Pensions

I noticed in the past few weeks that all the pension company ads on radio at the moment are focusing solely on their S&P rating, size and stability. The Life Assurance companies are masters at playing to the masses and almost always push a message which is the latest flavour of the month. 3 years ago it was geared equity and property funds. In Oct 2008 it was diversified asset funds and drip feeding your investment. Oct 2009 was Cash Deposits and Bond funds and in 2010 it is all about their financial strength! They seem to always be a year behind the market reality, when we actually pay them to try to beat the markets not follow them.

They are using their marketing muscle to play to our concerns and win as much new business as possible. I understand they have to make profits but clients pay them to give investment leadership and real market knowledge, when in reality they take their lead from their clients and push whatever they think will sell.

At the moment, security of the life company is secondary to comparable performance and charges. We want to see who are the firms that are constantly at the top of the league tables, NET of charges, but we won't hear that on a Newstalk ad!!  Who are the Chelsea, Kilkenny or Lee Westwood in terms of investment return and value in Ireland? Comparison of investment performance (NET of charges) and critical examination of the investment team and philosphy is the most important factor when choosing a pension product. Financial security can then be compared among the best performers.

 

PS - I must do some research into how your investments would do if you placed your money in exactly the opposite direction to the Life Assurance Company marketing material and new funds each year. Watch this space....

Dave

Don't take your advisor or accountants' word for it when considering where to invest your pension contribution this year.

As we approach the deadline for filing tax returns, this is the time of year for self employed pension contributions and AVC's. Pensions are the only large tax break still available so it is always worth considering a pension contribution, partly to help put aside some funds for retirement, but mostly to offset some of that tax cheque to be written by the end of October. Generally an advisor will make a recommendation on where to invest the funds, and it is usually a last minute thing, at 5pm on the 31st October!

Property and Stock market activity over the past 3 years has led investors to examine more closely where they invest their single pension contribution each October. The majority have gone for cash funds with the life assurance companies, but they offer extraordinarily bad value. With cash returns in these funds often less than 1%, and management fees of 1% typical, a cash fund is guaranteed to fall in value. I accept there is security in a cash fund, which is comforting, but if retirement is a long way away, some cautious, diversified and well researched investment is always a good idea. Consider it an opportunity to buy raw materials cheapily now, that will be used in 20-30 years time to build an annual pension. You wouldn't want to buy the raw materials now at a high price,but would prefer to see value.

 

Pension Contribution Checklist -

1) Any recommendation is backed up with market wide, independent research, including fund performance comparisons.

2) All charges are clearly illustrated and explained.

3) Broker / accountant / intermediary commission is disclosed.

4) Existing investments and pensions considered to ensure balance of overall portfolio

 

If your existing provider is not doing all these things, then find a better advisor (or give us a call!!)

 

Dave

After years of research, lobbying and discussion, the National Pensions Framework was announced this afternoon. This is a long term plan to address the concern about our ageing population and the lack of adequate pension provision, particularly among private sector workers.

The main points of the framework document are as follows,

Government goal is for all retired individuals to have a retirement income of 50% of final salary

State Pension Age to increase to 66 in 2014, 67 in 2021 and 68 in 2028

Government to maintain the State Pension at 35% of average weekly wage

Current pension contributions will receive an SSIA style government contribution equivalent to 33% Tax Relief, rather than the existing standard and marginal tax reliefs

Public Service - A single new pension scheme will be introduced for all new entrants from 2010

Auto-Enrolment - All employees will be automatically enrolled in a new scheme with employer and governemtn contributing equally and employee also obliged to contribute. EG for every 4 euro an employee contributes, the government will contribute 1 euro and the employer will contribute at least 1 euro. Any employees below a certain income threshold, or already in a scheme are excluded Read More On The *NEW* Pension Framework

With the huge demand for Property Investment in Ireland since the mid 90's, Small Self Administered Pensions (SSAP's) became very popular and the growth in this segment of the market was remarkable. There are currently approximately 20 Pensioneer Trustee firms in Dublin alone offering Trustee services for this type of pension. The basic tenet of these structures is to allow the investor set up their own individual scheme, separate from any Life Assurance Company with complete flexibility over investment choice. The vast majority of investors used this to buy direct investment properties and borrow within the pension fund.  Pension syndicates were also popular, allowing individual investors to pool their resources to buy bigger commercial and retail units. In the past year demand for property investment has completely died, so is there still demand for SSAPs?
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