At our recent TierOne sponsored Pensions Workshop, we discussed a number of important issues affecting pensions planning in Ireland today.
Those included looking at the various types of pension structures, how they interact, emphasising the necessity for planning well in advance of retirement. We uncovered some less known facts about Social Welfare Pensions entitlements and discussed more complex matters on the transfer of pensions outside of Ireland altogether. We discussed Estate Planning, and the increasing problem of family home inheritance tax liability.
Of course, a critical factor to any successful pension plan is time. Without adequate time and planning, retiring successfully becomes all the more challenging and we provided a number of examples to illustrate the point. Other key factors, including maximum contribution limits are also a major consideration depending on whether or not one is employed or self-employed.
What peaked the attendee’s interest?
Attendees were surprisingly interested in the area Social Welfare Pension entitlements. We added it to our presentation almost as an FYI, and the topic attracted more than its share of questions. Many thought that they could receive their full benefit with ten years contributions and were surprised that it is no longer the case.
We dealt with the issue of passing on the family home and as Kevin and Clive pointed out, while CAT may have been viewed as a somewhat remote tax impacting the top few ‘wealthy’ of Irish society in the past, because of reduction in CAT limits and recent rises in property values, more and more families are now falling into the CAT net.
Of course, this being a pensions workshop, we did actually discuss those in considerable detail too. For example, Kevin provided both the morning and afternoon group with some helpful graphics which demonstrated the anomalies which currently exist in transferring funds between different pension arrangements, including “BOBS”, “PPP’s”, “EPP’s” and “PRSA’s”. Yes, this really is a minefield where event the ‘experts’ can find it all a little too confusing.
What is clear from this most recent workshop and others is that there is an incredible appetite for clarity and information from consumers.
TierOne will be announcing its next round of Workshops shortly.
Someday we may all look back and wonder how things ever go to where they are today.
The other day, the New York Times ran a story of some lucky borrower in Denmark that was being paid by their bank to borrow from it. It was a story of an entrepreneur that was not only approved for a loan, but one where the rate of interest was -0.0172%. A negative rate of interest where the borrower ended up being paid back cash.
These are strange times in the world of investing and saving for a rainy day or even retirement. Across Europe, investors are buying Government bonds knowing full well that the amount they will eventually get repaid could be less than their original investment.
But in the topsy-turvy world of investment returns, the current madness doesn’t just stop at Government bonds; it extends to corporate bonds including Nestle and Novartis.
While the current return on investment landscape makes for interesting reading, it also makes for terrible investment opportunities.
For those planning ahead for their years in retirement, the current market conditions means they need save more and save for longer if they are to accumulate a satisfactory retirement nest egg.
So, what are investors to do?
Diversification – this is the first major factor of a sound investment strategy. Ensuring that a personal portfolio is well-balanced and aligned to the investment goals and risk profile of the individual is the key to long term success.
The world is greater than the village – some investment portfolios can be overly weighted in domestic and regional assets which may result in underperformance. This can have a significant negative impact on the long-term investment performance.
Watch the true cost of it all – how much it really costs to administer a personal portfolio can greatly impact the long term potential for a strong return. Commissions and various trading charges alone can have a major draining impact on a personal investment fund so it is critical one is familiar with how this all works and be prepared to either challenge it or change provider to a no commission model.
Frank Conway is a qualified financial advisor and founder of MoneyWhizz, the financial literacy initiative.
By Frank Conway
A lot of what I have written about as well as content in media in general focuses on financial topics for those in the 20 – 50-something age bands. These include mortgages, investing and savings.
One area that I have noticed that receives less coverage is financial planning for those already in retirement. No, I am not talking about financial planning in the strictest sense, rather I have focused in the area of loss prevention.
I have published a new e-book that provides high level tips to those in retirement already about how they can protect themselves against fraud and exploitation.
If you know of someone that may benefit from my Protecting Against Fraud and Financial Exploitation in retirement, please feel free to make contact and request a copy.
It’s taken a while to get here but MoneyWhizz is about to go live across Ireland. Already, over 50 schools have signed up for the programme and will shortly be receiving their unique login and password details to get them started (the programme is also available in the US and UK).
This has been a really important project for me and one that I feel very strongly about. Teaching our youth how to manage money is a critical life skill.
If you have an area school that would benefit from MoneyWhizz, let them know about the programme. This is sure to make a lot of difference in the lives of our students and young adults.
You can access further details at www.moneywhizz.org
For small business owners, a deep understanding of their company’s financial situation will significantly improve their chance of long-term success. When they know exactly where they stand in terms of their financials, they can plan for the future and avoid common financial management pitfalls.
Unfortunately, the fact remains, business owners struggle to get a grasp on their finances. In a recent North American study, 46 per cent of owners rated their knowledge of financial management as sufficient or less, while one in 10 surveyed believe that a lack of financial management knowledge is the greatest barrier to small business success.
Around the world, a common mistake made by owner-managers is to assume that accountancy is finance – nothing could be further from the truth. Accountants are financial historians whereas in business finance, this involves a very high degree of forward planning.
The following tips have been compiled to provide some general guidance to assist owner-managers take greater control of business finances, improving financial literacy and taking their company to the next level:
1. Do the sums. Do you know how much money it takes to run your business? Determine the true costs of your products and services, including wages, transportation, rent, marketing, insurance, phone, internet, utilities, taxes, and whatever else you require to function. That’s just the beginning. You need to learn how to effectively track money in and out of your business, a first step of which would be setting invoicing periods.
2. Uncover those other costs. Have you ever needed to obtain license? Even securing an online presence requires time and this costs money. The expense of these things can start adding up, especially when you factor in the cost of legal services, your own salary, return on investor capital, and capital for future expansion. Don’t forget to add the cost of borrowing money and the interest and debt you may have already accrued. Then start thinking ahead: once you can put numbers to everything that takes money out of your business, you can plan how much you will need to grow going forward.
3. Don’t avoid the necessary. A major challenge for business owners (this is true for large and small firms) is that if they don’t fully understand the figures, they assume someone else will…and will also look out for them. This is a major mistake. Not because of any trust issue but because owners with even a good level of financial knowledge can challenge costs and the impact costs can have on the performance of the company. This includes knowing and using of – income statements and balance sheets, understanding inventories and learning to manage cash flow and supply chain.
4. Take the landscape view. Become familiar with the general state of your immediate marketplace. Analyse your competitors and ascertain how your company stacks up against them in terms of goods, services, and pricing. Do a SWOT analysis and determine competitors’ strengths and weaknesses and identify opportunities therein. Additionally, work on deepening your understanding of your customers and figure out if they could and would spend more for what you provide (there are some easy – and free online tools that can assist you here).
5. Learn how to use financial training software. Business owners no longer need to take long journeys or days out of the office to improve essential financial skills. New online resources such as Ablata can provide valuable up-skill services that can assist owner-managers improve their financial skills significantly for a fraction of traditional in-class settings. Whether you have a good understanding of finance or are just starting to learn, pioneering software options can be structured to help owner-managers become proficient in the language of business finance in as little as 12 hours.
Worth isn’t just about price or what to charge – it’s about the true value of your business, which involves a combination of factors: your products, services, competitive landscape, and the value your business brings to customers. By educating yourself on your financials, and working with the correct tools and credible professionals, you’ll be on your way to a lifetime of success – without leaving anything to chance.
Secondary school students are studying up on mathematics, physics, advanced chemistry, and world history, but most aren’t learning fundamental money lessons to help them financially navigate the real world.
Such is the case with students all over Ireland who struggle with the basics of personal finance. Even in so-called ‘top rated schools, students are being neglected when it comes to basic personal finance.
“The assumption is that somebody else will teach it” said Mr. Frank Conway, Founder of MoneyWhizz.org, the personal money management and personal budgeting service.
Across the globe, there is a growing chorus of influencers calling for the introduction of financial education to be introduced into the curriculum. Both the OECD and UNICEF have been calling for such material to be introduced at school level for years.
“What is really concerning are the findings of a study carried out by Harvard University which reveals that even smart students don’t have an understanding of personal finance” said Mr. Conway.
Growing complexity that parents and teachers couldn’t be expected to fully understand
Part of the problem is that the financial system has become increasingly complex. New rules, new products, new technologies have made many areas of personal finance more and more abstract. For example, many people no longer fully understand how complex mathematical models track how they borrow and repay their debts. These can have life-long implications across a range of areas ranging from credit to employment. Also, for students that may live and work abroad, personal credit scores will impact their insurance costs, ability to rent property and in some cases, whether or not they get admitted into hospital.
“Personal credit reports have become our most important social media profile yet nobody teaches this stuff to students” said Mr. Conway.
Interest is there, opportunity in not. In a US poll, 84 percent of high school students desire more financial education. Among 16- to 18-year-olds, 86 percent said they would rather learn about money management in the classroom than make financial mistakes in the real world.
Irish parents have also expressed concern, as have grandparents. In 2011 – 2013, Cents & Sensibility – a financial guide for young adults sold out in a matter of weeks at Ireland’s top book store. This was despite the fact the book was marketed via word of mouth and testament to the emotional appeal of teaching finance to the next generation.
“There is a market demand for personal finance knowledge but too often, there are few answers to solve the lack of training” said Mr Conway.
MoneyWhizz is a new, non-profit programme developed specifically for students aged 16 – 20. It teaches 10 essential money lessons that every student will require knowledge of as they become financially independent.
In Ireland, a number of schools are beginning to buck the trend with gradual introduction of personal finance to students. But the major difficulty for teachers and schools is the lack of financial resources.
Free, Independent, Commercial-free
MoneyWhizz offers 10 core money lessons that have been specially written and edited for students. Schools that would like to avail of the MoneyWhizz programme can contact firstname.lastname@example.org