INTEREST RATE HEDGING PRODUCTS - HAVE YOU BEEN MIS-SOLD?

First ask yourself four simple questions:

1.         Did you take out a new facility with your bank on or before 1 December 2001?

2.         Does your facility letter use any of the following words…Swaps, Caps, Collars or Structured Collars?

3.         Are these facilities less than £10 million pounds?

4.         At the time you took out your facility, did your company have:

i. Turnover of more than £6.5 million; or

ii. Balance sheet total of more than £3.26 million; or

iii. More than 50 employees.

If you have answered yes to any of the above, chances are you have been mis-sold a product by your lender. Redress may be owed to you and in some cases you may even be entitled to additional compensation.

Get in touch with GDP Partnership today to see if we can assist.

HOW SAFE IS YOUR PENSION?

I think the vast majority of people would answer that question with the answer 'Completely safe'. Unfortunately they would be wrong!
Wherever you travel, from jurisdiction to jurisdiction, there is a general assumption that whatever may happen, no one can touch your pension. Many believe that whilst other assets can be targeted by creditors, the pension remains off limit. That is not the case.
In these difficult times where insolvency is more the norm than the exception it is vitally important that everybody realises this and understands the type of pension that they have, as there are very distinct differences.

In law, your pension is an item of property and is an asset of a member, just like any other asset. It is treated as a current right to a future payment. It is possible to use them as security or assign them to a third party unless there are specific rules to the contrary governing their use. In pre and post Celtic Tiger Ireland, charging pensions as security at the banks to access the sums on offer became quite common place.  In this regard there is a huge difference between an occupational pension and a personal pension and it makes a
substantial difference to you.

Occupational Pension.

By far the better type of pension to hold if you are experiencing serious financial difficulty. An occupational pension is one established by an employer for the benefit of the employees. An employer would neither expect or allow for such a pension to be used as collateral for borrowing or be available to discharge the
liabilities of the employee. You will typically find that occupational pensions include a provision that the benefits of the pension will be forfeited in certain circumstances. These would include any attempt to assign the benefit of the pension if the person entitled becomes bankrupt. In those circumstances the benefit of the pension falls back into the general pool and if the rules permit the trustees can pay the benefit to another class of beneficiary which may be one of the member's immediate family. This will only occur if the rules do so provide and the trustees exercise their discretion in that manner.

Personal Pensions.

Unfortunately these are viewed very differently. A personal pension is subject to contract and typically there are no forfeiture clauses protecting the pension benefit. For this reason, entitlements due under a personal pension are open to attack from creditors.
Many people often think they can ride out the storm as the pension will only be paid out in the future. That hope is largely in vain. The example of re L Bankrupt is a case where no forfeiture clause was available in the pension. A Solicitor took out a retirement annuity contract in 1982. In 1990 a bankruptcy order was made against him and he was subsequently discharged from bankruptcy in 1993. A year later in 1994, he retired and sought the benefits of the policy. The trustee in bankruptcy claimed the benefits under the pension and succeeded in his claim.  Also never forget that the Revenue have significant powers of attachment where a debt is due to a taxpayer. Under the Tax Consolidation Act 1997 the revenue can require that the amount of tax outstanding is deducted from the debt and paid to the Revenue instead.

SUMMARY

These are the details that nobody thinks about when they are planning a pension, nor why should they. It's really only in times such as these that it becomes considerably more important. Everyone, at least should know what type of pension that they have, whether or not it has been preferred or assigned as collateral and most importantly whether or not there is a forfeiture clause. These are the essentials.

A pension is in place to ensure that you have a reasonable standard of living after your retirement. At least this is what we all believe. As the future remains so uncertain in Ireland, it is more important that you have the right type of pension in place and seek the necessary advice.
Were you to be declared bankrupt, a personal pension is liable to attack by your creditors. If you hold an occupational pension, on maturity any lump sum payment can be at risk and possible ongoing attachments to income based on your living expenses.

If you require any further information please contact GDP Partnership

Better to be safe than sorry!

ICELAND AHEAD OF THE GAME

Iceland’s government has announced that it will be writing off up to 24,000 euros ($32,600) of every household’s mortgage, fulfilling its election promise, despite overwhelming criticism from international financial institutions.

The measure was introduced by the country’s prime minister, Sigmundur David Gunnlaugsson, the leader of the Progressive Party which won the late-April elections on a promise of household debt relief. According to the government’s website the household debt will be reduced by 13% on average. 
Citizens of Iceland have been suffering from debt since the 2008 financial crisis, which led to high borrowing costs after the collapse of the krona against other currencies.  

If you are an Irish person reading this, what are you thinking?  As the Irish debt crisis continues to escalate with no let-up in sight anytime soon, surely a measure such as this by the Irish government would be on everyone’s Christmas wish list.  The mortgage crisis and household debt problem in Ireland is reaching critical stage with more than 100,000 mortgages in 3 months arrears or more.  The banks have been ordered by Central bank to deal with the issue as opposed to their approach to date with kicking the can down the road.  Are they actually dealing with it now – well the jury is out on that one?

Former President Bill Clinton said on a visit to Ireland on October 2011, that the country will not recover until there is debt forgiveness.  I whisper that quietly for fear of arrest as those two words are forbidden in Ireland – why? Because the banks says so.  It’s very clear now that the banks are ruling the roost, and continue to drag their heals over any kind of reform.  With the recent publication of the Tomlinson report, where it highlights the practises of RBS/Ulster Bank in the past couple of years, and the other stories coming out of banks across the globe – I don’t hold out much hope that as far as banks go, anything will change regarding how they conduct their business.

It is the government of each country that makes the laws and at the end of the day is responsible for the overall well being of any nation?  You cannot help but admire the courage and foresight of the Icelandic government with this debt forgiveness move for its people – looking around the world right now, it would appear that they are the only set of rulers who actually have the balls to help the people who elected them into power.  Well done Iceland!

Conor Devine MRICS