Tuesday 21 November 2017

Will my bank give me a bonus if I pay a lump sum off my tracker?

Banks are incurring significant losses on tracker mortgages
Banks are incurring significant losses on tracker mortgages

Jim Hegarty

As all banks are incurring significant losses on tracker mortgages, I thought they would be open to giving an additional write-down over and above any lump sum paid off a tracker mortgage.

When I queried this with my local branch, it said it would not offer any additional write-down. Do banks offer any financial incentives to those who pay lump sums off tracker mortgages? Surely it would make commercial sense to do so?

Vincent, Fairview, Dublin 3

Sadly Vincent, none of the banks offer a financial incentive to those who pay a lump sum off a tracker mortgage. In 2011, Permanent TSB paid a 10pc bonus on top of any lump sum paid off a tracker mortgage. However, this offer has long since been discontinued and there is no sign of it being reintroduced - either by Permanent TSB or any of the other lenders. Despite this, it is still a good idea to put a savings budget in place in case lenders have a change of heart. Even if they don't, at least you will still have a nest egg!

 

I have a family business with my wife which provides me with a pension - should my wife also have one?

Robert, Leixlip, Co Kildare

If your wife is involved in the business, she should definitely have a pension. There are only a few ways of transferring company assets to personal assets in a tax-efficient manner. A pension contribution (which is simply a payment from the company into a savings contract for your retirement) has no tax consequences for your wife and the company also benefits from a write off as a trading expense.

It would also be wise for you both to maximise your tax-free allowances as a couple and one way to do this is to make additional voluntary contributions (AVCs - pension contributions made in addition to your normal pension contributions).

As well as your pension, you and your wife might also consider taking out life assurance and income protection.

Life assurance will typically pay out a lump sum should you or your wife die or become seriously ill. An income-protection policy is designed to replace your wage in circumstances where you have been certified as unable to work due to illness or injury.

 

As grandparents, we are financially secure and would like to make provisions for our grandchildren's education. What is the best course of action?

Jim and Mary, Kilkenny

In the current economic climate, many grandparents are contributing to the cost of their grandchildren's education or college fees. It is important, however, to remember that you could trigger a Capital Acquisitions Tax (CAT - also known as inheritance tax and gift tax) bill for your grandchildren should you do so.

However, under the CAT rules, there is an annual small gift exemption where an individual can receive €3,000 a year tax-free from any number of givers. This would allow you as grandparents to gift €6,000 between you to a grandchild each year. By using this exemption, you avoid eating into your grandchild's CAT tax-free threshold (the amount of money your grandchildren can inherit from you tax-free ).

In the current low deposit interest rate environment, it would also be a good idea to consider setting up a bare trust which allows the trustees (which are often the grandparents/parents) to invest money on a child's behalf in a tax-efficient way.

Jim Hegarty is chairman of Hegarty Financial Management

Email your questions to lmcbride@independent.ie or write to 'Your Questions, The Sunday Independent Business Section, 27-32 Talbot Street, Dublin 1'.

While we will endeavour to place your questions with the most appropriate expert to answer your query, this column is a reader service and is not intended to replace professional advice.

Sunday Indo Business

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