AGE – 20s TO 30s
Lifestyle funds (default funds)
If a fund uses lifestyling the pension assets are moved out of equities and into safer investments such as government bonds and cash as the investor approaches retirement.
Lifestyling is typically aimed at people who do not take much of an interest in their pension. It is not trying to cater for sophisticated investors out there.
Assumption 1 Gilts are less risky than equities (recent stock market falls saw investors protected – it protected people against the crash) and 2. Assumption that investors will buy an annuity – some people may leave their funds invested in the stock market at retirement and draw an income.
Instead consider a multi asset fund instead of say a global equity fund run by an active manager who decides the best time to buy certain asset classes rather than leave it to a computer. But this costs more in management fees and pressure is on many companies to reduce fees.
In times of high inflation buying gilts can be a bad idea as prices fall to push yields up to a high enough level for income investors.
Lifestyling is done through an automatic computer process and involves no active fund management.
LIFE COVER YOUR YOUNG COUPLES WITH CHILDREN
The cheapest form of Life Assurance to protect a family is a product called ‘Term Assurance.
How to pay less for your life cover.
1. Check the type of policy you already have. Some are more expensive than others. Term Assurance is the cheapest form of life cover. Better to have adequate cover than not enough.
2. Give up smoking. You’ll save hundreds over the life time of the policy and according to actuarial mortality tables you’ll live on average 5 years longer.
3. Don’t buy a policy for a term of years that is more than you need it for. For example if your youngest child is 3 don’t buy a 30 year policy but instead buy a 20 year one.
4. Don’t buy policies with unnecessary add-ons. Many are of dubious value for money as it can be difficult to qualify making a valid claim.
5. Currently the most competitive providers for term assurance tend to be Zurich, Caledonian Life and Friends First.
- Don’t fall into the trap of buying too much life assurance. You only need enough cover to replace income.
- Should you choose to add an inflation option to your policy be careful, not all companies charge the same. Compare the total cost of premiums paid over the full term of the policy to see which company is offering you real value.
LIFE ASSURANCE OVER 50’s
Life Assurance Options for the over 50’s
- Term Assurance – most competitive providers at present are Zurich, Caledonian Life, Friends First and Irish Life.
- Whole of Life – expensive but it provides a guaranteed amount of life cover for the whole of your life. The most competitive providers for the guaranteed product are Zurich and Aviva. Whole of life policies are usually used as part of inheritance tax planning.
Over 50’s cover – main players in the Irish market are Irish Life, One Direct, Cuna Mutual. Over 50’s cover may be ideal for persons who have a medical condition that otherwise makes them uninsurable. Premiums start at €15 a month and the most cover you can take out is normally up to €25,000.
- Don’t buy life assurance that you don’t need or already have.
- John Geraghty is CEO of online discount brokers www.LABrokers.ie