There have been a number of developments over the summer which should improve people’s financial lot
There have been a number of developments over the summer which should improve people’s financial lot
The number of calls made to the State's money advice service for help with electricity bills has almost tripled this summer – after a number of people were hit with unexpectedly high ‘catch-up’ bills.
“It's emerging that many electricity bills were underestimated over the last 12 to 18 months so some people are now facing bills of over €2,000 or €3,000,” said Karl Cronin, regional manager with the Money Advice and Budgeting Service (MABS) in north Connacht and Ulster.
The suspension of meter readings during Covid meant that many people's electricity bills were estimated during the lockdowns. Now restrictions have eased and accurate readings can be taken, catch-up bills are being received by customers whose electricity usage was much higher over the pandemic than anticipated in their estimated bills.
The number of calls made to MABS from people seeking help with utility bills in the first three weeks of July was almost three times the number made in the first three weeks of May, according to Cronin. “The biggest issue we are seeing is exceptionally high electricity bills,” said Cronin.
“Not only has the number of calls substantially increased, but the amount of debt on the utility bills has also substantially increased in a lot of these cases. We've people calling us who've never been in debt, who are facing these type of bills – and who are looking for advice or support.”
The end of the ban on electricity and gas disconnections earlier this summer will further increase the pressure on those recently hit with high electricity or heating bills. That ban, which had been in place since March 2020 to protect those who experienced difficulty repaying utility bills throughout the pandemic, was lifted in June.
Those who expect to struggle to pay a high catch-up bill should contact their electricity provider to discuss putting a plan in place to repay that bill – or contact MABS for advice or support in doing so, advised Cronin.
While these shock ‘catch up’ bills will be a blow to those who must deal with them, this summer is shaping up to be one of mixed financial fortunes for Irish people. There have been a number of developments over the summer which should improve people’s financial lot. Here are some of them.
The Central Bank moved this summer to ban a practice whereby people who don't shop around for their car or home insurance – and who instead stay with the same insurer for many years – are penalised with higher prices.
The practice – known as ‘price walking’ – means that customers who stay with the same car insurer for nine years or more are paying on average 14pc more for their insurance than a driver with a similar background who is renewing for the first time, according to recent research by the Central Bank. A home insurance customer who has remained with the same insurer for nine years would pay on average 32pc more.
To combat this, the Central Bank has proposed a ban on price walking. The ban, which is expected to come into place in July 2022, should ensure that longstanding car and home insurance customers get fairer prices and could knock €100 or more off their renewal premiums.
The review also examined the similar practice of dual pricing: where new customers are offered a much cheaper price for insurance than a customer renewing their insurance, even if the product, and costs of insuring the customers, are the same. However, the Central Bank has stopped short of recommending a ban on dual pricing – and its failure to do so has been criticised by some, including Brokers Ireland.
Carers got some reprieve in June when the annual carer's support grant – which is paid to carers who provide full-time care to an older person or a person with a disability – increased from €1,700 to €1,850.
“There's a significant cohort of carers that are reliant on this grant,” said Deborah Dwyer, development manager with the north Leinster Citizens Information Service. “The grant could allow the carer to make respite arrangements for the person receiving care – and this in turn allows for the carer to also receive a break from giving care.”
There are some who argue that the carer's grant should be higher but all the same, the €150 increase is a step in the right direction.
Those who rely on moneylenders for loans should soon find it less expensive to borrow money after the Government last month approved draft rules which will cap the interest rate that moneylenders can charge. The upcoming law will also ban moneylenders from charging an additional fee when calling to a customer's home to collect repayments.
Many of those who rely on moneylenders are low-income families on social welfare, according to Cronin. For these families, a moneylender could be the easiest and most convenient way for them to borrow money.
However, the interest charged on a moneylender loan could come to as much as a quarter of the amount originally borrowed – or more.
Moneylenders typically lend small amounts of money at a high rate of interest over a short period of time, which means the repayments are high.
“The new law is important for borrowers who have limited access to credit as it will mean lower loan repayments, lower borrowing costs and more borrowing capacity,” said Cronin.
Like any draft legislation, it will take time for the new rules to kick in.
Around 86,000 businesses – including 34,000 self-employed individuals – were given more of a breather with their tax debts earlier this summer when Revenue announced an extension of its debt warehousing scheme. Under this scheme, businesses can park VAT and PAYE tax debts which arose during the Covid crisis. One of the big advantages of the scheme, which was introduced during the pandemic to ease the financial pressure which many found themselves under, is that the tax debt can be parked interest-free.
“Before the extension, self-employed individuals or small businesses would have been facing into the servicing of interest on a Covid tax liability in 2022,” said Norah Collender, professional tax leader with Chartered Accountants Ireland.
“The extension pushes out the servicing of such interest until 2023. It gives self-employed individuals and businesses extra space to get up and running. The tax debt warehousing scheme is a helpful scheme which recognises the genuine difficulties facing businesses coming out and ramping up business after Covid.”
Collender advised businesses not to forget about any tax debt parked in the warehousing scheme. “For most businesses, the goal will be to clear the Covid tax debt before the 3pc interest kicks in,” said Collender.
First-time buyers were given some hope earlier this summer that they may soon have a better chance of getting on to the property ladder when the Central Bank announced that it would conduct a major review of its mortgage rules.
The rules restrict the amount that a first-time buyer can borrow to three-and-a-half times their income – though there are exemptions which allow some to borrow more. Single people in particular often struggle to get enough of a mortgage to buy a home under the current rules.
The review will run throughout 2021 and 2022 – so the earliest that any new rules could kick in may be next year. Some are concerned that any tinkering with the current rules could fuel further house price rises. The Central Bank has a tightrope walk ahead of it here.
Home heating shock: Anyone who uses home heating oil and who hasn’t filled up their tank since May could get a shock. A carbon tax hike kicked in for heating fuels such as home heating oil, coal, briquettes and natural gas on May 1. This increase – combined with the surge in oil prices in the first six months of this year – will make it more expensive for many homeowners to fill up their oil tanks. One reader for example found that her bill for 750 litres of kerosene had jumped to around €500 this summer – up from €360 in November 2020. A deal struck last month by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies to increase oil supply could see oil prices fall in the coming months – and offer some relief to those who depend on home heating oil to warm their homes. Oil prices however are notoriously volatile and some expect the upward trend in oil prices to continue for some time.
Pricier parcels: Ordering small parcels from the UK – and other countries outside the EU – became pricier since the start of July due to a withdrawal of the VAT exemption on parcels worth less than €22. Before July, it was possible to avoid Irish VAT on items ordered from the UK and other countries outside the EU if the value of the item ordered was less than €22. However, VAT must now be paid on all such items, regardless of their value.
Phasing out of PUP: The Pandemic Unemployment Payment (PUP) has been closed to new applicants since July 8. People who lose their job after that date must apply for the dole. Although the phasing out of PUP is a sign that the country is recovering from the pandemic, some people will get less money on the dole than they would on the PUP.
Those who were on PUP before July 8 were asked to reconfirm their eligibility for the payment by July 27. “If you didn’t confirm your eligibility, the payment may have been stopped,” said Deborah Dwyer, development manager with the north Leinster Citizens Information Service. Those whose PUP payments were stopped as a result of failure to confirm their eligibility should act quickly so they get their payment reinstated, advised Dwyer. “The longer you leave it, the harder it will be for the payment to be reinstated,” said Dwyer.
You can reconfirm your eligibility for PUP on welfare.ie – or you can get help from your local Citizens Information Centre. (The Citizens Information helpline is 0818 074000). Those still in receipt of PUP will see their payments cut from September 14.
Electricity Price hike: Since the start of this month, it has become more expensive for 1.1 million electricity customers to boil their kettles for a cuppa and to turn on the washing machine after Electric Ireland increased its electricity prices by 9pc. The supplier also hiked its gas prices by almost 8pc on August 1. The increase will add almost €100 a year to the average annual electricity bill and €60 to the average annual gas bill. Electric Ireland’s price rise follows a raft of energy price increases from other suppliers.
Check uniform allowance: Check if you qualify for a State digout towards the cost of school uniforms and footwear.
This digout — which is available through the back-to-school clothing and footwear allowance — is €150 for eligible children aged between four and 11 — and €275 for eligible children aged between 12 and 22. Children aged between 18 and 22 must be returning to second-level education this autumn to qualify for the allowance.
Families who are on the Pandemic Unemployment Payment or certain other social welfare payments or benefits may qualify for the allowance — as long as a number of conditions are met.
The allowance is a means-tested once-off payment which is automatically paid to many families.
However, if you have not already received a letter confirming that you will receive the payment, you should apply online (on mywelfare.ie) by September 30.
Check what supplies you already have: The move to remote learning in the first few months of this year — and indeed during the first lockdown of 2020 — meant that many school copies and other stationery were not used over the last year-and-a-half.
So before ordering new copies, glue sticks, coloured markers and other school supplies for the upcoming academic year, check if you have any spare ones left over or hiding under the sofa.
Don’t use your credit card: Almost a third of Dublin parents use their credit card for back-to-school purchases, according to the Irish League of Credit Union’s latest back-to-school survey. However, credit cards are one of the most expensive ways to borrow money — interest could be three or four times the interest on a bank or credit union loan.
So if you must borrow for back-to-school costs, avoid high-cost finance — and instead get a cheaper loan. Ideally, don’t borrow for back-to-school costs at all and use your savings or monthly income instead.
Buy generic: Buy generic rather than crested uniforms (if this is an option) — or if you must get a crested uniform, buy sew-on crests (if you can).
But second-hand: Check online forums — such as the one on schooldays.ie — for second-hand uniforms or books, or visit your local charity shop.