Pension Fund Held in Cash and Bank Bail-Ins

L

LiferT

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Hi All

As one moves towards retirement I have heard that it would be wise to de-risk one’s portfolio by incrementally moving a higher proportion of the accumulated pension fund into cash to offset the effects of a stock market crash close to the retirement date.

I understand that pension fund managers would usually spread their cash deposits across a number of different international banks.

Does anyone know whether pension funds held in cash at a bank would be subject to a ‘bail-in’ in the event of a bank failure?

Also, is the cash held under the beneficiary’s own account, in which case they could possibly benefit from any Depositor Guarantee scheme, or is the cash held by the pension fund itself?

Many thanks in advance.

LT
 
LiferT said:
Also, is the cash held under the beneficiary’s own account, in which case they could possibly benefit from any Depositor Guarantee scheme, or is the cash held by the pension fund itself?
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The latter.

Am not the expert but AFAIK pension funds mainly hold "cash" not in bank deposits but in the form of low-risk debt instruments like short-term government bonds. They will have some bank deposits of course but probably not much.


Otherwise I am reasonably knowledgeable and I see the risk of a bank failure with big losses for depositors as very low right now, to the point where you should probably not worry about it.
 
LiferT said:
I understand that pension fund managers would usually spread their cash deposits across a number of different international banks.
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For a fund it's far more likely that the money would be used to buy highly rated bonds than being placed into typical deposit accounts.

The prospectus of the fund should detail it, but it could be any mixture of Government bonds or triple A rates bank or corporate bonds. The "cash" element of the fund held in a bank account would usually be very low, to cover a few days of inflows/ outflows.
 
It's usually a mix of cash deposits, money market instruments and short dated bonds, all in euro denominated assets to avoid currency volatility.

It cannot benefit from the Deposit Guarantee scheme which applies to personal deposits and not institutional investment. Investments with life companies are unit linked i.e. pooled. they invest tens of millions, the holding of individual policy holders is not a factor.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
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