Property in your Approved Retirement Fund (ARF)?
A recent survey by iCubed in Ireland (Sunday Business Post Oct 15th 2017) surveyed a sample group of Irish households with annual income in excess of €75k and asked what they would do if they had a lump sum to invest. Property emerged as the top choice and many of those surveyed were more risk averse in relation to Funds since the recent crash. It's a cliche of course but it's also a fact that most Irish people consider property a safer / more reliable investment than Equities and Investment Funds. Is it because they can touch and feel it? They can see it with their eyes? They understand it as we all buy and sell property (usually successfully) during our lives? My own thoughts having spent over 20 years as a Financial Advisor would be that we have far more tangible evidence of wealth creation through property than we do from other Investment classes. Of course, there are statistics to tell us equities are better but I can honestly say I rarely see clients make large gains from equities / funds whereas most do very well in property over time. There will be those who say but what about all the people who lost out in the crash but a common theme there was they were heavily leveraged which of course massively increases the risk. When borrowings are modest (or not used at all) property ticks a lot of boxes. You receive rental income and given the demographics / lack of property there is only one way this is going. You also have the potential for capital appreciation which over time is relatively certain.
So, should you consider having some Property in your ARF. If your fund is reasonably sizeable I believe the answer is a resounding YES. Of course, you need to maintain sufficient liquidity to provide your pension income but property definitely offers income / yield and potential capital appreciation AND you have more control over what you buy etc.
In recent weeks, I have attended a number of Retirement / Investment Seminars by leading Pension Providers in Ireland. A common theme was that most ARF investors are in Risk Level 3 and 4 Funds. However when you strip out the management charges and look at expected average returns, these are unlikely to maintain the fund over time. Maybe you are ok with that? It will almost certainly be better than an Annuity BUT if you take a longer term view both in terms of your own longevity and also wealth transfer on your death to your family, surely you need to be slightly more ambitious? This is where property can do a job for you.
If you would like to discuss your situation and debate the above further, don't hesitate to contact me on (01) 293 7200 or by completing the form below.