Blow for pension savers as bank imposes charges on holding cash

LDFerguson

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If a person has €50,000 cash in their Self Administered Pension Fund account with Bank of Ireland , will it reduce by 0.65% a year?
Yes.

If other banks follow Bank of Ireland on this, the person may find it difficult to find any bank that won't charge them for holding their money.
 

Sarenco

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I can't access the original article. Can you quote the bit which is misleading?
The opening lines of the article are as follows:

"Bank of Ireland is to impose negative interest rates on cash held in pensions, in a move that will hit hard people saving for their retirement.

It is the first time negative rates will have been charged to consumers."

BoI have not announced that they are going to start charging negative rates to consumers - they will start charging negative rates to pension trustees.

BoI have applied negative rates on deposits for large institutional and corporate customers (including life companies and investment funds) since 2016 so this is not a "first" in any meaningful sense.
 

Brendan Burgess

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Sarenco

Liam has explained exactly what is happening.

People with Small Self Administered Pension Funds will be charged 0.65% on their deposits.

This is the first time that this has happened, as far as I am aware.

Your legalistic "The charge is on the trustees" position ignores the impact on the owners of the Small Self Administered Pension Funds.

I agree fully with you that the Bank is right to impose this charge. The surprise is that they have not done it before now.

Brendan
 

Sarenco

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Your legalistic "The charge is on the trustees" position ignores the impact on the owners of the Small Self Administered Pension Funds.
Well, my pension provider is a life company. If the bank charges a life company negative interest rates (which they do) that directly impacts my pension fund.

So I don't think I'm being legalistic.

Negative interest rates have been a reality for pension savers for quite some time.

All BoI are doing is bringing trustees of self-administered pension schemes in line with other institutional investors (including trustees of occupational pension schemes, life companies and other PRSA providers).

The article suggests that this is the first time that pension savers have been charged negative interest rates. That is simply untrue.
 

Brendan Burgess

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Hi Sarenco

Do you agree with the following:

People with small self-administered pension funds are going to be charged interest on their bank deposits with Bank of Ireland for the first time.

Brendan
 

Sarenco

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Do you agree with the following:

People with small self-administered pension funds are going to be charged interest on their bank deposits with Bank of Ireland for the first time.
I agree that people with self-administered pension funds are going to be impacted by negative interest deposit rates for the first time.

But the article states that "it is the first time negative rates will have been charged to consumers".

That is technically incorrect.

But more importantly it is not the first time that retirement savers will be (indirectly) impacted by negative deposit rates.
 

Brendan Burgess

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I agree that people with self-administered pension funds are going to be impacted by negative interest deposit rates for the first time.
Thank you.

And to those impacted people that certainly is news. News that they need to know so that they can manage affairs accordingly.

If they had put in the word directly "it is the first time negative rates will have been charged directly to consumers". would it be technically and practically correct?

Agreed that retirement savers are being hit hard by negative deposit rates without knowing it.

Brendan
 

Gordon Gekko

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There are other options...not all banks provide trustee bank accounts, but PTSB do and they’re not charging negative rates. Or alternatively clients just send all of the money to their investment manager and, for discretionary accounts at least, there’s no charge for cash.
 

Brendan Burgess

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The Irish Times covers it today in an opinion piece


First, the obvious: Bank of Ireland has decided to levy a 0.65 per cent charge: the ECB deposit facility rate is currently 0.5 per cent. So the bank is not simply recouping its costs, it is making a profit of 15 basis points by doing nothing.

It doesn't strike me as unreasonable that the bank is charging a margin for this?

Brendan
 

Gordon Gekko

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They’re entitled to make a profit. And this is rubbish business which BOI don’t really want. It’s not as if they’re getting a slice of the investment business through New Ireland either. They’re dealing with bitty little stuff like taking in monthly payments, sending payments out, and simply holding cash. And for hundreds or even thousands of accounts through the likes of ITC.
 

Gordon Gekko

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"Having money in cash is never good for pensions"

Gimme a break...........like everyone was delighted to have money in equities when covid landed?
elacsaplau,

The answer to success with one’s pension is to pick an approach that works from a volatility and behavioural perspectiveand to then stick to it religiously.

The volatility point just revolves around the amount one can tolerate it going down during times of weakness and market stress.

You have to tune out things like Covid. I adopt a 100% equity approach so I know that it WILL fall in value by big percentages over the decades. But it will recover and I’m okay with that.

But here’s the thing; I don’t know what it’s worth today. Do you know why? Because I haven’t looked at it this year. Best guess, I last checked it in or around March or April 2019.

On our (hopefully) 70 year pension fund journey, Covid, whilst sad on a human level, is not relevant.
 
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roker

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As a pensioner does this include my savings in BOI ? Is this I considered a pension fund,
 
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Jim2007

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Yes.

If other banks follow Bank of Ireland on this, the person may find it difficult to find any bank that won't charge them for holding their money.
I guess we will have to wait and see. Here in Switzerland they have walked up to the line, but not crossed it - personal accounts (deposit and current) are not subject to negative interest yet. All other types of account are subject to negative interest - companies, government, pension funds etc...

The bad news is that they have instead started to terminate unprofitable relationships, so if all you do is keep money on deposit and they make no other fees from you... your 'invited' to leave!
 
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