In slow but undeniable trend pension investors are tentatively taking steps back into the property market by adding property to their retirement portfolio. This is according to Independent Trustee Company who looked at where clients with self-administered pension schemes are choosing to direct their pension savings. The pension experts, with €750million in clients funds, outlined the main areas of client interest in 2013 as being deposits; property and broker portfolios.
According to Michael Keyes Director of the ITC Group, “We’ve seen a significant pick-up in activity for both Commercial and Residential property and we believe this is down to several factors – first that the consensus from the major estate agents is that for prime commercial property in the major cities, prices have stabilised. Secondly while residential property continued to fall in 2012, certain sectors of the market are showing positive signs – South County Dublin saw an average increase of 3.1%. (Daft.ie). In addition, rental yields are averaging 8.8% and the average residential property price was €140k. (Allsop Space/Goodbody 8/12)”.
Michael added, “The one thing we haven’t seen is debt leverage. Lenders’ experience of negative equity and overall impairments has obviously affected their appetite to lend. Will lending to pensions happen again? Yes, I believe so, but in prime property and with lower loan to value ratios”.
According to Independent Trustee Company cash deposits are still popular for pension savers despite the downward trend in rates.
Michael went on to say, “What we have seen, however, is a shift from short term deposit accounts to the more long term which is mirrored by statistics from the CSO where deposits from Insurance Corporations and Pension funds increased by 6.9% in 2012, shorter term deposit rates (less than 2 years) reduced from 3.57% in Jan 2012 to 3.35% in Nov ’12 and longer term deposit rates (more than 2 years) increased from 2.37% to 2.42% over the same period.
It’s no surprise that ARF clients are the biggest supporters of deposit strategies. Their age profile means that they have less appetite for risk. This has resulted in over 60% of ITC ARF funds being held in deposits”.
Independent Trustee say that clients also favour broker portfolios more now – where the advisor has built their own offering for clients through the use of insured funds, stockbroking accounts and funds, deposit agencies etc. The advisor then assists the client in understanding their attitude to risk/loss, and then builds an agreed portfolio around their goals and objectives.
Michael concluded, “The strengths of this approach are obvious. The client has a better understanding and more involvement in the process. This gives the client more clarity and control. There are more touch points with the client which, results in a much stronger relationship between the client and Advisor”.
Independent Trustee Company Ltd. (ITC) was founded in 1993 to provide a complete set-up and administration service for Pension Trusts, also known as self-administered pension schemes (SSAPs, SSAS).
ITC is a Revenue Approved Trustee for this purpose. The company constructs and administers the Trust structure and advises clients on how to use these structures to achieve the maximum possible benefit.