Is inflation about to take off and have an impact on my savings?
Q I hear that inflation might be taking off and that the ECB won’t do anything to stop it. I have €65,000 in a savings account. Do you think I should invest it?
A The European Central Bank has recently indicated that it could be more tolerant of higher rates of inflation in the future. However, this does not mean that we are heading to the rates of inflation that were more common in the 1970s and 1980s, according to Frank Conway, founder of financial wellbeing provider Moneywhizz and a qualified financial adviser.
If you have that €65,000 earning 0.25pc deposit interest (or less) per year then at just 1pc inflation will mean you will lose almost €500 per year. This means that the real value of your money is falling every year. When you factor in the cost of Dirt tax on whatever rate of return you do receive on those savings, the real loss is even greater,
Mr Conway said. There is also the threat of negative interest rates. Negative interest rates are charges being imposed on your deposits by the institution where you currently hold them. Currently, such charges are common on commercial accounts but there have been a lot of signals that those charges could be extended to personal savers, especially those holding significant deposits. Even if there is a relatively modest 0.5pc charge placed on deposits, in your own case, this would mean paying €325 in fees.
When it comes to investing, the range of options is extensive, Mr Conway says. As you like keeping your money in a safe place, one area you could explore are low-cost ETF’s (Exchange Traded Funds) that can serve as a useful way of investing that can include lots of diversification while limiting the impact of fees, he said. You will need to talk to a financial adviser. There is also a multitude of other investment options in the market and any good financial adviser can direct you on those.
Q I have a very basic health insurance plan that covers public hospitals and I also have a cash plan with HSF. Is it worthwhile keeping the cash plan in place as well or could I be over-insured?
A These cash plans are very different to health insurance. According to broker Dermot Goode of Total--HealthCare.ie they are designed to give refunds on routine out-patient expenses such as GP, consultant fees, physiotherapy, dental, optical etc.
They also give cash allowances for every night in hospital (public or private) and also for day case procedures, he says. They are not a substitute for private health insurance cover and given that people are all likely to incur some level of out-patient expenses even for minor ailments or injuries Mr Goode recommends you try and maintain this cover in addition to your health insurance plan. He said you should bear in mind that prior to most elective admissions to hospital, all patients will incur some level of out-patient costs and there will usually be some post-operative follow-up on an out-patient basis all of which will come under the cash plan and not the basic health insurance policy.
Q I work in a frontline delivery business, and we have regular Covid testing at work. There’s been talk among my colleagues around benefit-in-kind (BIK) tax relating to Covid testing and flu vaccines. Some say we are liable and other say that tests are free from BIK charges. What is the position and are there any other benefits that are exempt from charges?
A Most benefits provided by employers to employees are taxable, according to the tax manager at Taxback.com Marian Ryan. But Revenue recently confirmed that no benefit-in-kind charge will arise from Covid testing where an employer facilitates this for employees. This proviso also applies to self-administered tests, where these are provided by an employer for employees. Given the unprecedented circumstances, Revenue has also confirmed that it won’t be charging BIK for the 2020 tax year in the case of employee flu vaccinations, where these are facilitated in the workplace by a registered practitioner.
If you paid for a flu vaccination and find it is available through work, you can seek reimbursement from your employer on production of a receipt, or alternatively you can include the receipt in your annual tax refund claim for medical expenses. This also applies if you incurred the cost of vaccination yourself, and your employer does not provide a flu vaccination scheme.