Blog – David McCarthy – Galway Talks, 18/07/2013

galway-bayfmQuestion:  I have some money that I want to give to my grandchildren.  They are in their early teens.  I am wondering would you recommend putting the money on deposit?

Answer:  While you might consider leaving money on deposit as the most conservative/ secure option, you must remember that your Grandchildren have a time horizon of 10 years + before they are looking to access these monies.  The sensible way to invest these monies would be to take some risk and look at investing in something like an Absolute Return Fund.

Question:  You spoke a few weeks ago about Defined Benefit Pension Plans.  A company I work for have made an offer to all of the staff to transfer from the existing to a new Defined Contribution structure.  I am unsure what to do, what would you advise?

Answer:  Unfortunately there has been a lot of publicity in recent months about the uncertainty around security of pensions in Defined Benefit Plans.  This is because a lot of these plans are operating with a severe deficit and as a result there is no guarantee that you will receive what is due to you when you retire.

If the scheme, is operating with a deficit (which is most likely) then you may decide that receiving a transfer value now, and moving to a Defined Contribution plan, could be the most prudent course of action.

Question:  I have a small business and the banks that I deal with have increased the interest rates on my borrowings and I am now also paying much higher bank charges.  I have looked at moving to an alternative institution, but that does not seem feasible at the moment.  Can you tell me, in your opinion, when this situation may change?

Answer: Unfortunately competition in the banking sector means that customers are being excessively penalized with high interest and charges by their banks.  I have no good news in this regard, except to say that you will probably have to continue with your current bank until such time as effective competition in the banking sector returns.