Investment fund security

[Doninga]

Hello all.
I'm just wondering about fund security.
If you buy an ARF or place a lump sum in a fund with a bank or insurer and they go bust do you loose your money?

 

[Steven Barrett]

I am not aware of any bank that is authorised to carry out pension business, they all act as tied agents. Bank of Ireland of course own New Ireland, which is its own entity.

The capitalisation requirements of life companies are very high, so it is unlikely they will go bust. Your policy is not an asset of the company, so the company's creditors cannot make a claim against the value of your policy.

 

[ClubMan]

Hello all.
I'm just wondering about fund security.
If you buy an ARF or place a lump sum in a fund with a bank or insurer and they go bust do you loose your money?

I am not aware of any bank that is authorised to carry out pension business, they all act as tied agents. Bank of Ireland of course own New Ireland, which is its own entity.

The capitalisation requirements of life companies are very high, so it is unlikely they will go bust. Your policy is not an asset of the company, so the company's creditors cannot make a claim against the value of your policy.

Does that mean that the answer is, effectively, "no"?

 

[Steven Barrett]

Does that mean that the answer is, effectively, "no"?

It is very unlikely that an insurance company will go bust. The ones we have seen in the past are the likes of Equitable Life, who gave massive annuity guarantees that they couldn't afford. Policyholders got their massive annuity guarantees. The most recent one in Ireland was Custom House Capital, which was alleged misuse of funds (there has never been a court case for this case!). The liquidator tried to get the customers to pay fees but was not allowed as clients money is kept in segregated accounts.

I am long enough in the tooth to never say that you will 100% not loose your money and it is definitely protected, but it is highly unlikely that clients would lose anything if that happened.


There is of course the Investor Compensation fund that we all have to pay into every year (I don't even handle clients money!) but that only covers up to €20,000.


Steven
www.bluewaterfp.ie

 

[Allpartied]

Does that mean that the answer is, effectively, "no"?

If there is another massive, once in a hundred years, financial crisis, they will, probably do the same as 2008.

In the event of a catastrophic, unstable capital market, with banks and insurance companies falling over like dominoes, everything will be nationalised. All accounts will be guaranteed and the cost will be spread across society. Its unfair to people with no capital, of course, but the main motivation of goverment is to protect the concept of money and avoid everyone reverting to gold, or sheep, or tins of soup. Whether it will work this time is a more difficult question.

 

[Steven Barrett]

If there is another massive, once in a hundred years, financial crisis, they will, probably do the same as 2008.

In the event of a catastrophic, unstable capital market, with banks and insurance companies falling over like dominoes, everything will be nationalised. All accounts will be guaranteed and the cost will be spread across society. Its unfair to people with no capital, of course, but the main motivation of goverment is to protect the concept of money and avoid everyone reverting to gold, or sheep, or tins of soup. Whether it will work this time is a more difficult question.

There was nothing wrong with life assurance companies in 2008. They didn't lend any money or insure policies like AIG did. Custom House Capital is the only one that went to the wall and that was a small, niche, product provider that was mixing client money with their own.

 

[Allpartied]

There was nothing wrong with life assurance companies in 2008. They didn't lend any money or insure policies like AIG did. Custom House Capital is the only one that went to the wall and that was a small, niche, product provider that was mixing client money with their own.

But that doesn't mean pension funds can't go belly up.
They are subject to market chaos as well.
See the UK, yesterday.

Why the mini-budget threatened to bankrupt pension funds | ITV News

It all stems from a dramatic collapse in the price of these government bonds, called gilts, a collapse magnified by Friday's fiscally loose mini budget. | ITV National News

www.itv.com

 

[Steven Barrett]

But that doesn't mean pension funds can't go belly up.
They are subject to market chaos as well.
See the UK, yesterday.

Why the mini-budget threatened to bankrupt pension funds | ITV News

It all stems from a dramatic collapse in the price of these government bonds, called gilts, a collapse magnified by Friday's fiscally loose mini budget. | ITV National News

www.itv.com

That's not the question that was asked.

Pension funds going belly up is market risk. and that article you linked to involved pension funds that leveraged up. If you invest in leveraged pension funds you have to accept that they could go to nothing as you are taking on a huge amount of risk

 

[Allpartied]

That's not the question that was asked.

Pension funds going belly up is market risk. and that article you linked to involved pension funds that leveraged up. If you invest in leveraged pension funds you have to accept that they could go to nothing as you are taking on a huge amount of risk

The poster asked if his ARF could go bust. The pension funds in the UK don't do anything different to Irish funds, as far as I know.
As it stands there was no risk, because the state will always step in and rescue these funds. Which was the point I was making.

 

[ClubMan]

My sympathy to the original poster, now drowned in a tidal wave of gobbledygook and insider infighting, when all they wanted was an answer to a perfectly simple question....