Financial advice with Grainne McGuinness
Hi, I have been in my current job for almost a year. When I joined I was sent information about what I thought was health cover and every month a deduction has been made from my salary. I have been told I will need some dental work soon and told a colleague I planned to claim on our work cover. But she told me what we have is not really health insurance and won’t cover the cost? Robert Kiely, Laois.
The writer sent me on the information he had been given and, unfortunately, his colleague is correct.
The cover that he has is permanent health insurance (PHI) rather than a standard health insurance policy.
PHI is a protection policy offered by life assurance companies.
Its purpose is to pay out a regular income if you suffer a loss of earnings due to sickness or disability.
The insurance begins paying out once you have been unable to work for longer than a set deferred period, which varies depending on your policy.
In terms of benefits it is your income that is covered rather than medical costs.
The letter writer is going to have to pay for his dental treatment and this query is a reminder of the importance of fully understanding your pay slip.
That doesn’t just mean knowing where the various deductions are going but what benefit you are gaining as a result.
Another good example of this is pension provision.
Many PAYE workers have a pension deduction coming out of their salaries, with an additional contribution from the employer.
If asked people say yes, I am making plans for retirement, I pay into a pension.
But many of us have no idea what level of pension we are funding or of it is sufficient for the kind of life we have planned after we stop working.
It is quite likely the amount is the minimum set by your employer and may be nowhere near the optimal amount you should be paying.
What that amount is depends on what you can afford to save and your age — as people get older they get increasing tax relief for pension contributions and it makes sense to take advantage of this if you can.
Recent research by Irish Life showed that just under two thirds of Irish people are actively saving and have some savings.
The pension provider is keen to point out that by saving into a private or company pension plan, people’s savings can go a lot further.
If a person wants to save €100 into a pension, it will only cost them €80 if their tax rate is 20%, or €60 if their tax rate is 40%.
If their employer matches their contribution the benefits can be even greater.
Managing Director of Irish Life Corporate Business Tony Lawless said; “It’s positive to see that people are saving.
However, we are helping people to understand that they can significantly enhance their financial position in retirement by starting to save into a pension, or by even increasing the amount they save in addition to any employer pension contributions they may receive.”
So don’t leave your pension planning to your employer.
Sit down with a financial adviser to work out the best plan for you.
The biggest deduction for most of us is tax and unfortunately we do not get to decide ourselves what we owe.
However, it is still worth taking the time to check that Revenue is taking the correct amount.
You can get detailed information on tax credits and allowances at www.citizensinformation.ie.
Common ones that people overlook include the home carer tax credit and flat-rate expenses relating to your employment.
If your circumstances change this may also impact your tax liability.
If you are married or in a civil partnership, you can choose one of three ways to be assessed.
Should the relationship break down it is important to sort out the tax implications promptly; Revenue ask to be notified as soon as possible.
If you are allocated and make use of credits you are not actually entitled to Revenue will usually look to clear your underpayment by making an adjustment to your tax credits.
This means reduced take-home pay the following year until the underpayment is cleared.
Dependents can also affect your tax liability.
If you want further advice on tax or feel you may have overpaid in recent years, you can get more information at taxback.com.
Car insurance costs continue to be a major cost for Irish
motorists and the best advice is to forget loyalty and shop around at each renewal.
If your policy expires before the end of the month, it may be worth getting a quote from the AA.
The company are offering €75 off policies bought online before July 31.
The discount is offered in addition to a range of other benefits including unlimited windscreen cover, no claims discount and step back bonus protection.
They have additional bonuses for AA members including being covered to drive other cars fully comprehensive.
They will also be covered up to €750 for personal belongings like a sat nav and mobile phone and if the locks and alarms in the car need replacing, the AA covers members for up to €1,500.
You can get a quote now at www.theaa.ie.
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