Irish banks set to make a fortune as perfect storm of increased interest rates combine with exit of competitors will increase profitability over the coming years. In an effort to curb inflation, the ECB increased rates by 1.25% so far in 2022. Many expect this increase to steadily increase over the coming years. This has been reflected in increased mortgage rates for the Irish borrower. However, as yet we have seen no significant increase in the interest rates banks are offering for money held on deposit.

The exit of Ulster Bank and KBC has seen massive inflows of money to the remaining banks. PTSB, Bank of Ireland, EBS and AIB have attracted a huge increase in the money they hold on deposit for customers as people are forced to close their existing accounts and find a home elsewhere. The lack of competition from the exit of Ulster Bank and KBC will leave the banks left standing with no major incentive to attract new customers.

While Irish Banks will avail of more attractive interest rates in Europe, there is no sign of any plans to pass this on to their customers as yet. While we have already seen significant increases in the rates at which they are lending. With inflation at an almost 40 year high in Ireland for 2022, those who are holding money on deposit long term will see their purchasing power dramatically decreased over the past year.

People who hold money they are not planning to use within the next five years, should consider alternative investment options. There is a wide range of attractive investment options ranging from, unit linked funds to structured products. If you are interested in learning more about what options are available to you, get in touch on darach@honanfs.com or 087-1277155.

The value of funding your pension

As the personal tax deadline approaches quickly, many will be handing over more money to the revenue than they need to by not availing of generous tax reliefs. Chief amongst them is tax incentives to contribute to a pension. For those who are paying tax at the high rate of 40%, they will receive 40% back from revenue on their contribution to pension. Not only this, but all growth within

For example:

Joe Bloggs is 42 and owns a carpentry business and earns €70,000 per annum. His total tax bill for the year will be roughly €12,450. He currently has no pension and would like to start so that he can retire at age 65.

As Joe is in his 40s, he can contribute 25% of his annual earnings to pension, €17,500. He will receive 40% tax relief on his contribution, €7,000. He is now in a position whereby he has €17,500 in a pension and has reduced his tax bill for the year from €12,450 to €5,450.

Joe decides to invest his pension in equities. Over the last 100 years, most global equity indices have averaged an annual return of between 8-10% per annum. However, for the purposes of this example we will use a very conservative expected return of 4.5%. If Joe contributes €17,500 to pension each year until age 65 he would have a pension pot worth €704,375. His total contribution would be €402,500 which after tax relief would have only costed him, €241,500.

Unfortunately, the mistake that many people make is not utilising the correct funds to invest their pension into and not contributing enough to pension. This is why it is crucial to review your pension with a financial advisor you can trust. If you have not sat down with a financial advisor to review your pension in the last year, get in touch through darach@honanfs.com or 087-1277155

In Ireland we are in a precarious position of not having a sustainable state pension system in place. The state pension as it stands currently is completely unsustainable because of the demographics of the population here in Ireland. Due to a political unwillingness to address the issue young people in Ireland will be forced to rely on their own pension benefits that they have built up rather than the state pension benefit.

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TESTIMONIALS

My initial meeting with Darach was as a Lecturer in LIT who will have less than 40 years- service at retirement.  After a completing a review, I had a clear understanding of how my pension worked and how best to optimize it going forward.

I have found Darach to be very friendly, knowledgeable, no way pushy and quite transparent in his recommendations. I would strongly urge you to have that initial consultation. My experience of Honan Financial Services has been a very positive one both personally and financially.

Tim Galvin , Lecturer, Limerick Institute of Technology

I was looking for alternatives to saving in the bank as there was little to no growth to be had in their savings accounts. Honan FS made it very easy to invest in a multi asset fund which meets my long-term goals. I’d recommend Honan FS to anyone looking for advice on any aspect of their financial planning.

Sean, Business Development Manager

When taking out our mortgage we were offered mortgage protection by the bank. After a review with Darach we found a policy which was more comprehensive and better value for money. We were also able to optimize our savings through a regular savers policy which has achieved far better returns than what was on offer with the bank.

Anthony O’Halloran, Director, Deloitte

At the start of 2021 we both decided to do a health check on our financial status. We both had occupational pensions schemes left from previous employers and we reached out to Darach for assistance and advice on transfer options. Darach was excellent in helping us map out our future financial needs , determining our outlook to risk , providing sound financial advice and discussing best performing options to suit us

Darach dealt on our behalf with the previous pension providers and their associated agencies and the whole process we felt was very professional and a seamless transaction to us. Because of interest rate returns on bank deposits /post office being virtually zero and essentially loosing money on deposit we also seeked advice on alternative investment products for the mid to long term.

We were looking for products that gave a good rate of return and that we could lock away for 10 years plus to help with education funding. Both requirements were met very professionally by Darach and his team. We are both very happy we reached out to Darach . The only regret was we didn’t do this a few years earlier but better late than never.”

Gerard & Niamh O’Grady, Private Clients
Darach has looked after my pension for a number of years and once he setup Honan Financial Services, it was an easy decision to move my pension / financial planning with him. Darach continuously demonstrates a thorough and rigorous approach to customer service and his clients individual’s needs. He is thoroughly professional, exceptionally friendly and the best in the west in my opinion. I would highly recommend him to all.
Shane Murphy, Private Client