those who do not wish to take on too much risk, a guaranteed investment fund – meaning that your initial investment is wholly or partly protected, depending on the product you choose – can seem attractive.

However, if you opt for this type of investment product for a first foray into equities or other asset classes, you will pay for the element of protection through a lower potential return.

O’Hanlon said management fees on guaranteed funds could be up to half a per cent more than fees charged on standard investment funds. Also, she said, investors who put money into a guaranteed fund might see their returns capped at a certain level.

When you make the leap from saver to investor, don’t forget to consider the tax implications of your investment decisions. For example, an exit tax applies to investment funds, which means that 23 per cent of any profit you make is deducted from your investment when you withdraw money.

If you plan to take the plunge and start investing, rather than just saving all you can, keep some of your nest egg aside in case of emergency. Walsh said it was important to have access to some money quickly in order to cover unexpected medical bills or other urgent expenses.

As a new investor, carefully consider your investment horizon. ‘‘You need to be very much in tune with this money being locked away for a set period of time,” O’Hanlon said. She advised that a certain percentage of your cash be held on demand for immediate access.

Should you need to lay your hands on your money, you may be able to access cash from your investment funds. But you will pay a hefty penalty for the privilege.

O’Hanlon said exit penalties – or an early encashment charge – of up to 6 per cent could apply in some cases if you tried to withdraw money from an investment fund before the maturity date.

For online article visit http://www.thepost.ie/story/text/mheyojkfid/

South East Business Magazines Article – May 2008

When it comes to your minimum obligations as an employer if you have one employee or one hundred, be under no illusion but you must by law provide some form of access for your employees to a Pension. This is regardless of whether your employees are full time, part time, temporary contract or casual.

It has been highlighted lately and it has been made known that under the Pensions Act, the authorities have stated that they intend to clamp down on employers who have paid little or no heed to this law.

This does not mean that you must provide a fat pension contribution for each employee, it merely states that you must at least nominate a PRSA provider via your Financial Advisor or a Life Company who can provide information for your employees on PRSA’s as a minimum. You must then make your employee’s aware of who this provider is and how they can access that information. Finally, you must accommodate them if they wish to make payments by ‘Net’ Salary deduction.

Simply contact your Financial Advisor for further information if you have not done so already. Doubt not that this is the law and you can and will be prosecuted.

AND/OR

WHAT YOU CAN DO FOR YOUR EMPLOYEE…………….

Let’s get straight to it! The Pensions subject is a hot topic and will become increasingly so as Irelands population ages. In the late 80’s, our social geography teacher stating that Ireland had one of the youngest populations in Europe at that stage, with a very high percentage under 25. Whilst that sounded great and we might have envisaged the youth taking over the country, where are those people now? For a start we are all 20 years older and getting closer to retirement. The Government ‘State Pension Health Warning’ is very real, the money will not be there to give us any great State Pension benefit the way things are going, so people should stop banking on that.

As an employer you must do the minimum as outlined above, but why not take it a step further.

A good Group PRSA/Pension scheme has long been recognised as a very valuable asset for both an employer and its employees.

Benefits for the Employer:

• Enhances your reputation and respect as a good employer

• Staff feel more secure, valued and important

• Increased loyalty and commitment from staff

• Makes you more appealing from a recruitment point of view

• Staff retention is higher

• Employer contributions are completely off settable and tax efficient

The reality is that there is usually a stronger staff participation rate to a Group Pension/PRSA Scheme when an employer makes a contribution.

So what are employers options should they wish to take the Group option further? Firstly, decide which scheme suits your business best. Here are some of the comparisons between PRSA & Group Pension Schemes (see table)

Additional benefits can be added to a Group Pension Scheme such as Income Protection and Death in Service benefit, usually at very attractive group rates as opposed to an individual. A similar package can be arranged as a separate contract alongside a Group PRSA scheme.

*Under the Social Welfare and Pensions Act 2008 new regulations will affect existing and new Group Pension schemes putting new responsibilities on Employers, Trustees and Administrators. Therefore for smaller business’s the option of a Group PRSA scheme may prove more appealing in the future.

Don’t forget if you exclude certain employees until they have a minimum service. etc you must meet the minimum requirements as outlined for these employees.

In summary, Pensions may not be the coolest thing in the world but if you want to know the importance of a pension, ask somebody who is retired.

As a progressive employer, encourage and embrace the concept of pensions for the good of your business, employee’s future and for the future wealth of the country.

An experienced or novice investor could be easily confused about investing at present. The bottom line is to be true to yourself, your long term financial goal and your comfort with risk. Cash is King no doubt at present but don’t be afraid to invest in other asset classes if your investment sight is medium to long term. Equities are low at present and they may go even lower but if you are buying in on the ‘drip’ by means of a monthly savings plan or pension contribution you are buying units at varying levels as the market rises and falls.

Don’t forget the Golden rules……

1. Diversify – Choose funds/ investments that give you access to different asset classes, including equities, cash, property, commodities, currencies etc
2. Timing – Think Short, Medium & Long Term when investing. Don’t tie all your money up for the same term – that includes deposits options
3. Exposure – Don’t over expose your self to any one asset class, Fund Manager, Life Company or Financial Institution
4. Beware of Charges, Interest Rates on anything you invest in, be it a savings plan, pension or House Purchase

Should you buy your first home now? The big Question is – Do you need a house?

It’s a buyers market without a doubt but make sure you are getting max value Versus how much rent you will pay if you wait Versus a possible further house price drop, property is not meant to be a short term investment Versus the ever tightening credit vice grip and the actual amount of money the bank will actually lend you. Could all lenders drop to 80% loan to value for first time buyers? Finally make sure you can afford the repayments and a possible rate increase.

What people forget is that the majority of investments were not supposed to be short term, though we all know of the individuals who supposedly made ‘killings’ on a short hop. But it’s only now you are hearing of those who actually lost their shirt or blouse.

Finally don’t forget an investment strategy that can yield an excellent return. Invest in yourself, be it expanding your education or reinventing yourself in these difficult times.

Be positive in what ever move you make.

Contact Frances on 052 6129487 or email on foh@foh.ie for advice.

South East Business Magazine Feature Article – April 2008

This is a question you should ask yourself on a regular basis and review your money and where it’s presently at. I am not just talking about what funds your pension is invested in, I am asking you to check how much money you have in your current account, what interest rate you are getting on your savings, how much do you owe on your credit card and how long is the balance outstanding?

All too often, people tend to forget their own finances, this goes doubly for the self employed as they are usually more focused on the finances of the business, be it a Sole Trader or a Limited Company.

Our financial needs change as our lives evolve and therefore we need to change as time & circumstances dictate.

Furthermore people tend to still be ‘old fashioned’ when it comes to their finances leaving everything with one or two financial institutions regardless of whether they are competitive or not. The day and age of leaving everything with one financial institution is gone. Fear not the wrath of the financial institutions! Some people worry that a bank will think less of them for having their business fragmented. I would disagree. In fact it will show that you are in tune with what’s available across the market.

When it comes to setting up a business, some individuals may have signed personal letters of guarantee or provided other personal security such as house deeds, savings/life policies for facilities. If your business is now standing on its own two feet, review any personal security you may have given and get it back if you can. In relation to Limited Company Directors, it would be standard practice now that they may have to sign a personal letter of guarantee for Limited Company facilities so this may not be negotiable.

If you are a self employed person or Company Director it is vital that you have sufficient cover in the event of death and also more importantly in the event you are unable to work due to accident illness etc. There are numerous options available that can be tailored to suit your needs, and more importantly that can be legitimately paid through the business. All too often individuals who become self employed forget that they do not have the four times salary in life cover they had when they were an employee and defer taking out sufficient cover citing the business can’t afford it! What they fail to realise if they can’t afford not to have it.

In relation to Pensions, this is something that self employed people tend to defer unless their Accountant mentions a tax bill. Pensions are an extremely tax efficient means of saving for your retirement and they are an excellent means of taking money legitimately from your business. I believe this should be started as soon as possible and you should consider it as a regular expense of your business from day one; it’s a good habit to have. The premium can be commenced at an affordable level and increased as time progresses.

For further information contact foh@foh.ie

With the approach of the deadline at the end of this month for tax returns, the benefits of pensions for the self employed are not to be overlooked.

October 31st is the deadline for the payment of the balance of 2006 tax liabilities, the deadline for the preliminary tax for 2007 and the deadline for the submission of income tax returns for 2006.

According to Frances O’Hanlon of Frances O’Hanlon Mortgages & Investments, “Regardless of what people think of pensions when it comes to income tax, it’s as simple as this: you can reduce your tax bill by putting money into a pension, subject to certain limits.”
“Whilst the tax savings are obviously very attractive, the right investment choice with a provider and funds to suit the individual can prove to be equally beneficial. Look into it before the deadline and reap the benefits immediately.”

Contact Frances O’Hanlon Mortgages & Investments on 052 6129487 for further details.