Friday, March 4, 2016

The Destruction of the Irish Savings Market

The Irish Government campaign to discourage people from saving must come to an end. 

Regular savers to unit linked (fund) investments have really been maltreated and hounded. Not happy with the Government 1% Levy (Tax) on every contribution to a long-term unit linked saving plan, the current Government Exit Tax on any growth on the funds is 41%. Think about that. It's HUGE.

You're trying to be prudent, saving for the future, taking a risk on your investment and you get hammered on the growth in value. It's mind-blowingly stupid and short-sighted for a Government to maintain an obscene high tax regime on long-term savings. Of course, Governments think in 5 year election cycles so having a plan that goes beyond that short term is a collective anathema.

You can currently get a 'safe' tax-free return of 25% over 10 years (this was 47.5% in 2010 when the bond was introduced) by lending money to the Government via the Solidarity Bond. To get an equivalent current return from a product with a higher 'risk' insured investment fund, the fund would have to grow by about 55%, when you take annual management charges and taxation into consideration.

If we roll the clock back over the last 10 years and look at the SuperCapp Fund with Zurich Life and the With-Profit Fund with Standard Life we can see how difficult it is to compete with a Government sponsored product.

The gross return on the Standard Life Fund over 10 years, to February 2016, is 33.07% - deduct tax @ 41% and you're left with 19.51% net. The person that sold you the product got paid, the fund manager got paid, the Government got paid, but you're left with a paltry return on investment.

The figures for the Zurich Life SuperCapp Fund are a healthier 47.54% gross and 28.05% net. 

What needs to happen is that the Government need to get rid of the levy on these products and reduce the tax rate dramatically  OR introduce a tax efficient scheme like the Individual Savings Accounts (ISAs) in the UK. These allow individuals to save/invest Stg. £15,240 per annum in a variety of tax-free products.

If this doesn't happen, regular savers will be lured back into investing in property again, as the alternatives are so unattractive.

Given the way the Government have raided pension funds in the past and the current prohibitive tax regime on savings, there would want to be some reassurances from them on keeping their mitts off any surprise attacks on savings in the future.

The best person to save for the rainy day is you. So any talk of the Government setting aside a 'rainy day fund' is just nonsense. They'll just blow it, in time.


Wednesday, February 26, 2014

Price Matching - Consumer Obfuscation

You know when you ring your car/house insurance company and tell them that you have secured a cheaper quote, than their renewal, and they tell you that they will match the cheaper quote if you stay with them? Well, that's price matching and consumers are complicit in its growth as a way for insurers to gain and retain business.

It has slowly, but surely, made it way into the Life & Pension sector over the last number of years but regulators, consumer interest groups and advertising standards have ignored it. It's mainly in the term assurance market but is now standard practice, on annuities, for the largest insurer in the Country.

I have maintained that this practice inhibits competition and stifles innovation. It's the lazy mans way of pricing your product and not giving a toss about competing for business on product features.

If you're accepting business at a price lower than your book rate then you're effectively 'buying business'. I mean, why have 'rates' at all if you're just going to do it for the same price as your cheapest competitor?

Recently, Friends First held their hand up and admitted the following:

"We aim to do all we can to meet customers’ needs through offering high quality products at affordable premiums, ensuring transparent communication of charges and fees and providing unambiguous marketing literature. As a consequence, we have removed ‘price matching’ from our protection policies to improve customer transparency while improving the cost of our premiums at the same time.  You will now notice price cuts are across level and decreasing term products."

They've caught the bull by the horns and effectively blown the 'competition' out of the water by "doing all [they] can to meet customers’ needs through offering high quality products at affordable premiums, ensuring transparent communication of charges and fees, providing unambiguous marketing literature and rewarding them for long-term loyalty."

Answer that Caledonian Life, Aviva Life & Pension, Irish Life and New Ireland Assurance. NB : Zurich Life don't 'price pledge' and well done to them for not sinking that low.

Thursday, October 31, 2013

In Praise of Hill Walking

(One of these days I’ll get back to blogging about Pensions & Investments)

It probably started with a pointed comment from my daughter about being a “couch potato”. And possibly living in an area surrounded by three ranges of mountains. I had the boots. Bought a few years prior with the intention of ‘doing something’ with them, but never had.   
15 Months Later

I haven’t stopped walking since. I’m no sooner finished one walk than I’m planning the next. I’m fit; fitter than I’ve ever been. Why? What’s it all about?

The bug just bit me. The early walks were low level and I just kept cranking them up, to improve. I joined a club (I’m now in three) to get familiar with the open mountain by being led by more experienced walkers. Plus, if you’re hill walking by yourself you can’t really gauge if you’re any good at it, other than put yourself on the clock. I’m competitive, so that’s not much good.  

You hear stories on the hills about so-and-so being a strong walker and about long distance walks with certain height-gains. If you wanted to improve as a walker you had to set your sights on these ‘Challenges’, the hill walkers personal achievement championships. So, I did a few of them and did okay. I even made up a few of my own.

Along the way, I’ve met some of the most wonderful people. People that don’t suffer from adhesive mattress syndrome, have no issue with atrocious weather conditions, don’t mind getting stuck in when their help is needed and willing to impart acquired knowledge to help you along the way.

When you want to talk, you can talk. When you want to have some ‘me’ time, no one bothers you. It’s an unwritten rule, there are many. It’s different being out on the hills: for me it has a calming influence in a stress free environment. So many beautiful places on my doorstep that I’d never have seen but for the fortune of putting on a pair of boots. The place names, the local history, the wildlife and vegetation; all discovered and learnt about by accident.

It’s not all serene though. The craic, banter, slagging that goes on is mighty. There are those that would say that telling someone, who is struggling on a walk, that “We’re about halfway” when they ask “Is there far more to go?” might be mental torture, especially when 90% of the walk is done. But, it’s part of the ‘rise’ and you have to have a sense of humour at this game. Another favourite of a fellow walker is feigning snoring while directly behind someone that is struggling on the climbs. We laugh, and the misfortunate that’s at the receiving end does too; in time.

I struggled to find my pace for a long time. I suppose we do this in life’s pace also. Going off too fast and then feeling the pressure on the climbs. The food was important, the amount of water was important, the boots, the gear, the poles, what was in the rucksack (and what wasn’t); it all mattered in the quest for improvement. But it didn’t matter, in a way, because you’d get it right next time. There’s no All Ireland or Olympics to aim for. You walk and learn.    

I’ve learned how to read a map and use a compass. I have an app on my phone that can tell me where I am, if I go astray. If you’re fit enough you’ll stay calm. This gives me the confidence to walk alone on the three local ranges, because if the mood hits I have to go out.  

The walks have now progressed to be of a more strenuous nature. As another walker said at the weekend “We’re in training. But for what?” We don’t know, but we enjoy it so much there doesn’t have to be a target in sight.

This stuff just makes us happy!!