How Much is Too Much?

We all know that Irish pension funds lost more value in 2008 than the pension funds of any other major economy. Belatedly the Pension Board has indicated that this is because Irish pension funds have too much invested in Irish equities. How do they know this? The question isn’t as stupid as it sounds.

Basic investment philosophy for at least 5 decades has suggested that returns above inflation are best achieved by investing in real assets such as equities. Various investment gurus have established that the risk inherent in equity investment can be significantly reduced by:

1.                  investing over a long period of time

2.                  investing regular amounts rather than lump sums and

3.                  using a diversified portfolio

All of these are available to Irish pension funds.

In addition, our population profile would suggest we have one of the youngest populations in Europe and (until very recently) a growing population.

Does that not mean therefore that we should have more invested in equities than any other country in Europe? If this is the case then events like 2008 will have a short term impact on fund values. However, overall the fund should continue to out-perform in the long term.

Unless, of course, you decide to get out of equities at the bottom of the market – thereby crystallising the loss and missing the bounce. Which you might do if your Regulator was saying you had too much in equities.

Author: Aidan McLoughlin

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Disclaimer: 

• The opinions expressed are those of the individuals rather than Independent Trustee Company.
• Independent Trustee Company does not take responsibility for the accuracy of any content.
• The contents cannot be construed as advice.
• We would strongly suggest that any information provided should be discussed with your financial adviser before any action is taken.

The Not so Smart Economy

Attracting high-end employment into Ireland is more difficult than ever. How do you get the scientists and the decision makers to come to Ireland to drive on the development of the smart economy?

One smart idea would be to consider that the key decision makers are likely to be 45 plus and to be very conscious of pensions. If you have a generous pension system these individuals could see a real benefit to locating their key people here. There is no cost to Ireland as:

1.                  The benefits will be paid by employers at a tax cost of 12.5%

2.                  75% of the benefits will be taxed to income tax at rates of up to 50%

Just when you think we are onto a winner the government finds a way to mess it up. By proposing that tax free lumps above €200k be taxed, the government could generate tax savings of €4m to benefit the Irish economy ……and drive away multinationals worth billions a year for the economy!

Still “fumbling in the greasy till and adding the halfpence to the pence”.
How smart is that?

Disclaimer: 

• The opinions expressed are those of the individuals rather than Independent Trustee Company.
• Independent Trustee Company does not take responsibility for the accuracy of any content.
• The contents cannot be construed as advice.
• We would strongly suggest that any information provided should be discussed with your financial adviser before any action is taken.

The Battle of Britain 2

September is the month when the trustee training requirement went live. This means that multi-national employers establishing in Ireland, the potential saviours of the Irish economy, will probably have to subject ALL their executives to training in Irish Pensions Law!!

YES – as we face in to the greatest economic crisis this nation has ever known, with the eyes (and ears) of the financial world focussed on every financial move (and hoarse cough) we make, our government can assure them that at least the Pension Board has not been found wanting.

Consider the position of the Directors of British multinationals, many of whom have signalled the idea of establishing their international headquarters in Ireland. Their check-list will now look like this:

Tax rate	Excellent
Educated work force	Excellent
Favourable time zone	Excellent
English Speaking	Excellent
Requirement for all directors to spend 9 hours learning about Irish Pensions	*!!??**!!?

Never in the history of Financial Management has so much grief been caused for so little gain.

Disclaimer: 

• The opinions expressed are those of the individuals rather than Independent Trustee Company.
• Independent Trustee Company does not take responsibility for the accuracy of any content.
• The contents cannot be construed as advice.
• We would strongly suggest that any information provided should be discussed with your financial adviser before any action is taken.