Q My father died recently and left me €80,000. Should I use this to pay off some of my tracker mortgage now that European Central Bank rates are due to start rising? I am on a tracker rate of ECB plus 0.5pc. I am in my late 50s, and have children in college, but no other debts. There is €120,000 left on the mortgage.
A Paying down more expensive forms of credit is always the first option, according to Joey Sheahan, head of credit at online brokers MyMortgages.ie and Author of The Mortgage Coach. You don’t have any other debts, so paying down your mortgage is a good idea, he said. And it is relatively straightforward to do so – just contact your lender directly to arrange.
The fact that you are on a tracker means you are currently on a great rate, he said. So, you could also consider putting some of these funds towards your pension, particularly if you are paying the higher rate of tax, as you will get up to 40pc tax relief on what you put in.
For example, if you put €20,000 per annum into your pension for the next four years (ie €80,000 total), you would get tax relief of 40pc of it which is €32,000. And you could always use the money you save in tax relief to put against your mortgage, or support your children if needed.
You could actually put €20,000 per year in for seven years, meaning you would invest €140,000 gross in your pension, but you would get tax relief at 40pc which means you would receive €8,000 annually, which is €56,000 in total relief. So your gross contribution of €140,000 would cost just €84,000, Mr Sheahan said.
Q We are both in our early 60s and are on the Laya Simply Connect scheme. We are particularly concerned with keeping good orthopaedic cover in place. Is this plan still good cover?
A This is still a good semi-private corporate plan costing €1,361 per adult, according to leading health insurance broker Dermot Goode of TotalHealthCover.ie.
The plan includes good refunds on eligible out-patient expenses and also includes full cover for major orthopaedic procedures in standard private hospitals, he said. If you are happy with this type of plan, he would recommend no change for this renewal as there is no other lower-cost plan that provides the same level of cover.
Mr Goode said there is another version of this plan called Simply Connect Plus, costing €1,471 per adult, which gives better out-patient cover and lower excesses to pay in private hospitals.
Q What is the impact of inflation on my savings?
A During the height of the Covid lockdowns, many people were lucky enough to be able to save a lot of money. This was in large part down to not being able to spend. However, over the last 12 months, those savings have come under attack by rising inflation.
Although most people associate inflation with higher food and energy costs, it also reduces the value of money, and savings over time, according to Frank Conway, founder of financial wellbeing provider MoneyWhizz and a qualified financial adviser.
Take a saver with €50,000 on deposit. If the rate of inflation is 5pc, in just one year, the buying power of that money falls to about €47,600. So even though the €50,000 capital amount will still be on deposit, it will have lost about €2,400 in buying power, Mr Conway said.
After five years, the buying power falls to about €39,000, which means the saver has lost €11,000 in buying power. Although inflation today exceeds 5pc, it is expected that over time, it will fall back to more sustainable levels.
Q I am insured on the 4D Health 3 scheme from Irish Life Health. Other family members are all insured on so-called ‘corporate’ plans. Is my cover a corporate scheme or should I review?
A This is still an excellent private room, corporate plan costing €1,572 per adult, said Mr Goode of TotalHealthCover.ie.
It covers a private room in all public and standard private hospitals and also includes good cover for the high-tech hospitals and 50pc refund on a range of eligible out-patient expenses, he said.
If you wanted to increase your cover for routine out-patient expenses, he suggests you consider the next level up which is the 4D Health 4 scheme costing €1,637 per adult, as the refund on GP and consultant fees increases to 75pc.