Sunday Times - Money comment- June 5

Posted by Jill Kerby on June 05 2011 @ 09:00

Forget the mawkish ad, life cover is vital for parents


Irish Life’s has a new advertising campaign aimed at parents who should be buying life insurance: a young man reminisces about how he didn’t always take his dead father’s advice when he was alive, but how his own life has turned out pretty well because his parent had the foresight to take out an Irish Life protection policy.

Everyone I’ve asked about to about the advert shares my view – that it’s mawkish and maudlin.  One suggested that “it looks like it was produced by the same mind that came up with that horrible ISPCC ad about child abuse.”

Irish Life defend their new advert on the grounds that the feedback they received from focus groups showed “there is a lack of awareness and information out there for families on the importance of protection” and that the message needed to be a strong one if it wasn’t to be lost.

I couldn’t agree more that life insurance is probably the second most important form of financial protection that a parent can provide for their dependent children (having a good job is the first). The financial hardship that can happen when a parent dies prematurely is something I experienced as a teenager when my own father died, aged 50, leaving only an inadequate death-in-service benefit to support his family.

I think a more honest, straightforward message reminding parents of the risks they take by not having the appropriate amount of life insurance in place and how genuinely affordable the cover is – as little as €15 a month for €100,000 of insurance for 25 years - would be far more effective than the sentimental, soft focus claptrap that Irish Life seems to think will grab viewers attention.

It isn’t surprising that Irish Life is concentrating on life insurance for this campaign, which was preceded by a survey about people’s financial concerns if an unexpected death or serious illness were to strike.

High costs, poor investment returns; dodgy capital guarantees on tracker bonds and soon, the confiscation of pension savings by the government explains why the life companies are rediscovering the merits – to them – of promoting old fashioned and genuinely worthwhile products like old fashioned life insurance.

The margins aren’t as high as those produced by investment funds or pensions, but the industry only has itself to blame for systematically killing off that golden goose.

Buy life insurance. Your loved ones may thank you for it someday.


Yet another U-turn


Is there any end to the election promise u-turns that this coalition government has to make? 

The latest to be disappointed are parents and their college going children – again - who were told prior to the election by Labour’s education spokesman Ruari Quinn that there would be no re-introduction of college fees on his watch, and that he’d reverse the proposed €500 hike in the 2011 registration charge.

Did anyone really believe Quinn when he insisted that fees were gone for good? In this economy?  Still, there must have been a few Labour supporters who thought with their champion’s help, they might dodge the latest €500 hike which would otherwise see them forking out €2,000 for the 2011-12 college year.

So much for promises: the €500 hike falls due in September and Minister Quinn is repeating the government mantra that the country is broke and his hands are tied by his EU/ECB/IMF overlords, just like every other member of the cabinet, including Leo Varadkar.

He didn’t quite say that there will continue to be no money in the state coffers for as long as the €18 billion shortfall between money spent by the government and the revenue it collects remains and little headway is made on reducing the cost of the three biggest ticket items - public sector pay and pensions, social welfare payments and the health service.

The reality is that subsidized, let alone free, third level education – like heavily subsidized nursing home care for the elderly – was never sustainable.  It took just over a year for promised Fair Deal scheme to collapse and about 10 years for the free third level promise to be gradually withdrawn as registration fees were introduced.

Parents who want their children to have a college education have to start saving and investing from the time their baby is born. 

The £9,000 (€10,320) annual fees that now apply in England and Wales are probably as good a target to aim for as any if your children are still in primary school.


Best of a bad lot?


There are plenty of reasons why Nationwide UK Ireland is a popular deposit destination for thousands of Irish savers:  it offers very competitive demand and fixed rate deposit accounts; it is not owned by the Irish state, or the UK one either but by its members and it is regulated by the British Financial Services Authority, not the Irish Central Bank.  Its customer service is very good.

Nationwide UKs latest results are the other good reason why its Irish subsidiary should keep attracting worried Irish savers - it made a pre-tax profit of £317 million, and an underlying profit of €276 million last year, up 30% on the previous 12 months.

Do they pay their executives too much? Probably.  Do they share profits generously enough with its millions of member and customers? Probably not.

But its loan arrears are a third lower than the UK banking average, it has £189 billion in total assets, and has some of the highest capital and solvency ratios in the world.

The Nationwide UK building society emerged intact from the great banking crisis because it didn’t lose its collective head by discouraging savings and lending out more money than could be repaid. There isn’t a single Irish bank that can make such claims.






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