Who can I trust after being stung before?

QI HAVE decided to re-enter the investment market after a six-year “hiatus” having been stung by the insolvency of my investment firm and the total loss of the money I had invested a while back.

I know however that it would be a fool’s errand to let that stop me from working on my portfolio again, so here I am. Naturally I’m more than a little cautious in terms of whose advice I will take and who I can trust. What advice can you give someone like me who wants to dip their toe in the water again? David, Killiney, Co Dublin IT’S unfortunate, to say the least, that that happened to you — but you are not alone. Having been stung by the insolvency of several investment firms, many investors in Ireland now know only too well the importance of protecting their investment or pension fund and are unfortunately now aware of the relatively low level of protection the State offers should an investment firm fail.

You need to be selective in your approach. There are investment firms that provide excellent returns by operating a lower cost base and by employing some excellent investment managers.

However, while these firms can provide the opportunity to achieve better investment returns it is important that you understand the vulnerability of any investment firm to financial shock from risks such as fraud or cyberattack.

Don’t blindly accept explanations such as a “strong financial parent”, the use of capital guarantee products or custodians.

Satisfy yourself as to the financial strength (evidenced by their balance sheet) of your investment firm and how this relates to the total amount of investments they manage.

The level of State guarantee for money on deposit is currently €100,000 for money or investments, with an investment firm this reduces to just €20,000.

Explore other forms of protection from insolvency such as FundInsure, which can provide over twice the protection of the deposit guarantee scheme and over 12 times the state investment compensation scheme for a relatively modest cost.

Is property pension option?

QMY pension provider has recently come to me with an investment option — in residential property.

I’m a little cautious given how our property market has performed in the past, but part of me is thinking that this could be a good choice given the fact that the rental market in particular is very strong at the moment, which should make for strong yields. What are your thoughts on this? Would you recommend this? Ann, Raheen, Limerick city FIRSTLY, I should point out that we would recommend you carefully consider all the investment options across a mix of asset classes, not just those investments and asset classes you may be familiar with or that might have been highlighted to you of late.

If you are considering the property route then it’s imperative that you use experienced advisers with a good track record, rather than rely solely on your own limited property investment expertise.

That said, property as an investment choice for pensions can, in certain circumstances, be a clever move.

Price and rent rises over the last few years have resulted in strong yields and, when it comes to pension investment, these yields prove even more lucrative because any income and gains made from pension fund investments are exempt from income tax and capital gains tax (CGT), which means that rental income is not subject to income tax nor will CGT be payable if you end up selling the property.

In terms of what your fund will allow, choosing a self-administered fund will afford you a degree of flexibility in your options.

You will be subject to certain pension rules of course — for example, the vendor of the property must be at arm’s length from the scheme and the employer.

However, if these conditions are met then you will have the freedom to choose the property you wish to purchase, which is where the outside expertise will come into play. Be careful also about where the property is located — you could lose any tax efficiency on properties outside Ireland.

Insurance hit by claim ‘ruse’

QI RUN a shop on the outskirts of Cork and while my business is doing well I’ve been subject to several insurance claims over the past two years, mostly from the same extended family.

These include claims for people “falling” or “tripping” on the premises and claims of defamation where I asked each claimant on two different occasions if they had paid for an item that appeared to have come from my shop.

On reflection I now realise that these had all been a ruse and that I had essentially been set up.

I’m now told that with over €100,000 set aside for these claims, I cannot get a decent insurance quote from any insurer. I’m willing to take a sizeable excess — what should I do? Pat, Co Cork INCREASING insurance costs as a consequence of deteriorating claims activity is becoming a major problem in Ireland, to the extent that it is beginning to threatening the financial viability of some businesses — as you are currently experiencing.

I would advise you to do some homework to try to identify an insurance broker that can access insurers in not only in Ireland but some of the bigger insurers outside Ireland such as Lloyds of London as they may well be more likely to take on this “risk” at an affordable premium.

The bottom line is that the greater the insurance broker’s access to insurers and insurance markets the more options can be negotiated and explored.

As you suggest, you may have to accept an increase in excesses, but there may also other ways to overcome the challenges you now face so it is important you engage an insurance broker that has experience of these international insurance markets and in negotiating bespoke terms.