9th February 2015 – Why all this money on deposit

There is currently over 92 billion of funds on deposit with banks in Ireland. A large proportion of this money is earning less than 1% interest annually. The life companies recently carried out a survey to see what was preventing depositors from looking for alternative investment opportunities for their funds.  There were 2 key barriers identified:

1 – The first was access to funds. Most depositors wanted immediate access to funds.

2 – The second was risk – many were reluctant to take risk with their funds

In response to these findings the life companies have introduced risk targeted funds. These are funds focused on specific levels of risk and corresponding returns. They range from no risk to small levels of risk to medium and high.

Following on from this a number of the companies recently launched investments whereby investors have instant access to their funds.

With the current state of play in Europe it is likely to remain a low interest rate environment in the short to medium term. There is a lot of debt in Europe and the most effective way of tackling this debt is for governments to fund their borrowings at very low interest rates.

In November, European Central Bank president Mario Draghi told the markets that inflation is firmly back on the ECB’s agenda, as it strives to stimulate growth in Europe. Two weeks ago quantitative easing took place in an effort to stave off deflation and stimulate growth.

“It is essential to bring back inflation to target and without delay,” he said. The European target of course is 2 per cent.

In light of this environment of low interest rates and inflation, we recommend considering the investment opportunities currently in place with the life companies.  They offer the opportunity to outperform inflation and deposit rates. They have a wide range of funds specifically targeted to your level of risk while offering instant access to funds.

If you would like to discuss the above in more detail, please drop me an email.