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October 2013

This newsletter is exclusively for existing clients of PFP Financial Services. We hope you find it useful. This newsletter is meant to capture a few interesting concepts we believe might be of relevance to clients. If you require clarification or additional information please contact your regular PFP Financial advisor.

Kind regards

Paddy Mahony
Director

 
Budget 2014
Budget 2014

Budget 2014 delivered last week is to be welcomed for retaining the tax relief on pension contributions at 41% (effectively 52% if you are a company executive with company contributions). However the increase in DIRT to 45% (DIRT plus 4% PRSI) when combined with the paltry interest rates available from the banks has really made saving with a bank unattractive to the medium term investor.

We would suggest that for the medium term investor an investment in a pension plan where tax relief is available as well as tax free growth within the fund is a very attractive alternative. At a minimum anyone within 5 years of retirement (from 60 years old in most cases) should give serious considering for funding to the maximum tax free cash level. See example below:

Pension Fund Versus Savings

 

 

€20,000 Invested

Pension €

Savings €

%

Cost of Investment

20,000

20,000

 

Tax Relief

8,200

 

 

Total Amount Invested

28,200

20,000

 

Return at 5%

1,410

1,000

 

DIRT at 45%

-

(450)

 

Value after1 year

29,610

20,550

44%

The fund choice does not have to be in equities and depending on an individuals attitude to risk could be invested in a low risk deposit account with a large bank like Rabodirect via Irish Life.

The Budget has also reduced the maximum fund threshold. If you think this might effect you please contact us and we can review this for you.

 
Budget 2014
Film Investment 2014

The budget announced that the changes in S.481 film investments will be brought forward to 2015. We will be in contact in 2014 when we have suitable opportunities and advise clients on how the might be able to participate in the new regime being implemented in 2015.

 
Budget 2014
Irish Property - Time to Buy?

As some clients will be aware we have been quite keen on Irish Property Funds for the last six months. There are signs that the Irish Property market may be beginning to turn. The recent arrival of international heavyweights such as Blackstone (purchase of the Burlington Hotel for circa €67m) and Kennedy Wilson (purchase of Gasworks for circa €40m) as well as others are very encouraging signs.

In 2012 over €600m of transactions were completed in the Irish market (source Aviva Investors).

Property as an investment has performed poorly in recent times but it is worth remembering that over the last 29 years property funds have returned approximately 8.8% per annum even including the massive downturn experienced in recent years (source Aviva Investors).

With the significant reduction in deposit rates in recent months we believe the Irish Property market is a good alternative for medium terms investment returns. All the funds detailed below are un-geared and deemed medium risk investments.

We currently favour the Friends First Commercial Property Fund for the following reasons:

  • Down 70% in value terms since the peak.
  • Yield still 7% plus
  • This fund has lagged it peers (+4% YTD versus Irish Life +28% YTD). We believe that the spread between this fund and its peers will contract
  • The fund is still valued on a disposal basis.
  • The properties in the fund are good quality (mainly Dublin based)

We believe that this stage in the cycle represents a good buying opportunity and while potentially the market may soften further before recovery we believe that in the medium term that the outlook for the Irish Property market from current levels is very positive. Contact Paddy Mahony or Andrew Nevin on 01 498 0007 for any additional information including details Research Reports (internal and external).

 

PFP Financial Services Limited. Registered in Ireland: No. 473441. Registered Office: 1 Upper Rathmines Road, Rathmines, Dublin 6, Ireland. Place of Business: 1 Upper Rathmines Road, Rathmines, Dublin 6

PFP Financial Services is regulated by the Central Bank of Ireland. here