Investment options for 70k fund

[stantheman]

Retired couple (75 and 73) both have small annuity pensions on top of our State pensions which, bar unforeseen outgoings, is sufficient to fund day to day lifestyle.

We have a pot of €70k which, based on professional advice, we invested in Standard Life GARS (Global Absolute Return Strategies) back in Dec 2016. The annual management charge on the fund is 1.35% and the fund has achieved a return of -1.79% over the lifetime of the investment.

We are obviously not happy with the performance and are looking for an alternate investment strategy. We are fairly conservative but realise that we need to take some risk to achieve a reasonable return.

Any advice folks here can offer would be appreciated - plus let me know if any additional information would help.

 

[Marc]

Such a common story.

We have warned continuously about the concerns with Standard Life GARS and I recently posted an analysis over nearly 10 years of an alternative strategy which has provided consistently better returns without taking more risk

In Search of the Perfect Investment Portfolio

Many investors find it difficult to achieve returns offered by the markets due to a misunderstanding of investment risk, costs and taxes.

globalwealth.ie

for those who are more technically minded a full analysis can be found here

Absolute Return Funds, Shame About the Returns - Everlake

Producing investment products with good marketing is a business. Investors shouldn't confuse complexity with the right way to invest.

globalwealth.ie

so the challenge here is that the “ideal” solution from an Irish tax perspective is to hold a portfolio which is subject to income tax since, from what you describe, it’s highly likely that your effective rate of tax is likely to be relatively low and certainly lower than the 41% that applies to Irish retail investment products.

to avail of such an option you would need to file an annual self assessment tax return which you might not be happy to do yourself and paying someone to do it for you could negate any advantages that should be due to you but which are challenging to say the least to access in Ireland.

you would also need to hold enough in risky assets to make use of the tax breaks which may be inappropriate for your overall risk capacity.

so the fault here lies partially with Revenue who make the process of investing unnecessarily complicated for Irish investors.

with €70k to invest our advice is typically to keep an adequate emergency fund in State Savings certificates and to invest the balance in an equity index fund via an insurance company since this deals with the tax return at source and is likely to be more cost effective than an alternative more bespoke solution.

it’s not the most tax efficient solution and all things being equal it’s not what we would choose to recommend but in the circumstances it’s probably the most suitable and appropriate option.

 

[stantheman]

Thanks Marc. Appreciate the guidance. Do you know of any such insurance company with low charges?

 

[Marc]

You’ve already paid for a Standard Life contract.

We would compare simply making a fund switch and probably a partial withdrawal from the existing contract with a new investment.

you are going to be most likely better off changing adviser, sticking with the existing contract and switching to a more suitable fund. You probably don’t need a new contract at all