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Pension? I’d be better off putting it in the Post Office.

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Over the last few months, I have heard a number of dicussions relating to the continued use of private pension plans. This is usually related to the falls in fund values, negative sentiment regarding global economies and taxation changes. My advice is that for most people funding long term for retirement, pensions are still the best game in town.

Security:
It is important to remember that Insurance Companies are not Banks. The liquidity requirements for Insurance companies are much much more onerous than for the banking sector. An Insurance Company must at least match assets and liabilities and indeed most insurers exceed this. If you have a Self Administered Fund with a Pensioneer trustee, your assets are held in a ring fenced trust so should the Trustee company face difficulties or indeed become insolvent, your assets are protected.

Investment Performance:

Yes it has been a pretty torrid time for global equity and bond markets. The Credit Crunch that started in the US has now turned into a European Sovereign Debt Crisis and we have had our own property and banking problems along the way. We don’t pretend to be able to predict the future, however we can plan a portfolio and guide our clients through the various behaviours of assets so that there are fewer surprises. Investment markets will rise and fall. It is their nature.  You can, however, have a lot of influence over how your investment rises and falls in line with global markets.

Investment Strategy:

Matching your investment portfolio to your investment term and taking into account your attitude to risk should lead to fewer surprises when receiving your fund valuations. There have never been more investment options out there, ranging from 100% capital protection to riskier leveraged investments.

Tax Benefits:

Tax relief at up to 41% is still in force. Ignoring charges and investment performance, to accumulate a fund of €500,000 outside of a pension, it would cost you nearly €850,000. Compare that to saving into a pension plan where the equivalent cost would be  €500,000 and you can access 25% of that tax free upon maturity.

Review - Regularly:
Investment markets change. Attitude to risk changes. In my experience, during the boom years, investors became cavelier about their own capacity for risk and have subsequently come to realise this. Experieneced independent professional advice can offer diversification solutions and offer an impartial view to ensure that both the investment growth potential and risk profile are within specific agreed criteria

 
Inflation is no longer on the prowl - it's back!

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Irish consumer prices for March rose 3% in year-on-year terms

The risk of inflation taking hold in Ireland is a concern for all. This risk is now materialising with headline rates of inflation accelerating and likely to increase further in the months ahead. The decision by Irish households to hold large swathes of cash on deposit will prove increasingly costly if inflation continues to track higher.

The latest inflation numbers

Consumer Prices in March, as measured by the CPI, increased by 0.9% in the month, which is the second consecutive monthly increase of 0.9%. This compares to an increase of 0.1% recorded in March of last year. Prices on average, as measured by the CPI, were 3.0% higher in March compared with March 2010.

The annual rate of inflation in Ireland for the last 10 years can be seen in Chart 1. The most striking feature is that inflation has risen from a low of -6.6% to currently stand at 3% in little over a year. The most notable changes in the year were increases in:

Housing, Water, Electricity, Gas & Other Fuels   +12.5%
Miscellaneous Goods & Services                        +7.6%
Communications                                                 +4.1%
Health                                                                 +4.1%

Obviously, the impact of rising energy prices is having a very big impact on the level of consumer prices and it can be expected (hoped?) that this rate of price increase will not be sustained. However, inflationary pressures are becoming more widespread and are evident in many other components of the index as can be seen from the following Chart 2.

Chart 1: From a low of -6.6% to 3% and rising - inflation is back!
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Chart 2: It’s not just energy prices and mortgage costs
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Inflation erodes the purchasing power of cash

Cash is a low risk option in the short-term but it becomes an increasingly risky option as time goes by. The ravages of inflation can destroy the purchasing power of money and the only meaningful way to protect against rising inflation is by having exposure to real financial assets, such as equities, property and commodities amongst others.

With inflationary pressures also mounting on a global basis, the outlook is for rising consumer prices for the year ahead. In our view, the most appropriate asset allocation for a medium to long-term investor who wants to beat inflation is a multi-asset investment strategy rather than a concentrated allocation to one management style or asset class, especially if that asset class is cash or deposits.

Important - Disclaimer: This document is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person, and does not take account of the specific needs or circumstances of any person. Any comments on specific investments are intended as an objective, independent view in relation to that investment generally, and not in relation to its suitability to any specific person.

 
Budget Summary......

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click here to download

To find out more or talk about how this affects you, contact John or Damian at 01 8404012 or  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 
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