What is an Equity Release and how does it work?

Your equity in your home is how much you own. Think of it as the amount of your mortgage that you have already paid off, or the difference between your home’s market value and what you still owe the lender. So, once you have paid off your mortgage completely, you have 100% equity: you own it entirely. But as the value of your home appreciates, there is no immediate benefit to you in terms of cash. You will not be able to profit from the increase in value until you sell your property, and if you never sell, your estate and beneficiaries will be the only ones who are better off.

An equity release mortgage offers a way around this. These mortgages are becoming increasingly popular for homeowners aged 55 and older, as they give you a way to benefit from the equity you have built up in your home. An equity release involves a lender giving you a portion of the value of your home as a lump sum or a series of payments, in exchange for interest or …

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Pensions

Pensions in Ireland is paid to people from the age of 66 who have enough social insurance contributions. People who qualify for a state pension are also allowed to have other incomes and still receive the State pension. The State pension is taxable, but if the pension is the only source of income it is not likely to be taxed.

In order to qualify for the State pension an individual must have started paying social insurance before the age of 56 and have paid at least 520 full rate social insurance contributions. An individual must also have at least 48 paid or credited full rate contributions from the year they started insurable employment until reaching 66 years of age.

Recent research has shown that only 32% of people would like to continuing to work after the age of 66. This is concerning due to the increasing financial pressure leading to delay in retirement. Another recent statistic gathered from 1,000 employers revealed that only 61% of employees believe that they will have no choice but to work past the age of …

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Fair Deal Scheme

The Fair Deal Scheme was enacted in 2009 to assist those who cannot afford to pay full cost of nursing home care. The Fair Deal Scheme mainly applies to those in need of long term nursing home care, but cannot afford it. The main purpose of the scheme is to ensure that no one needs to sell their family home to pay for cost of care.

Nursing home care costs are managed under the Health Service Executive (HSE).  The costs can be paid in full or partially. Those charged with paying the resident’s portion of the cost are allowed to defer the charge. Under the Fair Deal Scheme, every person contributions to the cost of care is based on their means and the state will then pay the balance.

A financial assessment is needed to define the level of contribution an individual makes towards the cost of future care. Income and assets of each individual are assessed. Ultimately if you have little income and assets you pay less than those who have more income and assets.

Financial assessment requires …

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Pension top-ups failing seniors, women

The most recent governmental review of pension top-ups has left many retired people with far less than they had anticipated. Only 15% of around 11,500 cases reviewed within the last period will be receiving top-ups, leaving 10,000 people who applied for a top-up without any other option than to survive off of their same plan, despite rising prices.

This denial of pension top-ups extends beyond this small percentage of retirees. Tens of thousands of people were affected by this bad review, causing the public to go into a frenzy. Understandably so, given that everyone who has a pension is retired and between the ages of 60 and 70. Most of these people have already worked for over 40 years and have planned and saved so that they no longer have to work in the elderly stage of their lives.

Usually, people begin saving for pensions at the age of 25, paying small amounts to their retirement fund that are sometimes matched to a degree by either their current employer or the government. These plans also usually have higher …

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Behavioural economics and pensions

There was a fascinating paper published by the pensions institute in 2010 entitled ‘spend more today’ and it was about ways to encourage (or to use the economic vernacular ‘nudge’) people to take out pensions.

We realise that forty pages of technical reading may not be everybody’s cup of tea so here is the most brief synopsis we can offer you as an alternative. Just note that this isn’t what you ought to do per se, it is about how the system ought to work.

They put forward the idea of using ‘SPEEDOMETER‘ which stands for ‘Spending Optimally Throughout Retirement’, and the steps to take are as follows:

1: First make a plan, ideally with, but if necessary, without an advisor. This first point is of interest because we obviously think everybody should get advice when planning their pension, but upon reflection it’s equally true that a ‘start’, even with no advice is better than inaction and there is simple reason behind it.

Say you decided to start putting €200 a month into a pension, given that you might be …

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Retire young! Retire poor….

The age of retirement is going to rise, within the next five years it has to. There are several reasons, the most immediate being that the state doesn’t have the money to fund retirement at present, other factors are that people are living longer and the combined increase in health care costs to the elderly with the weight of funding pensions means one or the other has to give in eventually.

In October of 2005 Seamus Brennan gave a talk at the Merrion Hotel on the subject of the ‘Issues facing an ageing population’. The statistics are particularly relevant as they have not changed much since then.

(Excerpt) ‘The facts speak for themselves, in 2002 almost half a million people were aged 65 or over. The latest population projections suggest this may increase to 1.1 million people aged 65 and over by 2036. Right now we have almost 5 people working for every pensioner, when the demographic challenges are at their height this will decline to two workers for every pensioner. This fact has …

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