How to invest 200k in Ireland and make the money last?

Foreign & Colonial Investment Trust plc (FRCL) isn't actually an ETF - it's an investment trust (and the oldest collective in the world).

In contrast to an ETF, an investment trust issues a fixed number of shares which are then traded on exchange at their market price (which may differ somewhat from the aggregate value of their underlying holdings).

Shares in a UK-domiciled investment trust are subject to the same tax treatment as shares in any other publicly traded company - income tax on dividends, CGT on capital gains. In practice, you would probably pay little or no tax on your dividends (which are paid quarterly) given your modest income.

I should add that my suggested asset split is designed to allow you to spend down your inheritance at a rate of around €500 per month, adjusted for inflation over time, with a high degree of certainty that you won't completely exhaust your savings over your lifetime.
 


Thank you so much for your help. With regards to choosing this investment trust over an ETF, is the benefit that it is taxed at the CGT rate while with an ETF I'd need to pay 41 percent exit tax?
 
Also, the Irish life fund splits bond investments over different countries as opposed to just buying lots of irish bonds...is there much benefit to that strategy? Actually, looking at it, there are no irish bonds at all in Irish life's MAPS product.
 
Nomoneynohoney said:
Thank you so much for your help. With regards to choosing this investment trust over an ETF, is the benefit that it is taxed at the CGT rate while with an ETF I'd need to pay 41 percent exit tax?
Click to expand...
There are a few reasons why I think an investment trust (IT) would be a good option for somebody in your circumstances - but, yes, tax is certainly one of the main reasons.

With an EU-domiciled fund, ETF or insurance-based savings product, you would have to pay "exit tax" at a flat rate of 41% on encashment (with a "deemed" disposal after 8 years). With an investment trust, you pay income tax at your marginal rate (which probably will be close to zero given your low income) on dividends and CGT (current rate is 33%) on any realised gains (when you sell your shares).

However, bear in mind that the first €1,270 of your realised gain in any calendar year (after deducting any realised losses, which can be carried forward) will be exempt from CGT. In other words, if you gradually sell off your shareholding over an extended time period you might end up paying little or no CGT.

The other main reason why I think an IT would be a good option for you is more structural. ITs are allowed to borrow money and are not required to distribute all income that they generate from their underlying holdings. Most ITs therefore keep a cash reserve that allows them to "smooth" out their dividend payments (ie. keep up their dividend payment rates in challenging economic times).

Foreign & Colonial Investment Trust plc (FRCL) has actually increased its annual dividend rate for 46 consecutive years! So you can expect to receive a fairly predictable dividend payment every three months, which I think is important in your circumstances.

FRCL is very widely diversified - it holds stakes in more than 500 companies, accross 35 countries. It has a reasonable AMC (0.365%), modest borrowings and doesn't aim to "shoot the lights out" - it's conservatively managed and aims to grow investors' income and capital over the long-term.

I'm conscious that investing in an IT is a bit of hassle, that might be outside your comfort zone. You will have to open a brokerage account and file an annual tax return. However, I do think it's worth the effort if you think you would be up for it.

Hopefully that all makes sense but come back to me if you need clarification on any point.
 
Nomoneynohoney said:
Also, the Irish life fund splits bond investments over different countries as opposed to just buying lots of irish bonds...is there much benefit to that strategy? Actually, looking at it, there are no irish bonds at all in Irish life's MAPS product.
Click to expand...
I think you could happily treat State Savings Certificates as the "bond" (technically, the fixed-income) portion of your portfolio.

Irish 5-Year Government bonds are currently trading at yields of around 0.1%. Meanwhile, 5-Year State Savings Certificates (with precisely the same risk profile) are currently paying a coupon of 0.98% - tax free, with no investment costs.

It is, of course, possible that the Irish State will default on its obligations to holders of its Savings Certificates but, frankly, the possibility is so remote that it borders on theoretical.
 
This FRCL idea is interesting. How did you hear about them Sarenco? The tax benefits over UCITS ETFs are interesting, especially for those with low marginal tax rates
 
Sarenco, do you believe putting that much money in DeGiro is safe? I am not clear as to whether only 20k is insured or the risks involved. It does look like a good choice after the US ETFs disappearance.
 
How much money/assets can someone have before his entitlement to social housing is curtailed/eliminated?
 
@settlement
FRCL has been in existence for 150 years and has over £4 billion in gross assets - it's pretty hard to miss!

@boomshine
I'm not particularly recommending DeGiro over any other broker - I just noted that they were cheap.
 
if you used a broker like for example Degiro to buy shares in this fund,how safe is your ownership of these shares if the broker closed down
 
Hi Sarenco, I'm really interested in FRCL as a diversified asset and alternative to EUR ETFs due to simpler and theoretically more favorable tax treatment (although I guess the tax for dividends will include PRSI + USC, as opposed to UCITS ETFs).

I've had a US Ameritrade account for years with simplest portfolio (ie: VTI/VXUS) but due to the USD fluctuation and other commissions when depositing I was thinking to start investing directly in EUR using DeGiro or similar. However, if I choose FRCL - a GBP fund -wouldn't it be exposed to the same issues and benefits as my USD assets, or is it somehow more hedged to any currency devaluation?

If you were in my position, would you keep adding into the diversified USD assets, start investing in FRCL or similar GBP investment trust, or just in EUR assets?

For context, I already have a deposit account where I'm adding a few hundred monthly (KBC) and I'm just trying to decide what to do with the occasional 3-5K surplus that I get due to bonus, RSU/ESPP shares, etc.

EDIT: No house either, but not keen into buying one at the moment for a variety of reasons.
 
Last edited:
You must log in or register to reply here.
Menu
Log in
Register