Latest news with #DepositInterestRetentionTax
Irish Independent
30-06-2025
- Business
- Irish Independent
Large numbers of consumers confused about impact of inflation on purchasing power
And many consumers have a limited understanding of how the tax on savings accounts works. That is according to a new survey that lays bare the extent of financial illiteracy in this country. The PTSB 'Reflecting Ireland' research revealed that nine out of 10 of respondents think they have average or high financial literacy. But specific questions asked as part of the survey contradict this view that people understand personal financial matters. The research found that four out of 10 respondents could not correctly answer a Junior Cert level business sample exam question on the impact of inflation on household purchasing power. They were asked if high inflation is bad for their purchasing power – the quantity of products and services available for purchase with a certain amount of money. The research found that only 58pc of respondents identified that high inflation is bad for their purchasing power. Some 27pc got it wrong, answering that high inflation was not bad for their purchasing power. And 10pc incorrectly said their purchasing power would remain the same in a period of high inflation. Some 5pc said high inflation makes their personal finances more stable. ADVERTISEMENT Consumers were also asked about the impact of DIRT (Deposit Interest Retention Tax) on their savings. Only of respondents were able to correctly calculate the total amount of savings they would earn after DIRT is applied. PTSB said these findings were consistent with other aspects of the survey, which also asked respondents to assess for themselves their ability to understand financial terms, concepts and products. Just under 10pc of respondents said their financial literacy is low. This cohort reported feeling down about their finances and feeling uncomfortable talking about money to family and friends. Some 40pc of respondents cited the belief that feelings of embarrassment can be a key barrier to improving financial understanding. The survey, conducted by Core Research, also found that only 53pc of people are comfortable talking to a friend or family member about money. PTSB chief sustainability and corporate affairs officer Leontia Fannin said the results of the survey show that more needs to be done to raise financial literacy levels. 'These results highlight that support is needed to educate people on the importance of financial literacy in order to increase financial resilience, inclusion, and protection against financial scams,' she said. Almost half of respondents felt technology has helped them to better understand fees and charges, financial products and services available, and their personal spending habits. This increases to an average of 57pc for those aged between 18 and 24. Those over-55 are the least likely group to have used technology to help understand their finances better. A drop in consumer sentiment towards the economy was also recorded in the replies. More than half believe the country is on the wrong track, a number which has grown significantly since the start of the year. Some 42pc say their financial situation has deteriorated over the past 12 months. And a third say they expect to be worse off in a year's time, and a similar proportion say they will be no better off.
Irish Examiner
18-05-2025
- Business
- Irish Examiner
Under 3% of recipients have had to return Help to Buy payment
Less than 3% of first-time buyers utilising the Help to Buy (HTB) scheme over the last five years have had to either return the assistance payment or have Revenue claw it back over failing to meet the criteria, the finance minister has said. The HTB scheme was first introduced in January 2017 in order to help support first-time buyers to either buy a newly-built house or apartment or self build a new home. The scheme gives a refund of income tax and Deposit Interest Retention Tax paid in Ireland over the previous four years in order to help purchase the home. The scheme only applies to properties that cost €500,000 or less and the buyer must live in the property as their primary residence. In response to a parliamentary question on the matter, finance minister Paschal Donohoe said that in order to avail of the HTB payment, a home must be occupied for a minimum period of five years by the first-time buyer as their only main residence. 'Where this condition is not met the HTB payment has to be repaid to Revenue,' the minister said. Where occupation ceases within the five-year period, the HTB claimant is required to notify Revenue accordingly. 'The HTB payment will also have to be repaid to Revenue if, in the case of a self build, the property is not completed within two years of receiving the HTB payment or where it transpires that the claimant was not entitled to claim a HTB payment,' he said. Mr Donohoe said that he has been advised by Revenue that there has been 36,139 HTB scheme claims processed between 2019 and 2024, of which 934 claimants did not meet the relevant criteria, approximately 2.6%, and 'either had the claim clawed back or voluntarily cancelled their claim and returned the payment in the same period'. To qualify for the scheme, a claimant must take out a mortgage which must be at least 70% of the purchase value of the newly built property or the valuation approved by the mortgage provider if the mortgage is for someone building their own home. Under the scheme, a claimant can get relief to the tune of €30,000 or 10% of the market value of a new build property, or approved valuation of a self build property, whichever one is lower.
Irish Independent
05-05-2025
- Business
- Irish Independent
Silent squeeze of inflation the hidden threat to retirement planning as it eats away at our nest eggs
The issue is particularly acute for pensioners who have cash lump sums in the bank or are relying on their savings after leaving the workforce. Research carried out by online savings platform Raisin Bank found that if inflation stays at its current level of around 2pc in this country it would deflate a nest egg of €20,000 to just €16,600 in 10 years. The bank said inflation was a hidden threat to post-retirement planning. If inflation continues at the historical level it has been at for the past 50 years then €20,000 today would be worth just €13,000 in the next 10 years. The Ireland head of Raisin Bank, Eoghan O'Hara, said: 'Many Irish retirees receive lump sums or maintain cash savings accounts to help fund their lifestyle, cover healthcare costs, or prepare for unexpected expenses. 'But few realise how quickly inflation can shrink those savings unless they're earning a return that keeps up.' Mr O'Hara said that if left unprotected, even modest inflation can diminish the buying power of retirement lump sums or emergency funds meant to last years. He said workplace pensions are designed for long-term growth and can include inflation-linked elements. But cash savings, such as those held in low-interest demand deposit accounts, are far more vulnerable to inflation's silent squeeze. Inflation measures the rise in the cost of living over time. Even at a modest rate, inflation reduces the real value of your savings, making it vital to plan accordingly In Ireland, historical inflation rates over the past 50 years have averaged roughly 4.35pc year over year. The current economic policies of the European Central Bank aim to maintain a 2pc target. Mr O'Hara said: 'Even at a modest rate, inflation reduces the real value of your savings, making it vital to plan accordingly.' Statisticians at Raisin Bank used historical inflation rates and calculated that €100 today would be worth only €65 in 10 years. And the €100 would be worth just €43 in 20 years' time. However, under the 2pc target scenario, the decline is less severe. In that case, €100 will be worth €82 in 10 years, and €67 in 20 years. Mr O'Hara said this demonstrates how even small percentage differences compound over time, affecting retirement funds. He said that for those in their 30s and 40s, the challenge to retain value when building up retirement savings is even greater. With 26 to 36 years until retirement, inflation can dramatically alter expectations. A 30-year-old planning to retire at 66, experiencing a 4.35pc inflation rate, would see the purchasing power of €100 today shrink to around €21.5 by retirement. Mr O'Hara said taxation also plays a role in reducing post-inflation gains. In Ireland, Deposit Interest Retention Tax (Dirt) further diminishes real returns on savings accounts. When adjusted for tax, returns on low-yield savings can fall below inflation, leading to a loss in real value. This makes tax-efficient investment options within pension schemes even more critical, he said. Relying solely on low-return cash accounts is risky due to inflation's erosive effects. Instead, pensions and investments should be structured to deliver real, or inflation-adjusted, growth, Mr O'Hara said. Raisin Bank said average historical Dirt-corrected savings rates for term deposits are a full percentage point higher than the rates for demand deposits.
