The start of a new year is always a good time to do a little spring clean on your finances, but with all the talk of pensions in today's news, it appears we can never plan or save enough.
Last month, I met up with qualified financial advisor Gearoid Cleere and picked his brains on what we should do with our hard-earned money, and he made everything crystal cleere!
Last month I met up with qualified financial advisor Gearoid Cleere and picked his brains on what we should do with our hard-earned money, and he made everything crystal cleere!
Gearoid Gearoid was born and bred in Kilmanagh, where he lives with his wife Caroline and their three children Casey, Jonah and Brooke. He started working for Bank of Ireland at 19 and worked his way up to become an IMI manager, dealing with insurance and investments. In 2008 he moved to First Active and Aviva to gain more experience in the financial services side of the industry.
He moved to a broker in Kilkenny and three years later he set up his own business in 2015, Cleere Life and Pensions. Today the business has a book of over 2,000 clients from both their Kilkenny and Naas offices and holds approximately €80m asset under management (investments and pensions).
His firm is a multi-intermediary, which means they deal with all the life and assurance companies, as well as the main mortgage lenders - it’s a one-stop shop with all lenders under the one roof. With personal touches, Gearoid and his team of nine advisers know how to package and pitch your financial needs to the lenders, cutting out all the hard work for you.
With his wealth of experience, I am hoping Gearoid can give us a ‘Cleere’ guide in planning for the future. If anything, the past 22 months have shown us we just don’t know what’s around the corner...
Gearoid, what’s the best interest rate on the market for mortgages and loans?
There are some nice, fixed rates out there at the moment. If you get a five-year fixed rate, that would be nice. Fixed rates can go down as far at 1.95%, which is a very low rate.
Personally, I would fix it for several years and take the option to then come out of it, to see what’s on the market. You might come into some money and want to pay extra off your loan.
Variable rates are approximately 3.5% now. Interest rates are dropping the whole time and it’s cheap to borrow.
People should investigate switching their mortgages too, because the rates are so much better now than when they took the mortgage out 10 to 15 years ago. By switching it you could save yourself €150 a month. Some lenders are even offering cashback to people to switch and as a broker we have access to that information.
There’s a lot of extra money on deposit from savers who were lucky to hold onto their jobs during the pandemic. With these savings, is it a good idea to overpay your mortgage if you can?
Yes, this is an option, but I would recommend sitting down with an advisor as everyone’s circumstances are different.
Could you be charged a penalty or a redemption fee because you are technically breaking your mortgage contract by overpaying it?
Most lenders will allow you to overpay a certain percentage each year if you wish and we are seeing a lot more flexibility – for example ICS will allow up to 20% to be overpaid but again this depends on the product you hold.
We are all feeling the January pinch from the Christmas overindulgence. How you any saving tips for the year ahead?
Most people will be getting their first pay packet of 2022 this week. It’s a good idea to try to put some of it into a savings plan. No matter how small the amount, it’s just a good habit to get into.
We recently set up the Smart Savers Club to help people get started.
How does the Smart Savers Club work?
During Covid there was so much money put on deposit because people weren’t spending it. There are billions sitting on deposit in the banks. We believe that people need to get a bit more for their money instead of leaving it on deposit and earning absolutely zero on it.
Our Smart Savers Club offers a bit of growth on your money, especially if you build it up over a few years. It’s a savings plan that requires a minimum of €100 per month. It’s ideal for the likes of your children’s allowance to make an investment for college fees.
For example, if you put in the full children’s allowance over 18 years, it roughly comes to €30,000, but with growth you will make another €10,000 on top of that.
The Smart Savers Club is open ended. You can put it in for whatever term you like.
So, your money is put into a fund. What’s the element of risk in doing this?
We carry out a risk profile check with yourself, but the longer you leave your money invested, potentially the better return you are going to see. We would also recommend a period of more than five years.
Risk works on a scale of one to seven, seven being the highest risk. Most people will take a small element of risk, but they also want growth and security, and they can’t have it all.
So, we do a risk profile on the client. Based on that information we will know your risk profile (one to seven).
We will then find a fund in your risk category and invest your money, where you will earn some growth. We’ll even spread your money over a suite of various funds that come in under your risk category. At the end of the day, the longer you leave it in, the better growth you will get.
On the other hand, if you are in financial debt, what help is out there?
Money Advice and Budgeting Service MABS is a free and confidential service for people who are having problems with money management and debt. They are based on William Street in Kilkenny.
If someone is in difficulty because have lost a job or they are finding it hard to repay a loan or to make ends meet every month, MABS can help them. The agency might write to the lender on their behalf and request that the loan be put on ‘interest only’ basis, or work on a more affordable repayment schedule for you.
Most people that come into us are looking for a particular service, like a mortgage, life or illness cover for the mortgage, a pension or an investment and payment protection.
We are all told that we should start our pensions when we start working. However, that’s not really on any young person’s agenda!
When you are 20 you are enjoying life and exploring new things. When people hit 30, they are probably getting married and have the expense of building a house and starting a family.
So, if your employer has a pension scheme, you should get into that as soon as possible. It’s taken at source; they might contribute up to 5% or more and you can match this also if you wish.
If that’s not an option, then you should start thinking about a pension in your mid-30s. It’s never too late to start a pension; we still get people coming into us at the age of 55 and 60 to start one because they need to put money in to get tax relief from the contribution.
For example, if they are on the higher bracket of tax, earning €100,000 per annum, they can maximise their pension and get 40% tax relief on whatever they put in. If they put in €10,000 into a pension, it’s only going to cost them €6,000, because they are going to get €4,000 back from the Government in the form of tax credits.
Some people break into a sweat at the mere mention of pensions, but they are not that complicated.
Pensions are a win for the future because it’s free money from the Government and people don’t see that. In the above case it is only costing them €6,000 as they will be availing of tax relief.
To break it into simple terms, a pension is a long-term savings account, and you get tax relief on whatever marginal rate you are paying. That basically means if you are on the lower bracket of tax, which is 20%, you’ll get 20% tax relief on everything you put in and if you are on the higher bracket, you get 40% relief.
Instead of giving it to the taxman, if you put it into a pension, you will get tax relief. So, you are saving yourself money and I’m sure you’d rather it in your pocket than in the taxman’s pocket!
Are you thrifty yourself?
No! What’s worse if that my wife is an accountant and she would spend for Ireland! We do try to save each month, however.
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