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Consumers explore new options for their pensions

The economic downturn is forcing people to reconsider their pension options, according to a leading wealth management firm.

Harry Cassidy, chief executive of Dublin-based Custom House Capital, said: ‘‘Because the markets have been absolutely abysmal and people are losing money hand over fist, they want to do something different with their pension fund.” Custom House Capital was set up by Cassidy and John Mulholland in 1999 to provide wealth management services to high net worth individuals. ‘‘That is still largely what we do, but it just takes a different direction in terms of where people find their cash,” Cassidy said.

He said many clients would traditionally have been ‘‘cash rich, o r reasonably cash-rich’’, but changed conditions had seen some of them reconsidering their financial situation. ‘‘A lot of our business is pension-oriented, and what we are seeing - especially in the last few months and, we feel, for the next 18 months or so - is that the focus is on pension reorganisation.”

The reason is simple, Cassidy explains, as pensions are often where people have their cash. Custom House Capital acquired a licence for Personal Retirement Savings Accounts (PRSAs) in 2003. ‘‘The PRSA is quite a flexible animal,” said Cassidy. He said that PRSAs had a number of applications, including easing the burden of redundancy and allowing a person to transfer pension benefits home from abroad. Anyone in a defined contribution scheme could switch into a PRSA if they had less than 15 years’ membership of their existing scheme, he said. ‘‘People are slow to understand it, but it has a lot of applications,” he said.

For example, people who find themselves out of a job can consider using a PRSA as a means of accessing cash. ‘‘For the guy who has been made redundant, who needs access to cash quite quickly to put the kids through college or pay the mortgage, whatever it might be, he can take 25 per cent quickly,” Cassidy said. Under the rules governing PRSAs, an individual who is 50 or older can access one quarter of their pension fund, tax-free.

Cassidy explained that the remainder would stay invested and, if the individual returned to the workforce, h e or she could start making pension contributions again, v ia the PRSA. Custom House Capital’s non-standard PRSA qualifies under British rules as a recognised overseas pension scheme (QROPS). This means that people can use it to transfer their pension back home. Cassidy said it would particularly suit Irish people working abroad who planned to return home.

The wealth management firm has been aggressive in its investment strategy. Cassidy said the performance of typical managed funds was ‘‘appalling’’, and this had inspired him and his team to take a different approach. ‘‘We sold the bank shares in February 2007,a t slightly under the peak. We have a model that, if a share comes off a certain peak and it falls, i t triggers a decision,” he said. As Irish bank shares continue to falter, Cassidy said some clients have asked whether the time is right to buy back in. But he is not keen to do that yet, seeing no reason to reinvest.

‘‘I wouldn’t touch them now. The government has bailed out the banks, which have made a decision to suspend dividend payments. There is no major incentive to invest,” he said. While Cassidy does not see the banks as an attractive bet just now, h e does think they have potential in the future.

‘‘We feel that the banks will drive the economy out of the mess we are in. It will be bank-led,” he said.

In his view, the economy will start to pick up once banks start lending and creating wealth. ‘‘Although that’s probably not going to be until the back end of next year,” he said