10 years ago we had Steve Jobs, Bob Hope and Johnny Cash. Now we have no jobs, no hope and no cash!

Budget 2012 - Expectation Management 

by Aidan McLoughlin, ITC

The key theme of this year’s budget has been “EXPECTATION MANAGEMENT”.

What was normally a 3 hour event has been converted into a 3 day saga. Key features of this exercise have been:

·         to prepare the population for bad news (through an unprecedented level of kite flying as well as assistance from the German Parliament), and

·        
to ensure the previous government could clearly be shown to be responsible for the current crisis and that this government will “retrieve our economic sovereignty”.

Initial impressions are that the government has achieved some success in regard to damage limitation – “not as bad as we thought” seems to be the most common response.

Our economic sovereignty is more uncertain: the fact that we need to hear from the Germans probably emphasises where we are on this point.

Whilst the Budget is generally bleak and everyone will be a little worse off, there are some small points of hope – the increase in mortgage interest relief for first time buyers, the reduction on stamp duty on commercial property, the adjustment of the Universal Social Charge.

Equally there will be relief as regards changes that didn’t happen: tax relief for pension contributions and loss relief for capital taxes are two areas where audible sighs of relief were heard.

People will be glad to be still surviving, but the end line is still a long way off. Without offending the present government I would suggest the clear theme is perhaps “a lot done, more to do”.

For our view on other aspects of the budget, please click here. 

ITC continues to lobby the government on behalf of Advisors

Aidan McLoughlin, through his role as chairman of the Irish Brokers Association Pensions Committee, continues to be involved in lobbying the government on behalf of Advisors. Recent meetings include: 

·         TD Terence Flanagan of Fine Gael

·         TD Peter Matthews of Fine Gael

·         Senator Fidelma Healy Eames of Fine Gael

·         TD Michael McGrath of Fianna Fail

·         Senator Jimmy Harte of the Labour Party

·         Senator Michael D’Arcy of Fine Fail

·         Independent TD Shane Ross

·         The Department of Finance

·         The National Treasury Management Association (NTMA)

The Pensions Committee has developed a five point plan to make pensions more relevant in the current environment and to help protect the remaining tax reliefs. It was good to see last week that some TDs are listening and attempting to tackle the issues highlighted in the five point plan.

In addition to the above activity, ITC is represented on the several other industry groups including:

·         Association of Pensioneer Trustees of Ireland (APTI)

·         Young IBA

·         IAPF Council

·         Pensions Committee in the Law Society

·         Association of Compliance Officers

Through our blog, we will continue to keep you posted of ongoing lobbying activity.

What has the Pensions Board got to say about the Levy?

There was some interesting coverage in The Oireachtas Report which was broadcasted on RTE1 yesterday. The Pensions Board CEO, Brendan Kennedy, was questioned about the Pensions Board's role in advising the Government on the pensions levy.

The Oireachtas Report footage is here. The relevant piece starts at 12min 50. The footage will be available until 8th December 2012.

Pension Investment in Private Companies

Self-administered pensions can invest in a wide variety of investment products. Publically quoted shares and other securities, investment bonds, property and deposits are some of the more common.

However, in the last couple of years we have seen increasing interest in investment in private companies. It has traditionally been, and indeed remains, a high risk area, but, given the lack of alternative sources of finance, private companies that would otherwise find a ready market for their fundraising through the more usual routes are having to cast their nets wider. Many have come to appreciate the benefits of investment by pension funds, from both traditional pension fund investors and small self-administered schemes.

Investments structured to accept funding from self-administered pensions can be collective investment structures, but more typically an individual with a self-administered pension structure will want to make an investment into an ambitious SME. In the last three years alone, over €7.2 million has been invested in this way through ITC into a wide variety of companies, from wind energy companies and a provider of prepaid electricity meters through software development companies, an internet daily deals/social networking group of websites and electronic media companies to property development companies. Any trading company can profit from such investment.

Investments have to be on proper commercial terms. A private arrangement to fund your own business or that of a family member or friend or one that is not commercial would not be acceptable for pension investment, but a properly structured investment on market terms into a trading company would always be appropriate.

If you have any clients interested in making an investment into a private company through their pension schemes, please contact us.

Jeremy Mitchell

Pension Security

We are sometimes asked questions like …How do I know my pension fund is safe with you, and that you will not invest/divest it without my agreement?  What would happen my pension if the pension provider was to go out of business?

These questions are seeking answers about the security of the pension structure and how the assets are held. They are very valid questions and they are questions every aspiring pension holder and any advisor to the pension holder should ask.

The below table sets out the approach that ITC take compared to the standard industry approach. 

Click here to read how ITC's approach differs from others in the industry. 

Pension Shock: The Future is Now

George Lee’s special documentary “Pension Shock: The Future is now” was aired yesterday evening on RTE1. Overall, the show was interesting, but represented a somewhat  sensationalist view of the pensions situation and offered few solutions. There was a dominant focus on fees, a brief mention of the Levy and tax relief and no direct comparison of the pension classes.

Our MD Aidan McLoughlin appeared on the programme. He noted that we are facing real difficulties if we do not address the deficiencies in the system soon. We have an opportunity now to fix this problem if we are brave enough to do so.

One positive outcome of the programme will be that people will look to review their pension arrangements. The programme showed shocking examples of people who considered themselves to have sufficient pension coverage, but in reality their pensions were falling far short of the real income requirements.  

The argument for self-administered structures has only been strengthened as clients start to take back control of their pensions and look for transparent fee structures.

You can watch the programme here:

Pension Shock: The Future is Now RTÉ

Aidan McLoughlin is to appear on George Lee's special documentary, Pension Shock: The Future is Now,  this evening, Monday 17th, at 9.30pm on RTE1.

The programme is a one-hour special that looks at the looming pension crisis. George Lee talks to a number of experts, including Aidan, about the difficulties and how to address them.