Thursday, December 17, 2009

I Don't Follow You (on Twitter because....)

Your Name and Location are not provided

You are too lazy to include a unique Avatar (unless you're a client)

Your Bio tells me nothing about you

Your Following and Followers are not balanced (unless you're really important or interesting to me)

You Tweet too much (10 per day is enough, ignoring replies and RT's)

You include your website in every Tweet

Your Tweets are 'Protected'

You Tweet the same Tweet multiple times

You #FF me but don't Follow me yourself

You are a Spammer

Your Tweets are not interesting to me

Your Tweets are aggressive

Your Tweets refer to 'Making Money with Twitter'

Your Tweets are similar to those provided by someone else that I Follow

You expect me to read your Tweets but don't read mine

Your Tweets are not diverse

You make no attempt to engage with your Followers

You are 'into' Direct Marketing (big time!)

You don't Follow Back after 2/3 weeks

You ask a question but don't acknowledge an answer

I think that 500 (maybe less) 'Friends' is enough for anyone to cope with

Of course there are exceptions, but not that many. If you have any to add to the list, please feel free to do so.

Tuesday, December 15, 2009

CGNU Policy Change (Ireland)

Anyone that has a CGNU (GA Life) Investment Bond, that is 10 years old, will recently have got a communication from Hibernian Aviva. This letter is basically telling you that, because it is the 10th anniversary of the policy, you can currently exit from the Bond without a Market Value Adjustment (MVA).

You can exit/surrender/encash a CGNU Investment Bond without an MVA (currently 14%) applying on the 10th anniversary and on each subsequent 5th anniversary. This condition would have formed part of the original policy document.

The letter from Hibernian Aviva goes on to say that '...if you decide to leave your money invested, you can reduce any MVA that may apply when you subsequently withdraw from the fund by up to a maximum of 14%'. This is very important. But, Hibernian Aviva have not communicated the mechanics of it to the very advisors you will rely on to direct you on what the correct course of action is right for you.

What this additional condition means is that, if you want to cash in your policy at any future date, and the MVA on this tranche of business stays at 14%, you can do so without penalty. The only situation that could arise that would mitigate against you would be where the MVA were increased. If this happened, and say it was increased to 20%, you would only pay 6% of an MVA on your future encashment value.

If you cash in your CGNU Investment Bond before the 1st of January you will not be eligible for the final installment of the Special Bonus that is due for 2010. The Reattribution Bonus will, however, be paid in any event.

I honestly do not know why this new 'condition' has been applied to these particular policies. Perhaps it has something to do with the whole Reattribution process?. Maybe, the company have decided that it is not cost effective to administer these policies from the UK any more and that they would prefer that this tranche of business left them for good?

Friday, December 4, 2009

Zurich Life (Eagle Star) Balanced Fund

The 1st of November this year marked the 20th anniversary of the Zurich Life (Eagle Star) Balanced Fund. This fund would have an indicative Global Equity exposure of between 50% - 75%, with the balance being held in Bonds and Cash. It's general categorization in terms of Risk/Reward would be aimed at those who are 'Medium' risk takers.

The Balanced Fund did pretty well over this period: so rather that just say that the total gross performance was 632%, I wanted to provide a pension example using a monetary value.

If you invested €5,000 on 01/11/1989 and then paid €100 per month up until 31/10/2009, your total contributions would have amounted to €29,000. The value of your pension fund at 31/10/2009 would have been €84,028*. For an initial contribution of €10,000 and a regular monthly contribution of €250, the final fund value would have been €193,651*.

These figure represent a net annual compound return of approximately 8%.

Disclaimer: My only motive in doing this exercise is to 'translate' the gross 632% into an indicative annual net return.

Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up. Benefits may be affected by changes in currency exchange rates.

* Assumes a single charge of 1% per annum on the value of the fund ie. that no other charges apply to the product.

Friday, November 27, 2009

An Industry on a 'Collision Course' with itself

In July 2008 I wrote an 'Industry Overview' blog post in which I stated that the Life & Pension Companies in Ireland needed to turn their business model on its head to ensure their future viability. So what has changed in the last 16 months that has given me hope for optimism?

The short answer is: nothing!!

It would appear that the management of these financial institution are running around like headless chickens as they struggle to cope with the reductions in new business and the exodus of existing business.

The main focus of their current business efforts is in 'buying' business. This is predominately directed at the larger corporate broker sector so the 'small' guys, like me, have become surplus to requirements as far as they are concerned. The management line is all about 'developing partnerships' with brokers but they fail to mention that it only applies to the 'big' guys. Needless to say, I have no time for managers that talk-the-talk but don't walk-the-walk.

What I would really like to see happen with these companies is that they seriously look at the following issues :

i) Service - The general level of service to customers is atrocious. Service cannot be defined as processing 'new' business effectively. You have to start looking after existing customers. Customers should be for 'Life not just for Christmas'.

ii) Factory Gate Pricing - Companies have to introduce this immediately. The current model based on full allocation with exit penalties is dead, and you know it.

iii) Simplify Products - There should be a maximum of only two types of charges that can apply to a product.

iv) Embrace Technology - All companies should give their clients full access to their products online. They should also embrace Social Media. There is only one life & pension office on Twitter and the last time they tweeted was 13th August.

v) Acorns - The future viability of your business does not revolve around 'High Net Worth' individuals. It rests with the the folks that want to start something 'small' and build it up in the future.

vi) Moral - You've got to look at boosting the moral of your staff. Your management are severely damaging your employees motivation.

If you continue to do nothing; you will win the race to the bottom of the Life Insurance & Pension market.

Tuesday, October 20, 2009

Switching or Changing Pension Provider

If you are thinking of switching/changing your pension provider because you are none too happy about the level of charges on your product, consider the following:

If a person saved €1,000 per month (index linked at 3%) from the age of 30 to 65, the estimated retirement fund at 65 would be €1,472,823. This assumes that there is a 5% contribution charge on each payment made, the annual management charge is 1.5% and the fund grows at 6%pa.

Using the same details for contribution,term and growth rate, but having an annual management charge of 1% and no contribution charge, the estimated fund would be €1,673,568.

That's over €200,000 in potential savings. Is that a good enough reason to change?

Monday, September 28, 2009

Convertible Term Insurance

One would be forgiven for thinking that a product like Term Insurance should be pretty easy to understand. Normally, you pay a fixed premium for a fixed sum insured for a fixed term, end of story.

However, throw the word 'Convertible' in front of Term Insurance and a myriad of terms and conditions appear that are not standard throughout the Life Insurance Industry. 'Convertible' refers to the option of converting the existing policy to another type of policy, at some date in the future, without medical evidence.

The notion that price is the only deciding factor for a Convertible Term Insurance policy is a nonsense. Flexibility of the conversion option, in my opinion, carries much more weight.

In a recent e-mail survey of the Life offices offering Convertible Term policies in Ireland I asked a number of questions regarding the flexibility of the policy and what, exactly, were the policyholders options on the 'conversion' date.

Aviva/Hibernian Life - You cannot convert to a Pension Term Insurance. If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term.

Caledonian Life
- You can convert to a Pension Term Insurance. Client would get non-smoker rates at date of conversion and existing policy can be altered (premium reduction) to take into account non-smoker status after qualifying period.

Canada Life - If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term. You cannot convert to a Pension Term Insurance.

Eagle Star/Zurich Life - You can only convert the policy at the end of the original term (not during). If you were a smoker when you took the policy out but qualify as a non-smoker now, full underwriting is required to change the policy. You cannot convert to a Pension Term Insurance.

Friends First - Non-smoker rates can be availed of at the end of the policy term if you are converting to a new policy, without full underwriting. Smoking status cannot be altered during the original term of the policy.

Irish Life - Converting to Pension Term Insurance is not an option. If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term.

New Ireland - No Response (yet!).

It is likely that the majority of the above companies will have to review their product offerings. The profitability of this type of product is dependent on the term that it stays in force. It makes no sense whatsoever to 'force' the policyholder to jump through hoops (ie. new application with full underwriting) if they need to make an alteration to an existing policy. It is hard to reconcile how a product provider can make money on these products when an alteration will, more than likely, drive their client to another product provider.

At the moment, the Caledonian Life policy offers the greatest flexibility, at a competitive price; but this is based on current underwriting practice.

Tuesday, September 22, 2009

Best Pension Fund

Reluctant as I am to do a post on the past performance of pension funds, it is probably better to do one where it can be put in its correct context, rather than relying on it as an indicator as to what might happen in the future.

I would like to start by saying, what has gone before has no relevance as to what may happen in the future. Having said that, it would appear that many pension policyholders ( or potential pension policyholders) continue to study the past performance of pension funds with a view to factoring it in to their overall evaluation of how their pension is doing or indeed how it might do in the future.

If you need to study past performance, then I would suggest that you select 3 or 4 random documents from this page. The reason that I would take random documents is because fund managers can produce at least one period where they may be Number 1 on a specific single fund.

The information included in these monthly investment reviews are for the last five years from one product provider, but include the relevant data for all pension providers. There are, up to 13 categories of funds included and the data is broken down over 1, 3, 5, 10, and 15 year annualised returns.

In summary, you should take past performance with a pinch of salt and don't rely on it as a deciding factor on which pension provider is best for you. It is better to focus on the costs/charges, suitablity, flexibility and service available on the product.

Featured website

Warning: The income you get from an investment may go down as well as up. The value of your investment may go down as well as up. Benefits may be affected by changes in currency exchange rates. Past performance is not a reliable guide to future performance.

Friday, September 18, 2009

Pension Plans with Guaranteed Annuity Rates

Even though it is not now possible to buy a pension plan with a guaranteed annuity rate attaching to it, there are people that may have old policies with this feature.

If you have one of these policies, the provider may allow you to invest additional contributions in it to avail of the underlying guarantee on the original contract. But, because the policies are probably 20+ years old, the charging structures on them will be higher than what are currently available on the market. It is, however, possible to negotiate on the commission basis and you should do this to ensure more favourable terms for yourself.

It is often the case that a policyholder may have a number of different Personal Pensions (RACs) with various providers. When it comes to retirement, the policyholder is entitled to take 25% of their fund/s tax-free. Usually, the 25% is taken from each individual policy and the balance is used to buy an annuity, invest in an Approved Retirement Fund/s or a combination of both.

If you are fortunate enough to have one of your pensions maturing with a guaranteed annuity rate attaching to it, the annuity rate will be a couple of percentage points higher than what is currently available on the open market.

So, if you have i) a number of different policies ii) a guaranteed annuity rate applies to one of them iii) you want to avail of the guaranteed rate to buy an annuity and iv) you want to take your tax-free cash of 25%. What should you do?

Instead of taking the 25% from the policy that has the guaranteed annuity rate, you should take the equivalent amount from one of the other pension plans. It is not compulsory that the tax-free cash is taken from each individual policy, provided you can show that this amount does not exceed 25% of the total aggregate funds that are available.

If you were forced to take 25% of the policy that had a guaranteed annuity rate on it, this would put you in a disadvantageous position with regard to the benefits accruing, so Revenue will allow the aggregation of total funds available to overcome this predicament. It is essential that the 25% tax-free cash does not exceed the Revenue limits.

Monday, September 14, 2009

Inglorious Banksters

It never ceases to amaze me why investors continue to buy the shares of Irish Banks, when I stop to consider the prolonged list of (not so kosher) activities that they have had a hand or part in over the last 20 odd years.

In my eyes, the whole 'Institution' of Banking is supposed to be based on Trust, Honesty, Integrity and a bunch of other characteristics that typify good moral fibre.

Pause for a moment to consider the following Banking 'issues' :

Bogus Non-Resident Accounts, Overcharging (everything from foreign exchange to mortgages), Rogue Trading, Tax Evasion, Misselling of financial products to elderly, 'Exceptional Support' of another Bank, 100% Mortgages, Concealment of Personal Loans, Failure to ensure the accuracy of Regulatory Reports and, of course, the 'big' one that has given rise to NAMA.

I am sure there is probably a bunch of other issues that I may have failed to include, but investors continue to buy shares in these companies even though they are aware of these matters of contention.

I do business with companies and individuals because I trust them.

Why would I buy shares in these Banks? Or, why would I hold on to the shares if I was holding them?

Wednesday, September 9, 2009

What's In The News

Another Aphorism from Warren Buffett

"If it's going to keep me awake at night, I am not going to go there."..... in reply to the question whether anything (in his own financial decisions) was keeping him awake at night.

Economic 'Double Dip'

Professor Joseph Stiglitz has warned that the global economy could be heading for another dip. Savings rates are increasing so there are not that may people spending money to drive demand for products and services. I think that this reinforces our own precarious position here in Ireland. Looking at my own credit card statement for last month, the only 'Irish' transaction on it was a purchase at Shannon Duty Free.

Reports Galore

The Reports of the 'Special Group on Public Service Numbers and Expenditure Programmes' and 'Commission on Taxation' have been issued and the findings/recommendations will be debated for some time to come. Of course the 'real' debates will only commence once someone actually decides to implement any of the recommendations. Until such time as that occurs, I don't think that there is too much point dwelling on them.

I was however, disappointed that I could not find a recommendation from the 'Commission on Taxation' on allowing Gains/Losses to be offset against each other on Unit-Linked Saving/Investment type products.

The upshot of all these reports is that we need to save and spend at the same time, to keep the show on the road. A delicate balancing act for any Government in difficult times.

The Search for Value

More and more, consumers are seeking out better value on products and services. 'Mediocre' is just not acceptable with the thrift campaign that the Nation has embraced. To paraphrase Colm McCarthy, product and service providers "need to do more with less". Forced competitiveness, if you will.

PS :

Animated Films

For those of you with kids who like good animated films, you should check out some of the ones by Hayao Miyazaki and Isao Takahata at Studio Ghibli (if you have not already done so). This market does not begin and end with Disney/Pixar.

Saturday, August 29, 2009

My Top 10 Personal Finance Tips

Rule No. 1 - Never take Financial Advice from a Bank.

Rule No. 2 - Never, ever, forget Rule No. 1.

Rule No. 3 - Inertia is not your friend. It is the bedfellow of Financial Services Companies. Always look for cheaper alternatives.

Rule No. 4 - Be wary of the 'Past Performance' of Fund Managers as a reason to buy a product. It's irrelevant to what lies ahead.

Rule No. 5 - Educate yourself on investment and pension products so that you can eliminate the cost of financial advice.

Rule No. 6 - 'Free' Financial Review or 'Free' Impartial Advice - Where advertised; just steer clear.

Rule No.7 - Interview your Financial Advisor like you would a prospective key employee. Ask for references & recommendations.

Rule No. 8 -The average investor should not buy shares directly in companies. Low-Cost Index Tracking Funds is the way to go.

Rule No.9 - If you have to invest in a structured 'Tracker Bond'; only do so on a day that does not end with a 'y'.

Rule No. 10 - Diversify, Diversify, Diversify (your investments)- Over Asset Class, Sector and Region.

Wednesday, August 5, 2009

Eagle Star (Zurich) Gold Fund

Eagle Star Zurich have launched a unit-linked Gold Fund as part of its Matrix Range of Funds. The Gold Fund is aimed at those who (i)would like to gain exposure to movements in the price of gold (ii) want to diversify a portfolio of existing assets and (iii) have a higher risk preference.

The fund tracks the spot price of gold by investing in an Exchange Traded Commodity(ETC), which is backed by physical gold. A currency risk arises here for the Irish Investor, as the spot price is denominated in US Dollars.

You can access this fund through the products available on the and websites. There are no entry or exit charges through these websites. The Annual Management Charge is 1%pa of funds invested but do bear in mind that this does not include any transaction charges that are made within the ETC.

NB: While the fund is available to pension and investment/savings clients: unfortunately, it is not available under a PRSA type product.

Warning: The value of your investment may go down as well as up. Some products/funds may be affected by changes in currency exchange rates.

Thursday, July 30, 2009

1% Levy on Life Assurance & Pension Products (Update)

The following is a summary of the positions taken by each of the Life Offices in respect of the 'new' 1% Levy on Protection/Pension/Investment/Savings policies, as at 30/07/2009.

Standard Life

The levy will be deducted from any premiums invested into Standard Life savings and investments policies on or after 1 April 2010.

Standard Life will continue to absorb the cost of the levy on premiums paid on protection policies.
Updated 30/03/2010

Eagle Star Zurich

Will be collecting the 1% premium levy from 1st August 2009 on all protection and group risk policies.

For new ( Self-employed Pensions(RACs),PRSAs, ARFs, Annuities, Personal Buy-Out-Bonds, Investment and Savings contracts) business transacted after 1st of August, they will meet the cost of the 1% premium levy for premiums paid in August on any new business (including single premium top-ups) that are introduced before 1st September. They will not make any retrospective charge for such payments regardless of how the IIF proposals are received. They will review the situation in the coming weeks and will advise if this interim approach is to continue for September.

The 1% Levy applies to regular contributions to savings plans with effect from 01/07/2010. Levy applies to Single Premium Investments from 01/09/2010. Updated 13/09/2010

For existing ( Self-employed Pensions, PRSAs and Savings) business they intend to defer applying the 1% premium levy on these contracts pending the conclusion of discussions with the Department of Finance. Given the uncertainty as to what changes to the levy might be made as a result of these discussions, they reserve the right to deduct outstanding levies from the contracts when and if it is appropriate to do so.

Quinn Life

As part of Quinn Life's 10th anniversary celebrations, Quinn Life will cover the cost the levy for new and existing investments and savings business for their customers in 2010. Updated 02/03/2010

Caledonian Life

If a client has a Regular Premium protection policy (for example payable monthly or annually) their payment will increase by 1% from 1st August. If a client makes their payment by direct debit their payment will increase automatically. If a client makes their payment by other methods, Caledonian Life we will notify them of the increased payment in their next renewal notice.

The levy does not apply to existing Single Premium Investments. However, the levy will apply to all top-ups to existing policies and all new policies taken out from 1st August. 1% of any single premium received by us from 1st August will be deducted for the levy and paid to Revenue.

Irish Life

Irish Life implemented the Government levy for protection plans on the 01 August 2009.Protection plans include life cover, mortgage protection plans and plans which pay an amount on disability or the diagnosis of a specified illness.

This levy will also be introduced on Savings plans from the 01 February and on new investment plans from 01 March 2010.
Updated 30/03/2010

Hibernian Aviva

Hibernian Aviva will apply the levy on all protection policies from August 1.

Pending the outcome of industry discussions with the Department of Finance, Hibernian Aviva will not apply the 1% levy to pension and investment products while the discussions with the Department continue. Hibernian Aviva will review this position when they have greater clarity.

Hibernian Aviva will not apply the 1% levy retrospectively to premiums for pension and investment business received during this period. Therefore, we will not be going back to customers to apply the levy to pension or investment premiums already paid.

Friends First

For Executive Pension, Group Defined Benefit and Defined Contribution Schemes no levy will apply.

For Individual Protection, Group Protection and PRSA type contracts; pending outcome from Revenue, the Levy will only be collected from 1st January 2010

For Single Premium Pensions, Investments, ARFs and Buy-Out-Bonds; pending outcome from Revenue, the Levy will only be collected from clarification date. There will be no retrospective collection.

For Regular Premium Pensions, Savings and Life Insurance; pending the outcome from Revenue the Levy will be collected retrospectively to 1st August 2009.

New Ireland

Will collect the additional 1% of the premium from customers on the following policies with effect from 1st of August: life cover policies,mortgage protection policies and policies which pay an amount on a specified illness or on disability.

They are deferring collecting the levy for investment and pension customers pending the outcome of discussions with the Department of Finance.

Canada Life

Protection Business - The levy will be applied with effect from 1st August 2009

Existing Pension & Investment Business - Since August 2009 Canada Life has been applying the levy in arrears on existing savings and investment policies. However, from April 2010 Canada Life will collect the new 1% levy as part of a policyholder's existing payment method by adding it to their premium. In addition, Canada Life will begin to apply the levy on certain policies which it has exempted from the levy up until now.

Letters informing savings and investment policyholders of the changes to their policies, as well as a list of frequently asked questions, have been posted this week. Meanwhile, all new and existing pension clients will receive a letter later in the month to inform them that the 1% levy no longer applies to pensions (as per the Finance Act 2010) and that the levy is no longer being applied to their policies.
Updated 09/03/2010

NB : Some types of group pension schemes are exempt from the

Update 17/02/2010

The 1% Levy is being collected by all Life Offices for Protection Policies(Mortgage Protection, Term Insurance, PHI etc.)

The 1% Levy will not apply to Pension Policies.

Some Life Offices are collecting the 1% Levy on Savings & Investment Policies and others are planning to do so shortly.

If you are currently planning to Invest a Lump Sum in a Unit-Linked Investment Bond you should check with the product provider as to whether the levy will apply to you.

As of 30/03/2010, the 1% Levy on the product available through is being absorbed by the Life Offices and we will not make any retrospective charge to you for such payments.

Update 24th November 2011

With immediate effect, there will be no 1% Levy on contributions to the InvestAndSave product, for the duration of the contract, provided that the minimum Single and Regular payments are made. This applies to business transacted from 24th November 2011, or business that is currently in the pipeline but has not yet been issued.

So, if you invest €5,000 (or more) as a Single contribution and €100 (or more) per month as a Regular contribution you will avoid the Government Levy of 1% on all contributions.

If you invest a Single contribution only, the levy will apply to this payment.

There are no entry or exit charges on this product. You can choose to invest in any of the 17 Actively Managed and 13 Passive Funds available. The annual management charge on these funds is 1%pa.

Monday, July 20, 2009

1% Levy on Life Assurance & Pension Products

The 1st of August is almost upon us and the introduction of the new 1% Levy on payments to Life Insurance & Pension products is still in a bit of disarray. What is certain, is that from that date the 1% (of each new premium) will apply to individual life insurance 'protection' policies (Mortgage Protection, Term Insurance, PHI etc.). However, the 1% Levy on all new contributions to Pension/PRSA and Investment/Savings products remains a bit of a mystery.

On Friday I received confirmation from Irish Life that they are proposing to 'absorb' the cost of the 1%, to consumers, on Pension/PRSA & Investment/Savings contributions until further notice. It would appear that they, and other members of the Insurance Industry Federation, are in negotiations with the Department of Finance to try and come up with a better solution to this additional 'tax' on savings.

It is my understanding that all Life Offices acknowledge that the Government needs to raise additional revenue; but the levy on savings type products, in its current form, is not workable.

I would hope that the rest of the Life Offices operating in Ireland will adopt a similar approach to Irish Life, as I do not see the Levy as being a major revenue spinner for the Government in the immediate future. Indeed, judging by the levels of contributions to these type policies year to date, I doubt that it would be a hefty burden to bear by any well managed Life Office, from now until December.

A more practical, and probably easier to administer, approach would be to take a nominal tax on the funds under management of each Life Office. Whether this 'tax' would be passed on to the consumer, in the form of an increase in Annual Management Charges, remains to be seen.

As an industry practitioner, I don't go along with these additional taxes on savings. Without savings; there is no future. The Government should be abundantly aware of this predicament.

Update 17/02/2010

The 1% Levy is being collected by all Life Offices for Protection Policies(Mortgage Protection, Term Insurance, PHI etc.)

The 1% Levy will not apply to Pension Policies.

Some Life Offices are collecting the 1% Levy on Savings & Investment Policies and others are planning to do so shortly.

If you are currently planning to Invest a Lump Sum in a Unit-Linked Investment Bond you should check with the product provider as to whether the levy will apply to you.

As of today, the 1% Levy on the products available through and is being absorbed by the Life Offices and we will not make any retrospective charge to you for such payments.

Tuesday, July 7, 2009

Changes In Tenerife

For the past seven years I have been travelling to Los Cristianos, on a regular basis, for family holidays and weekly breaks. In that time, much had changed on the Island; but the climate is still the number one attraction as far as I am concerned.

The airline service to Tenerife has improved dramatically and you no longer have to rely on purchasing a 'seat-only' from one of the tour operators. Ryanair have a regular service from Dublin and Shannon and Aer Lingus fly from Dublin; and from Cork for 5/6 months of the Island's 'peak season'. I would consider a 4 hour return flight, at a cost of €125, to be pretty good value for money. Of course, this is probably at the lower end of the cost scale and at times it can rise to about double that, depending on timing.

I was there last week and the Island is very quiet. Even allowing for the fact that the Summer months would not be considered the busiest time of the year, there was a genuine lack of buzz around the place. As the kids in the UK have not got their school holidays yet, this may have contributed to the scarcity of people. On average there are usually about 25 beds out around the pool area where I stay; 12/14 was the most that were there this time.

Some other negatives would be : UK retirees that had their pensions paid to them while living in Tenerife are finding that the money is not stretching as far as it used to due to the current exchange rate (some have even returned to the UK). The young people that worked in the clubs and bars are returning to the UK as many have been let go and I believe that they are entitled to little or nothing in the form of social welfare in Tenerife. Taxi fares have increased, what I used to pay €2.75 for two years ago has now gone up to €3.75. There are lots more of Se Alquila and Se Vende (for rent/ sale) signs up around the place for shops and apartments; and it is very difficult to sell a property at the moment. My local Chinese restaurant manager told me that he was doing very little take-away business.

On the positive side : It's still Duty Free, even though it is in the EU. Medication and Prescription Drugs are a fraction of the cost that we have to pay here. Finnish has been added to some of the menus in the restaurants that I frequent (more holiday makers from Finland, I presume). The Local Police are now patrolling the promenade on their 'electric' motor cycles. There is little or no new development of accommodation complexes in Los Cristianos.

So, if you like the climate there; can arrange your flight for around €125; don't mind that there are less people around; are fond of walking; want to buy a reasonably priced apartment; are a smoker and/or a spirit drinker or are on some form of medication, it's not a bad stomping ground at the current moment in time.

Thursday, June 18, 2009

Blogger Interview - Miriam Ahern

What is the best business/investment decision you ever made? Setting up my own organisation development and human resources consultancy practice, Align Management Solutions, in 2001.

What kind of car do you drive? Jaguar XJ8

What is the worst financial advice that you ever received? To take out an endowment mortgage in 1987 – Thankfully I didn’t!

Do you own property abroad? Yes

How does the economic slowdown effect you? Like any other industry, in professional services it’s now harder to get new business and harder to get paid.

Do you contribute to a pension plan? Yes

What's your favourite film of all time? Billy Elliott because it shows what can be done against the odds when you have an unshakable vision and the passion to back it up.

Have you ever won money? Not yet but I’m ever hopeful!

Do you own your own home? Yes

Do you invest directly in the stock market, through funds or both? I had fantastic share options at one point during the dot com frenzy but they lost their value before I could exercise them. That reality check put me off the stock market somewhat.

What is your preferred method/system of saving (Deposits, Funds, Shares, Property)? Deposits and Property

What financial product/s do you consider to be bad value for money? Car loans, some credit cards, critical illness insurance (sounds good in principal but very tricky when you try to make a claim)

Do you trust your bank? I trust them but it really annoys me that having had personal and business accounts with them for twenty years, they still don’t know me when I visit.

Miriam Ahern is Managing Partner of Align Management Solutions

Tuesday, June 16, 2009

Pension & Investment Calculators

I have been flirting with the idea of providing Pension & Investment Calculators on my websites for a while and I have come to the conclusion that they may not be as reliable as some may believe them to be.

The natural tendency for an individual would be to rely on the information generated as absolute. However, I feel that the following points are worth bearing in mind should you decide to use them.

# The information generated can be based on multiple assumptions. The results are therefore obsolete when one of these assumptions changes and you need to recalculate on a regular basis.
# The assumptions used vary; depending on the calculator provider.
# The 'result' generated may deter an individual from making savings/pension provisions as they may deem the result to be impractical or unaffordable.
# Not all investment calculators are equal. The assumptions and results can vary depending on what Country the investment company is Regulated in.
# Variables, such as Taxation, are constantly changing.
# Calculators do not pay too much attention to Investment Strategy.
# Estimators of levels of Life Insurance cover are generic. Every ones circumstances and requirements are not the same.
# Calculators are generally provided by product providers that can weigh the premium/contribution in their favour ie. quoting an unrealistically high level of benefit.

In isolation, calculators/quotes/estimators are no better than the general rules of thumb that are put forward by product providers or intermediaries. They may be a required starting point for some, but I would not bet the house on them fulfilling reasonable lifetime expectations for the average saver/investor. They are not a substitute for specific advice; that incorporates a common sense approach, from Financial Advisors.

Wednesday, June 10, 2009

'Two Ideas of Government'

There was alot of talk about 'Democracy' in the Dáil Éireann yesterday. It reminded me of part of a speech made by US Presidential Candidate William Jennings Bryan on the 9th of July 1896 :

"Mr. Carlisle {Secretary of the Treasury} said in 1878 that this was a struggle between the idle holders of idle capital and the struggling masses who produce the wealth and pay the taxes of the country; and my friends, it is simply a question that we shall decide upon which side shall the Democratic Party fight. Upon the side of the idle holders of idle capital, or upon the side of the struggling masses? That is the question that the party must answer first; and then it must be answered by each individual hereafter. The sympathies of the Democratic Party, as described by the platform, are on the side of the struggling masses, who have ever been the foundation of the Democratic Party.

There are two ideas of government. There are those who believe that if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it."

Which 'idea' are you weighted in favour of?

Tuesday, June 2, 2009

Direct Investment in Stockmarket V's Unit Linked Funds

Individual investors who are between two minds as to whether they would be better off investing in a diversified portfolio of individual stocks or unit linked managed/index tracking funds may find this article of interest.

The author is of the opinion that :
....the decision to go with stocks or funds comes down to a realistic assessment of how much you want to make your own investing decisions and your ability to handle that responsibility. Walter Updegrave

If you allow for the Regional differences in terminology, resources and taxation the principles are basically the same. The 3 questions posed are very relevant.

Featured websites

Wednesday, May 27, 2009

Twitter - Two Months On

I would consider myself to be on the lower end of the Twitter knowledge curve having created an account just two months ago. The following are some of the observations that I have made to date.

...for personal use

* Twitter is a great 'leveler'; like Texas Hold'em. You sit down with strangers and you can't predict an outcome.
* Twitter helps you mix with communicators that are better than you. This helps to lift you up a notch or two.
* It brings out the willingness in people to be helpful.
* If you are an information junkie, you're made.
* If you have addictive tendencies; you might be in trouble using Twitter.
* Fear of what to update focuses the mind, but may inhibit the content.
* Strong personalities shine through.
* Selecting people to follow, at random, is not a good idea.

...for business use

* Twitter for business should be like subliminal self-promotion. The 'in-your-face' repetitive promotion is a no-no.
* The greater the number of people that know you exist; and what business you are in, can't be a bad thing.
* The Development of a Twitter business 'relationship' has to be gradual.
* The personality behind the business usually comes to the fore.
* Twitter provides you with an opportunity to be 'busy being busy' as opposed to 'busy being productive'.

If you are also a novice to Twitter, I would be interested in your own thoughts on it. Or, if you disagree with any of the above, leave a comment.

Wednesday, May 20, 2009

Save for Retirement or Kids Education

Those of you who have kids have probably given some thought to putting aside a few bob that will go towards helping with their education. You may even have set up a specific savings or investment account for them, where children's allowance or other money gifts are put away until they are needed.

More often than not, it is likely that the accumulated value of these educational funds will be insufficient to cover the full costs that will be incurred. But, at least you have made a start and you have a plan.

It is difficult to balance your 'here-and-now' family overheads, from the limited income resources available to you, with your potential long term liabilities in terms of educational costs. You may even be tempted to elevate savings for college as a primary objective; and bury retirement planning in the back of your mind. It's only natural; as you want to what's right for your kids and it is one of those selfless acts that comes with the territory.

The decision to prioritise your kids education over a comfortable standard of living in retirement is a personal choice. However, it may be worth considering some common sense financial issues, if you are beating yourself up over one or the other.

* If you have the opportunity to contribute to a PRSA or Occupational Pension Scheme, where the employer will match some or all of what you will contribute, it's a no-brainer; take the money.

* Any tax reliefs foregone cannot be recovered in future years. If you pay tax at the highest marginal rate, it makes perfect sense to contribute to a pension. This may change in the future as the divide, between the lower and higher rate of tax relief system, may be put on a more equitable footing. It is also possible that access to limited amounts of pension funds may be available, prior to normal retirement age, at some stage.

* If you have credit card debt, or other high interest loans, pay them off before you start making any long term savings plans.

* Make your kids aware of the fact that education is not free and that compromises will have to be made in the years ahead. As they get older, try to formulate a plan with them on managing their educational funding. If a limited amount of student debt is part of the plan, so be it. It's part of life and they can learn from it. It is easier to borrow for education than it is for retirement.

* If you have the resources to start funding for educational costs in addition to retirement planning, you should begin as early as possible. It's difficult to make up for lost ground if you leave it too late, and it may influence you into making investment decisions that would not normally be within your risk profile.

* If you are a home owner and you have not re-mortgaged on a regular basis you will have equity in your property which could be freed up if the need arises.

* Protect your family by having an adequate amount of life insurance in the event of the untimely death of a parent.

* If you are a business owner, try and add some value to that business so that it will enhance your future earning capacity and make your financial situation better. We tend to forget that more lucrative job opportunities may also happen for us in the future.

* Although there may be uncertainty about Government assistance for educational purposes, it is probably fair to say that there will be some form of grant or scholarship system available in the future. Weekend or part-time jobs for the students would also help with costs.

In summary, do not sacrifice funding for your retirement over your kids education. Look after number one, first. Always remember that you will be able to offer some financial assistance and guidance to your kids but it may not be in the form that you now aspire to. Financial goals of deferred retirement, reduced standards of living or taking on second jobs in retirement should not be on your radar.

Relevant/Featured Website/s

Thursday, May 14, 2009

Competitive Business Environment

Forgive my ignorance of economics, but I just don't understand how the current reform of taxation/spending is going to get us out of predicament that we are in.

Much has been written about the economic crisis in Finland in the 1990's and how this compares with what we are going through. Okay; the stock market and property market crashed, with drops of approximately 70% and 50% respectively, but they had their own currency at that time and had the 'luxury' of devaluing it to assist with a recovery.

As a small business owner I am acutely aware of the need to be competitive. The current crisis is having the effect of weeding out uncompetitive businesses but is also pushing some viable future businesses over the edge. There are internal costs that I can control, but the majority of the larger costs are outside my control. It's basically down to survival of the fittest at the moment, if you can get through this period unscathed then you will come out the other end in a far stronger position.

The private sector is being reformed by market force and the future is bright for businesses that can develop by gradual growth. A sustainable business will be possible, but the worry is in controlling those external costs. More worrying still, is the apparent irresponsible nature of the political establishment in managing these costs.

There is little point in having an environment where competitive and sustainable businesses can thrive, if the rewards of their labour are swallowed up in carrying the burden of an uncompetitive public sector. Both public and private sectors have to work in unison and we can't have a competitive 'one', without a competitive 'other' . It is about time that employee representatives in both sectors realised this. I would consider Finland to be a competitive and fair economy. They have made it so, without a minimum wage agreement.

In the short-term, consumers will benefit from the knock on effect of the surviving competitive businesses. Incentives have to be given to entrepreneurs and possibly investors, in creating and supporting businesses that actually 'make' something. Importing 'services' businesses that can be easily relocated to up-and-coming competitively priced countries is a stop-gap measure in a country's development.

Until such time as the hard economic decisions are made on whether we want the country as a whole to be competitive, not just sections of it, the problem will not go away. Or rather, it may go for a while but it will resurface again and again and again. I am sure that, given the choice between sinking and swimming, many more business owners would prefer to try rising above the surface without an anchor tied to their leg.

Monday, May 11, 2009

Active Fund Management V's Consensus Fund

Are there any Consensus Fund lovers out there that would like to rebut the points made by the Pensions Director of Eagle Star/Zurich in favour of Active Fund Management?

The Z-Cast is available here

In short, he argues that:

a)'Consensus' (follow the herd) has had its day
b) The out performance of some active managers could be the difference between having a solvent and insolvent pension scheme
c) The 'rear view' investment approach does not capture investment opportunities due to a time lag
d) Trustees of pension schemes should reconsider their 'safe' investment decisions
e) Some Actively Managed Funds are not necessarily more volatile than Consensus Funds.

Would be very interested in any views that you may have on this debate.

PS: It's specifically to do with Consensus Funds V' Active Fund Management. Not to be confused with the Active V's Index Tracking debate.

Relevant/Featured Website

Thursday, May 7, 2009

'Sitting in a well, looking at the sky'

The title of of this post refers to a Chinese Proverb, which basically means that you need to get out of the well to see the big 'picture'.The reason that this comes to mind is in the decision by George Lee to stand in the Dublin South by-election.

To me, the political party that he runs for is irrelevant as long as he does not get swamped by the status quo . What is important, is that he would have the ability to see the big 'macro' picture, and this would be very refreshing indeed. We need to take a step back from where we're at and change way things are done in the country. Very few 'local' political decisions are made in the national interest.

When the news of his candidacy was announced I did a quick search on what would be deemed the characteristics of a 'good' politician. The following would appear to be what is expected : Be Intelligent, Reasonable, Humble, Honest & Patriotic. Have Fiscal Experience and Clear/Achievable Goals. Have the ability to Think Strategically and Listen to others. Earn Respect and Know when to Quit.

I don't know about you, but I would settle for someone that is not of the 'typical politician' persuasion. Only time will tell but I think he should be given a fair chance.

If he can bring something new to the table, it has to be welcomed.

Friday, May 1, 2009

An Insurance Product of Last Resort

Every now and again an insurance product is introduced to the market that causes me to scratch my head and ask, "Why bother?". One such product is the new '50+ Easy Life Cover' from Irish Life.

This product is aimed at the age 50+ market and is designed to provide a limited amount of 'Life Insurance' for a fixed regular premium. There are no medical questions so you are guaranteed to be issued with a policy irrespective of your state of health. The premium is payable until a claim arises or age 90, whichever is the earliest. Smokers and Non-Smokers are charged the same premium.

Sounds great, as long as the premiums charged offer good value for money. Right?

If you die in the first two years of the policy, the sum insured would not be paid out unless it's as the result of an 'accidental' death. If you die from anything other than an accident in the first two years, your estate would receive a refund of the premiums paid.

A typical example of the cost of this product would be as follows. A Female aged 60 would pay €30 per month for a Sum Insured of €7,343. At first glance that looks okay, but when you consider that the average life expectancy of an Irish Female is 81.6 years, I'm not sure where the value lies ie. €30 X 12 X 21.6 = €7,776

In my opinion it would be more prudent to apply for a 'Guaranteed Whole-Of Life Insurance' policy by completing a full proposal form. If further medical evidence is required by the insurer it is not going to cost you anything for a Medical Attendants Report or Full Medical Report. The insurance company pay for these.

A relatively healthy, non-smoking female aged 60 would expect to pay a premium of about €18 per month for a sum insured of €7,343 with this alternative type of policy. The cover would apply from the date the policy is issued.

In summary, if you have to buy the '50+ Easy Life Cover', buy it as a last resort and pay particular attention to the exclusions that go with it.

Wednesday, April 22, 2009

Blogger Interview - Killian Nolan

What is the best business/investment decision you ever made?

Investing in an Equity SSIA. I'm still amazed at the amount of people that did not take up the offer.

What kind of car do you drive?

A very old BMW 520

What is the worst financial advice that you ever received?

Buy AIB shares at €18. Great Company and with a dividend of 5% you can't loose !!

Do you own property abroad?


How does the economic slowdown effect you?

From a business point of view we continue to do well and the current environment has probably helped us a little as we are the only triple A rated bank in Ireland. On a personnel basis money is a little tighter and I'm more comfortable to hold onto any cash I have as opposed to making any big purchases.

Do you contribute to a pension plan?


What's your favourite film of all time?

Life of Brian

Have you ever won money?

Won some money on the Grand National as a student but still waiting for the prize bonds to pay out !

Do you own your own home?

Yes (but still have a decent mortgage)

Do you invest directly in the stock market, through funds or both?

What is your preferred method/system of saving (Deposits, Funds,
Shares, Property)?

Regular investing into equity funds. Smoothes out the peaks and the troughs.

What financial product/s do you consider to be bad value for money?

Annuities - you invest in a pension for 30 years, retire, buy an annuity and then you get hit by a bus. Money gone.

ARF's and ARMF's are a better deal.

Do you trust your bank?

Yes, but I do keep an eye on things.

Killian Nolan is Investment Manager with RaboDirect

Friday, April 10, 2009

'Supermarket' Banks - Conflict of Interest

The last 25 years has seen much change in the services offered by Banks. The traditional role of Banks, as 'Deposit Takers', 'Risk Managers' and 'Prudent Lenders', has been morphed into something akin to 'Supermarkets' of Financial Services.

The ambition for greater profits and meteoric rises in business growth has led to a situation where the taxpayer/consumer is now picking up the tab for these misguided ambitions; and trust in the banking system has been severely damaged.

It would appear that the general consensus within banking was that they should offer their customers as many financial products as possible and pass the marketing of this business plan off as a convenient; 'One-Stop-Shop' .

The theory behind this plan is that you should be able to cross-sell as many products as possible to customers so that they are not tempted to buy from another service provider, thus maximising the revenue stream from an individual client. The problem with this targeting of 'Consumer Inertia' is that, the customer will always loose out.

Perhaps it is time to have an in-depth review of how banks market their non-core products to their client base. When the two main Irish banks launched their own Life & Pension Companies, it was commonplace that they would watch out for direct debits coming in from other Life & Pension providers so that they would then contact the client and offer them their own products. They got their knuckles rapped for this practice, but it still does not excuse their abuse of the information they had to hand.

Where one institution has a financial interest in another, there will always be the potential for a conflict of interest. This is heightened where information may be shared between the financial institutions or where recommended investment funds contain large shareholdings of their own stocks. It could also be argued, that the 'conversion' (cannibalization might be more appropriate) of deposit money to cost heavy investment products by some financial institutions may not be in the best interest of the consumer. Given the current need for capital in the banking sector, I am sure that there is no pressure on the branch network to 'advise' their clients to move their deposit money to investment products, as it is not in the banks best interest at the moment.

I think that it is about time that the core product offerings of banks are decoupled from their pension and investment arms and that they are operated in total isolation of each other. The banks should focus on deposit taking, risk management and lending. Targets for generating life and pension business should not be imposed on their staff/managers. In my opinion, the traditional role of the banks is not in line with the long term goals of consumers in respect of pension and investment products. They both have their parts to play in financial planning but you have to eliminate any risks of conflict.

When your business model is based on being a 'jack of all trades' you invariably become 'a master on none'.

Wednesday, April 8, 2009

'Execution-Only' Pension Products -

Who should use this service?

You should consider this type of service if :

(i) You have a good understanding of what type of pension product is suitable to your circumstances
(ii) You are comfortable with selecting investment funds appropriate to your risk profile
(iii) You want to buy a low-cost product
(iv) You do not require financial advice

Products Available

(i) Standard PRSA
(ii) Non-Standard PRSA
(iii) AVC PRSA
(iv) Personal Pension (RAC)
(v) Executive (Directors) Pension
(vi) AMRF
(vii) ARF
(viii) Retirement Bond

Sunday, April 5, 2009

'Lazy and Misleading' reporting of unemployment rate

I must say, that I had not given much thought to the way the figures were being interpreted by the media until I read the following on Saturday.

It's probably a negative perception that we could do without, if we want to attract foreign direct investment here.

PS: Can anyone persuade the media to abandon the lazy and misleading tendency to treat our Live Register figures as a measure of unemployment – despite the fact that every month the data includes the statement that: “The Live Register is not designed to measure unemployment”.

Last December the media was brandishing Live Register data to claim that unemployment then exceeded 275,000 – at a time when the internationally recognised unemployment figure was 170,000. The difference between these figures is accounted for by part-time seasonal and casual workers.

Garret Fitzgerald - Irish Times - 4th April 2009

Monday, March 23, 2009

Has the Recession changed the 'General Principles' of Financial Planning?

We are living in very different times at present. The whole Financial Services Industry is in turmoil. Many investment companies are hemorrhaging money, as investors call on their savings to meet current financial commitments. Early Exit Penalties, Market Value Adjustments and Loss of Capital don't seem to matter to consumers. They want their money back, and they need it now. Some of those that have direct debits for savings, income protection, pension, and in some cases life insurance, are cancelling what they deem 'unnecessary' in the current climate.

I think that some of the 'Rules of Thumb' that apply to Financial Planning may have to be tweaked, so that our personal finances can be more 'sustainable' in the future.



It is inevitable that we will have to borrow to finance some assets, such as our homes or investment properties. The problem arises when we borrow too much money (relative to value) over mega terms for properties that are too big for our basic requirements. 100% mortgages over 35 years that gobble up 35%+ of our income are a step too far.

The bar needs to be reset at 75/80% of Loan to Value over 20/25 years. The size of the house is a personal matter, but stretching yourself to buy a 'bigger' house also carries with it higher maintenance costs, which will be ongoing. Common sense should prevail.


If you need to buy a car and have to borrow to finance it, you should probably only do so once you have 20% of the purchase price saved. The longest term for a car loan should be 5 years and the repayments should cost you no more than 7/8% of your income.

Do bear in mind that the monthly cost of running the car could add about 75% to the cost of your actual loan. Be cautious with what you deem to be affordable, buy second hand and keep the car for 7+ years. Using the words 'car' and 'investment' in the same sentence can be a bit of a contradiction.

Credit Cards

Simple. If you can't afford to pay the full amount off every month, you probably shouldn't have a credit card.


Keep your affairs up to date with Revenue and claim for all reliefs/allowances to which you are entitled. There is no point in putting tax issues on the back burner in the hope that they will go away. The last thing you need is getting a demand for taxes owing, with possible penalties and fines, when you can least afford to pay it back.

Financial Advice

Never, ever, take financial advice from a Bank on an investment or pension product where the Investment Company is an integral part of the Bank.


You should probably target to have enough money in a high yield deposit account to cover your living expenses + mortgage/debt payments for a period of 9 months. Some say that you should save 10% of your income in non-pension savings products. I say, that it depends on your individual circumstances as every ones commitments are different. The 'savings' deposit account should be your first priority. Once you have achieved that milestone, it is then a good idea to start looking at 'investing' in low-cost index tracking unit linked funds.

Family Protection

We have an uncanny habit of going into denial when it comes to taking out life insurance or other protection products that would give security to our dependents. Simply brushing the requirement aside by saying that 'I have a policy' or 'I am covered though work' is not good enough. It is the level of cover, relative to your needs and affordability, that is important. Most 'death-in-service' work related life cover policies insure the employee for 2 or 3 times salary. For someone with dependents, this can be a paltry amount of money. Think 8 to 10 times; and buy convertible term assurance. You will be surprised at how inexpensive it is. Always insure the stay at home spouse, not just the bread-winner.

When it comes to Specified Illness Cover, you should always keep this separate from any life cover you may have for mortgage related debt. It is expensive, so be realistic about what level of cover you might need so that it is affordable.


If your employer has a facility whereby they will pay into a pension scheme subject to you making a personal contribution, always take this option. If you want to make additional contributions to the pension you should start early. You are not signing a commitment to retirement age so you can reduce or stop payments at a later date.

The general consensus in the market would imply that you will need a fund of 20 times your annual income when you retire. That's fine, if your only retirement asset will be your pension policy but do bear in mind that you will have equity in your home (if you need to downsize) and you will still have an earning potential at 65. If you are a business owner, you should be able to realize a value from the transfer or sale of your business. If you can afford to buy diversified property (commercial/foreign), you should add this to your pension assets.


It is my opinion that the 'general principals' of financial planning remain intact. The only caveat that I would add is that we will have to be a tad more cautious about taking on too much risk. Asset building should be done slowly and we have to diversify our pot of savings/investments as much as possible.

If you are of the opinion that, on a scale of 1 - 10 (where 1 is 'no' risk and 10 is very high risk), you can stomach a '7' you should probably deem yourself a '5' on the scale. I have yet to come across a case where an investor takes a case against an advisor or product provider for not recommending a higher risk investment.

Tuesday, March 17, 2009

Claiming Tax Relief on Pension or PRSA

If you are an employee who does not contribute to a PRSA / AVC PRSA through salary deduction, you will need to 'manually' apply for Tax Relief from Revenue. You are entitled, subject to certain limits, to have the amount that you contribute to a PRSA/Pension deducted from your gross income before that income becomes liable to tax.

If a contribution exceeds the age or income related Revenue limits in any one year, it can be carried forward for relief in subsequent years. If a contribution is paid after the end of the year, but before the following 31 October, relief may be allowed in the earlier year provided you elect (notify Revenue) to do so on or before the 31 October. If it's an AVC PRSA, you must notify before end of October.

Self-employed taxpayers filing returns under ROS may avail of the extended filing date (mid November) to make an election and pay a contribution to a PRSA/Pension.

The normal procedure is as follows. You will have to write to your local tax office and send them the PRSA1/PRSA2 Certificate that will accompany the PRSA policy document (RAC if it is a Personal Pension), quoting your PPS Number. They will then adjust your tax credits etc.

If you are applying for pension reliefs for previous years, Section 17 of The Finance Act 2003 amends the time limits to 4 years as set out in Section 865 of the Taxes Consolidation Act 1997. Do remember that a claim for relief for 2007 must be submitted to your Tax District before 31st December 2011.

Featured website

Edited 24/10/2012

Monday, March 16, 2009

Completing a PRSA Application

The following are some of the common questions that are asked, in respect of the information required, on an Eagle Star/Zurich Life Individual Application Form through

Section A.

Q - Do I need to send a copy of evidence of my date of birth with the application form?
A - Only if your contribution is greater than 15% of Net Relevant Earnings.

Q - Do I need to send a copy of a P60, or other tax document, with the application form?
A - Yes. (The only exception to this is where the contribution is a transfer from another pension arrangement.)

Section C. 1

Q - Can the 'Contract Start Date' be any date in a particular month?
A - No. The 'Contract Start Date' has to be the 1st of a month.

Q - When will the contribution be taken from my bank account?
A - You can choose the 1st, 7th or 15th of the month. You can make a note of your preference on the application.

Section C. 2

Q - My employer has a salary deduction facility with Eagle Star Life through another Intermediary/Broker. Can this 'Execution Only' application be processed on the same Direct Debiting mandate?
A - Yes, if the employer confirms that it is order to do so.

Q - Do I need to sign this Section if I am paying by Direct Debit from my own account?
A - No.

Section E.

Q - Can I choose different funds for my regular and single contribution to my PRSA?
A - Yes.

Standalone PRSA-AVC

Sections D & E

Q - Is all the information required in these sections?
A - Yes.

Section G.

Q - Can I choose different funds for my regular and single contribution to my PRSA?
A - Yes.

Monday, March 9, 2009


When we think about investments, we normally think about them in terms of property,equities or bonds. The current economic climate dictates that the market for these investment assets is very weak at present. When you couple this with negative consumer sentiment and the continuing uncertainty, immediate new opportunities for these products looks bleak.

That said, it is probably a good time to review your existing investments. If you were running your own business, you would certainly be scrutinizing your cost-base at present and be looking for more cost effective solutions to reduce overheads.

The 'easiest' investment opportunity is the one where the least amount of effort is required. We tend to pass our hard earned cash on to someone who will advise us on where we should be putting our money for future growth. In the current environment, it may be a good idea to consider investing more of that money, in yourself.

If you ask yourself the question "How can I add value to my business/career for the long term?", you will probably come up with an answer that incorporates some sort of immediate sacrifice and hard work. The trouble with this is that the results may not be tangible or easily measured any time soon, but if you have a plan and put the effort in the long term pay-off will be worth it.

If you are a business owner you may need to sit down and write a 5 year plan. Running your business on a year to year basis is not a good place to be at. In boom times this may work out fine but when things start to head south, it is hard to adjust to the circumstances with any degree of pace. It may even be necessary to alter or change the current business model that you adopt.

So, what can you invest in? Perhaps it is a good time to (i) promote staff development (ii) invest in new technology or equipment (iii) get to know your customers better (iv) advertise or (v) diversify into a totally new uncorrelated business. Any one of these has the potential to add to the value of your business assets.

If you are an employee, you could just as easily substitute the word 'career' for business and diversify your skills to include things like (i) an additional language (ii) computer literacy (iii) personal finance education or (iv) work on any perceived weakness that you may have.

Irrespective of your trade or profession, now is a good time to take stock of your life and invest in something that will add value to your earning potential in the years ahead. Others will be just marking time/trying to survive at present so the opportunity is there to try and steal a march on the competition by being proactive in your approach to your business/career.

Wednesday, February 18, 2009

'Excessive Debt' Disorder

As if we needed reminding at this stage of the game, the EU Commission has come out today and told us that we are suffering from an 'Excessive Debt' Disorder. Unfortunately, our political masters are struggling to to come up with a remedy; a cure that will be unpalatable.

I often wonder if it ever occurs to those that control the State purse strings that you have to save for a 'rainy day' or does this euphemism only apply to the 'little people'?. Without savings, the future is bleak.

Does it ever occur to these people that a prevention is better than a cure or that, instead of leading us down an undignified road to penury, they could (and should) have done something about it. Was anybody keeping watch?

As we cling to wit and comedy while trying to dodge the recessionary bullets, it is disheartening to listen to the mitigated words of all parties to the debacle. It seems that the culture of the vulture will be ingrained in our corporate legacy for some time to come. Unless of course, it is acknowledged by those concerned, NOW.

Then, and only then, can they start putting in place a system that does not feed the greedy and unscrupulous. You can't right a wrong until you admit that it was morally inappropriate in the first place.

Wednesday, February 11, 2009

Eating Out (with Kids)

As a regular visitor to Tenerife I find it refreshing to experience the welcome that is afforded to children once they enter the door of a restaurant. Shy and all as they pretend to be, they do like the attention; so long as the staff don't start rubbing their hair or gently pinch their cheeks.

The majority of these restaurants carry a 'Kids Menu' which is predominately intended to suit the demand of the sausage and chip aficionado, but more often that not, will include a pasta dish or two. In some cases they even go to the bother of naming a dish after something that the kids can relate to. For example, the 'Mickey Mouse Steak'.

It is also reasonable to ask for a kids/half portion from the Á La Carte menu, and receive it without any 'tut-tutting' or having to fret about it costing much more than half the cost of the adult portion. The whole experience is relaxing, consistent and it makes you want to come back for more.

So why do I find it difficult to find a similar experience here, without it costing an arm and a leg. Surely there has to be a fairly constant demand for this type of service with good food? Is there some fundamental cultural difference that needs to be addressed so that I am not made to feel like a skinflint when I have to ask for an adult portion, with two plates?

Are there restaurants out there that offer a relatively healthy, reasonably priced, 3 course set menu for kids of the non-chip/nugget/sausage variety?

Tuesday, February 3, 2009

'Top Gear' and the Honda FCX Clarity

I was watching a re-run of 'Top Gear' on Sunday evening and I was taken aback by the positive comments that were made about this car on the show. What was remarkable was that the presenters regarded it as the most significant car development in a 100 years.

Don't get me wrong, I agreed with what they were saying but I thought that it was momentous to hear confirmed petrol/diesel 'heads' extolling the virtues of an electric car. A car, where you fill your tank with Hydrogen and the only emission, is water.

I am not sure about how far off Honda are in making this vehicle a commercial proposition for the mass market as it would appear that it is only available for lease, to 'select' Californians, at a cost of $21,600 over 3 years and there is no purchase option.

I think that Jay Leno really hit the nail on the head when he spoke about the market for this type of car being, individuals and families that would use a car like this during the week and probably take the petrol/diesel motor out at the weekend. This, in my opinion, would be a realistic compromise as I can't see it as a permanent substitute.

New Pension Product and Enhancements to Existing Products

Personal Retirement Bond (also referred to as a Buy-out-Bond or Pension Transfer Plan). This is a single contribution retirement investment product designed for those who are leaving employment, moving from one employer to another or transferring between pension schemes.

The minimum transfer amount is €2,500. There are no entry/exit charges, so 100% of your money is invested. The only charge is an annual charge of 0.85% on the value of your investment fund. There are 26 funds to choose from and you will have the option of having on-line access to your account.

The minimum single contribution on the product has been reduced from €7,500 to €5,000.

The Global Absolute Return Strategies Fund (GARS) has been added as an investment option.

Monday, February 2, 2009

PRSAs and Transfers

The following is a summary of the transfer options available to individuals who may want to transfer their existing pension fund, to and from PRSAs.

PRSA to PRSA - As all PRSA contracts must allow the transfer of assets from one PRSA to another.

Personal Pension to PRSA - Fund assets can be transferred with the mutual agreement of the Personal Pension Provider and PRSA Provider.

PRSA to Personal Pension - Not currently allowed.

Occupational AVC to PRSA - AVCs can be transferred to a PRSA if the pension scheme member is leaving service or the AVC Scheme is being wound up.

PRSA to Occupational AVC - Not currently allowed.

PRSA to Occupational Pension Scheme - Can be transferred if the company pension scheme Trustees agree.

Buy-Out-Bond to PRSA - Not currently allowed.

PRSA to Buy-Out-Bond - Not currently allowed.

Company Pension Scheme to PRSA - If any of the following are satisfied, the transfer can take place without a disclosure requirement (see note*) (i) you have less than 15 years service (ii) the transfer is less than €10,000 (iii) the employee has less than 2 years qualifying service (iv) the Pensions Board have been notified that the scheme is being wound up.

PRSA to Overseas - This is allowed provided the PRSA Provider and/or Pensions Board are satisfied that the overseas arrangement is suitable.

Overseas to PRSA - This is also allowed if the Irish Revenue, Overseas Revenue and Overseas Pension Provider agree.

*Disclosure Requirement - The scheme member must be provided with (i) a certificate of comparison of benefits (ii) a written statement as to why the transfer is in their interest.

As this is intended as a brief summary, it may be prudent to seek independent financial advice on your specific circumstances.

Monday, January 12, 2009

Company Pension Scheme being Discontinued ('Wind-up')

In a previous article I wrote about the procedure involved, where the company you work for is 'winding-up' the existing pension scheme and replacing it with an alternative arrangement within the same employment.

Unfortunately, it is looking increasingly likely that more and more companies will be going out of business and that the employees will have to transfer their pension assets elsewhere.

What normally happens in this situation is that the Company resolves to 'wind-up' the pension scheme and stops making contributions to it. They will then advise the scheme 'Trustees' of their intent and appoint a Pensions Consultant to manage the process.

The Consultants will then write to each individual member (active and deferred) and i) advise them of the procedures involved ii) outline the benefits (values of funds) and iii) provide the members with information on the various options available.

The 'Benefits' Statement should include a) the value of your fund in the main scheme b) the value of an AVCs you made while in employment and c) the value of any transfers in to the scheme from previous employment.

The 'Options' available to you for the transfer of these 'Benefits' should include :

1. Transfer your benefit to a new Employer's Pension Scheme
2. Transfer to a Personal Retirement Bond (also referred to as Buy-out-Bonds and Pension Transfer Plans)
3. Transfer to a PRSA
4. Early Retirement Option or
5. Take your benefit as a 'Trivial Cash' payment.

The Consultants will advise you which of these options are open to you and they will probably also include what is referred to as a 'Default Option'. A default option is exercised by the Trustees where they have not received confirmation from a member as to what they wish to do with their benefits.

Thursday, January 8, 2009

Buying Investment Products from a Bank

The following is a comprehensive list of reasons why you should purchase an investment/pension/life insurance product, or expect unbiased financial advice, from a Bank that is a 'Tied Agent' of a Life Assurance Company.


I am struggling to find one. Any Help?

Tuesday, January 6, 2009

'The Ascent of Money'

If you feel that you need to take a step back from the current financial abyss and want to read a broad history on how the financial world has evolved, I would recommend that you get your hands on a copy of this book by Niall Ferguson.

The main appeal of the book is in its educational content. If you have the desire to learn more about the components of finance, in terms of how credit, insurance, banking, property and bonds have 'developed' over the years, this will probably whet your apetite for further information.

It is aimed at those who have a basic knowledge of how 'money' works and I found it entertaining from the point of view of its combination of History & Finance. There was also a TV Series of the same name but I have not seen it.

Monday, January 5, 2009

PRSA - Wealth Warning

Where an employer makes contributions on behalf of an employee to a PRSA, the employer's contributions are treated as a benefit-in-kind in the employee's hands. This benefit-in-kind charge would only apply where the combined contributions (employer's and employee's) exceed the relevant Revenue limits.

Following the introduction of the Income Levy in the recent Budget, combined with the tax treatment of employer PRSA contributions, it is imperative that these Revenue limits are not breached.

If the relevant contribution limits are breached, the full contribution would be subject to benefit-in-kind and would also get hit for the new Income Levy.

NB: This rule does not apply to 'Occupational Pensions', just PRSAs.