Richard Fitzpatrick

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Richard Fitzpatrick Consumer Information 3
October 2008
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Financial Regulator

• Established 1 May 2003
• Independent watchdog.
• Responsible for the regulation of all financial
  services firms in Ireland.
• Almost 13,000 financial services providers and
  collective investment schemes.

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Our Main Tasks

• To help consumers make informed financial
  decisions in a safe and fair market and
• To foster sound, growing and solvent financial
  institutions which give consumers confidence that
  their deposits and investments are secure.

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Consumer Information

• Publications Online Surveys, Guides, Booklets,
  Fact sheets.
• Consumer Helpline 1890 77 77 77
• Website www.itsyourmoney.ie
• Information Centre 6-8 College Green, Dublin 2
• Talks/presentations exhibitions.

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Options for Lump Sums
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Some things to think about before starting

• How much of the lump sum are you going to
  deposit/invest?
• How long can you tie the money up for?
• Do you have any debts you should repay first?
• What do you want from this money at the end of
  the deposit/investment?
• How do you feel about risking all or any of the
  money?
• What other deposits/investments do you have?
• What has your past experience of
  investing/depositing been?
• Accessibility I.e. branches V internet/phone
  based

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Repaying debts early

• Do a list of all outstanding debts you have,
  include
• Mortgage,
• All loans - car, bank and credit union,
• Overdraft,
• Credit cards store cards,
• Moneylender loans, incl. catalogue debt,
• Hire purchase.

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Repaying debts early

• Ask your lender for the following information
• How long is left on the debt?
• What interest rate are you paying(APR)?
• How much would it cost to repay the debt now?
• How much interest will you save if you repay the
  debt now?
• Will you pay any penalties for repaying early?

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How long can you tie the money up for?

• Short-term 0-2 years
• Medium term 2-5 years
• Long term 5 years or longer
• You need to be happy that you wont need to
  access the money during that time period.

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Short Term Products 0-2 years
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Short-term products (0-2 years)

• Bank building society deposit accounts
• Credit union savings
• Savings products from An Post.

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Bank and Building Society Deposit Accounts

• You deposit money and interest is earned on that
  money.
• Interest is called
• CAR Compound Annual Rate
• AER Annual Equivalent Rate
• EAR Equivalent Annual Rate.
• NB Use these to compare accounts.
• DIRT payable on interest 20.
• Capital is secure but there is inflation risk.

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Types of accounts available

• Demand Account
• Variable interest rate
• You can get your money as soon as you want it.
• Notice Account
• Variable interest rate
• You must give the bank advance notice of when you
  want your money, e.g. 30 days.
• Term or Fixed Rate Account
• You leave your money for a set period of time and
  the bank gives you a set amount of interest.

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Credit Union Savings

• You can become a member of a CU if you share the
  common bond.
• Annual dividend paid. Dividend based on CUs
  performance last year.

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Types of CU Savings

• Share account
• Most common form of CU Savings.
• You can get your money as soon as you want it,
  unless you have a loan.
• Free life savings insurance.
• Other types of savings accounts available through
  some credit unions, e.g. Deposit Account, Special
  Term Account.

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Products from An Post

• 30 day notice account.
• DIRT payable on interest.
• Variable interest rate.
• You must give the post office 30 days advance
  notice of when you want your money.
• State guaranteed.

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20,000 lump sum deposit sample rates from our
online survey (EAR) 26/9/08

• Demand 1mth Notice 12mth fixed term
• ACC 0.95 n/a contact ACC
• AIB 0.50 3. 50 contact AIB
• Anglo Irish Bank 4.25 4.65 6.00
• An Post 1.00 3.00 n/a
• Bank of Ireland 1.00 n/a 3.25
• EBS 1.00 n/a 5.60
• First Active 3.90 n/a Contact FA
• Halifax n/a n/a 3.60
• INBS 1.00 5.00 6.00
• Investec Bank UK n/a 5.00 5.60
• NIB 4.00 n/a 5.10
• Northern Rock 5.00 3.90 5.20
• PTSB 0.60 n/a 4.55
• Pfizer Intl Bank 3.65 3.65 3.85
• Postbank 3.30 n/a n/a
• Rabodirect 4.30 4.50 5.15
• Ulster Bank 0.80 1.90 n/a

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Medium Term2-5 years
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Medium term (2-5 years)

• Savings products from An Post
• Guaranteed bonds
• Fixed term savings accounts.

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Products from An Post

• Savings certificates
• 5 ½ years
• Tax free interest
• Min. investment of 50
• Can encash early but will lose some interest
• State guaranteed
• NB look at annual rate not overall rate to
  compare with other accounts.

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Products from An Post

• Savings Bonds
• 3 years
• Tax free interest
• Min. investment of 100
• Can encash early but will lose some interest
• State guaranteed
• NB look at annual rate not overall rate to
  compare with other accounts.

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Guaranteed bonds

• Normally 5-6 years
• Available from banks, building societies or
  insurance companies
• Capital, i.e. the money you put in is guaranteed
• Return, i.e. what you earn is guaranteed, so long
  as you do not withdraw money early
• May be a penalty for taking money early.

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Fixed term savings accounts

• Available from banks or building societies
• Set term and set amount of interest
• You know exactly what you will get at the end of
  the term.

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Long Term5 years or longer
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Long term (5 years or longer)

• Tracker Bonds
• Unit Linked Investment Plans.
• Packaged Investment products
• Someone else manages your money for you.

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Tracker Bonds

• Fixed term investment, normally 5 years but can
  be 3-6years.
• Normal minimum investment is 5,000.
• Full or partial capital guarantee.
• Returns may be capped at certain level.
• Returns are not guaranteed.
• No access to money until bond has matured.

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Who provides Tracker Bonds

• Life Insurance Companies
• Banks and building societies
• Investment companies.

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How do Tracker Bonds work?

• They track the performance of a particular index.
  E.g. ISEQ index is the companies listed on the
  ISE.
• You do not buy or invest in shares.
• You are investing in a group of companies
  performing well over 5 years.

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How do Tracker Bonds work?

• A large part of your investment is placed on
  deposit at a fixed rate so that your capital
  can be returned to you.
• A smaller portion is then used to buy an option
  on a particular index- this is the portion that
  gives the return (or not).

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For example

• You invest 10,000 for 5 years in an ISEQ Index
  Tracker Bond with full capital guarantee.
• 9,500 placed on deposit for 5 years
• 500 buys an option in ISEQ index performs
  badly and all 500 lost.
• Fees and Charges built into investment.
• Balance of matured deposit 10,694
• You get 10,694

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Unit Linked Investment Plans

• Your money is pooled with other peoples money
  into a fund.
• You buy units in this fund. The price of each
  unit changes daily.
• A professional investment manager manages your
  fund.
• The fund can be invested in a mixture of cash,
  bonds(govt), equities, property.
• Normally your capital is not guaranteed.
• Normally open-ended.

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Unit Linked Investment Plans

• Different options available depending on risk
  low risk, medium risk, high risk.
• The safer the fund the lower the potential
  return.
• Early encashment possible but maybe subject to
  penalty fee.

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With Profit Funds

• 10-20 years.
• Similar to Unit linked fund.
• Some capital guarantee on set dates.
• Losses and gains are evened out so that fund
  stays steady.

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Taking an income from your fund

• You can specify that an income be given to you
  each year.
• The income will be taken from the balance in your
  fund.
• This could be taken from the growth on the fund
  or if there is no growth, taken from your
  original investment amount.

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For example

• 2002 you invest 20,000
• 2002-2005 growth 3,500
• 2006-2007 loss -2,500
• 2003-2007 Each year you take 1,000 in income
  -5,000
• 2007 Balance 16,000

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Types of charges

• Allocation rate - of your investment used to
  buy units in the fund. (90-105)
• Bid/offer spread difference between buying and
  selling units. (0-5)
• Monthly policy fee fixed amt each month. (3-6)
• Product management ongoing advice (1-2 of fund
  value)
• Yearly fund management fee fee for managing the
  fund (.75-1.5 of fund value)
• Early encashment fee (1-5)
• Market value reduction withdraw outside the
  guarantee date from a with profit fund value may
  be reduced.

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Questions to ask before buying an investment
product

• Can I tie my money up for the long-term?
• What balance of risk return am I looking for?
• What are the charges? How much would my
  investment have to grow each year to cover
  charges?
• What are the charges if I withdraw early?
• How much of my original investment is secured, if
  any?

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Shares
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Investing in shares

• A share is a small part of a company you can buy
  for a price.
• Prices can move up or down.
• Dividends can be paid to shareholders depending
  on profits of company.

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Buying Selling Shares

• Normally though a stockbroker.
• A stockbroker provides 3 levels of service
• Discretionary Service he makes investment
  decisions on your behalf
• Advisory Service gives you advice on what to
  buy or sell
• Execution-Only Service he buys or sells the
  shares you have already chosen.

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Charges

• Charges vary between stockbrokers.
• Fee depends on level of service on previous slide
  plus
• Commission for buying or selling shares. (1.5-2
  of purchase value)

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Deposit Protection Scheme

• Each individual can claim for 100 of their
  deposits up to max. 100,000.
• Claim per person, per institution.
• Covers money in current accounts, deposit
  accounts, share accounts with a bank, building
  society or credit union.

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Consumer Contact Detailswww.itsyourmoney.ieCo
nsumer Helpline 1890 77 77 77consumerinfo_at_ifsra.i
eInformation Centre, 6/8 College Green, Dublin
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Thank you

• Any questions?