The Sunday Times - Money Comment 20/06/09

Posted by Jill Kerby on June 20 2009 @ 21:25

We may be cutting back on overseas holidays this summer, but independent travel is clearly not going to disappear. 


Yet according to a survey done by the VHI, one of the biggest sellers of travel insurance in the country, 50% of travellers don’t bother with travel insurance.  For those that do, but opt for the cheapest premium, often from an on-line provider, it could end up as a very expensive mistake if they don’t bother to read all the terms and conditions. 


“Those questioned weren’t made aware that if they or a family member were taking prescribed medicine for a condition, that they might not be covered for that illness, and 39% weren’t made aware that if they or a family member had any existing or previous illness that they might not be covered for this.”  


More than eight out of ten respondents admitted that they were only interested in the amount of cover they’d receive for unexpected medical emergencies and illnesses.  Only 8% inquired about the breadth of overall cover. 


A quick review of the Financial Ombudsman’s reports shows just how badly you can get caught out by not looking out for exclusion clauses. One case the Ombudsman did not uphold last year involved a  €4,000 claim for cash and personal items that were stolen from an Irish traveller in South America.  That contract required the claimant produce receipts or some other proof that the items stolen actually existed.  


How many of us know to keep receipts – or even take photographs of the jewellery, cameras, laptops or expensive clothes we might travel with? In the case of another unsuccessful claimant, whose personal effects were subsequently stolen by a woman he’d met and entertained in his hotel room in the far east, the insurer required that the policy holder be vigilant in safekeeping their personal affects.  He obviously didn’t read that part of his contract.


The moral of the survey?  Aside from being a bit more particular about who you invite back to your hotel room and always keeping receipts of valuable objects, you should buy your travel policy from a broker or company you know and trust and then perhaps ask them to go through it with you. 




When I read about the small traders in Dublin and other cities who have lost significant business in this recession and are now caught up in upward-only rent reviews that could force them out of business, my sympathies tend to side with the traders against the banks or pension funds that own their premises.  



These are the same fund managers that didn’t necessarily do a very good job managing their clients money even during the boom years. 



I’m now left wondering about the tactics they’re employing, demanding massive rent increases when clearly the turnover is not there.  How can driving the merchants out of business enhance my pension fund performance? 


Last weekend the owner of Dunne & Crescenzi, one of my favourite Italian restaurants, was given a very sympathetic hearing on the Marian Finucane show. She explained how the rent on one of the units she occupies on South Frederick Street has more than doubled.  The restaurant is just as busy, she said, but customers are spending less and her turnover is down significantly. 



Bank of Ireland Asset Managers, her landlord, weren’t on the show, but other fund managers are defending themselves against charges that they are heartless, capitalist b*****ds intent on squeezing every last drop of extra rent from plucky little shopkeepers. 



They say their mandate is to get the best returns for their clients who are often ordinary people saving for their retirements. They say that the UK and Ireland are unusual in that unlike other places (like the USA) where short leases and annual or bi-annual rent reviews are more common, here, long 20 or 30 leases in city centre neighbourhoods mean that there can be significant capital gain for the lease holder.  Fortunes can, and have been made selling them on, but the tradeoff is a five year, upward-only rent review. 



The problem now is that the economic downturn makes even a 2004 level rent unaffordable, let alone one that is due a sizeable hike. 



The fund managers say they now have to decide whether it’s in the interest of the actual owners of the property – the pension fund members, for example – to leave a premises as a particular retail unit that might get hammered by the recession, or attract in a new business that can pay the higher rent.  They may even decide to redevelop smaller units into a bigger one or entirely change the use to office or residential accommodation. 


I hope it doesn’t come to that with any of the shopkeepers I know in the Grafton Street area who are struggling with these high rent demands. 


Who wants to live in a city where all the restaurants and cafes and little shops have been closed down and replaced by soulless office space?  Nor do I, as a pension fund investor fancy being used as the scapegoat for fund managers who haven’t much credibility anyway, and who produced rotten ‘managed’ fund results even when the economy was booming.

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