It seems to me that the solvency of the occupational pension scheme(s) is actually the biggest financial risk facing your parents,
5. I would deposit the balance in savings accounts and term deposits of Irish branches of non-Irish banks (Rabo, Investec, Nationwide UK), making sure to stay below the respective government guaranteed amount per depositor, per institution.
I wouldn't personally consider it necessary to adopt an aggressive allocation for their age, particularly as they own their PPR mortgage-free and have adequate pension income.
However, it seems to me that the extent to which Protocol's parents are reliant on this occupational pension to fund their living expenses substantially reduces their ability to take investment risk with their other assets, whatever about their need or willingness to do so.
1. Currency risk is obviously a two way street – the currency in which the deposits are denominated (or redenominated) could just as easily appreciate as depreciate as against other currencies.
In any event, currency risk also applies to equities.
2. Inflation reduces the real return of all income producing assets (equities, fixed-income and real estate) and there is nothing unique about deposits in this regard.
There is no one size fits all answer to this. Everyone is different based on their needs, goals and how much loss they are able to absorb.
- What are your parents trying to achieve?
- What are the managed funds for? Do they intend to spend the money anytime soon?
- With their ARF, do they want to maintain its value or are they happy to run it down over the next decade or so?
- Would a fall of 30% of their Managed fund and AVC have a serious impact on their lifestyle?
Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
1. I suppose you would call them risk-adverse, they want to protect their savings
2. There is no defined purpose for the managed funds - they don't really know that they own them. They are old life savings policies encashed and merged into a 100k managed fund.
No, they do not intend to spend the managed funds soon. They aren't really aware that they own them.
They can't spend their income, they save out of their income, so their is no question of the managed funds being spent anytime soon.
3. They don't need the 5% income, 3.5k, they just draw it down for tax purposes.
4. No. That has happened. They didn't know about it, and it didn't impact them one iota.
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