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GAZETTE
JANUARY/FEBRUARY 1984
overseas interests. Over recent years, shares have not
performed particularly well, reflecting the general
economic malaise, though some individual shares have
done well. Echoing the earlier point about inflation, a
successful investment portfolio must substantially out-
perform the general stock market trends, which have not
generally kept pace with the cost-of-living over recent
years. A stockbroker will advise under this heading
though, in the author's view, an investor would need to be
thinking in terms of investing at least £30,000 to achieve a
reasonable spread of investments and risk.
The last category, Unit-linked Funds, are a relatively
new phenomenon. These Funds are operated through the
medium of life insurance companies and there are now
some 36 Funds available, spread over nine companies.
These Funds are divided into five main categories —
property, equity, gilts, cash and managed funds, the last
being a mixture of all the others.
The expression unit-linked simply means that, for
example, if the original fund was launched by selling one
million units at £1 each (total fund therefore £1 million),
this amount is then invested by the insurance company in
property, equities, or whatever. The value of the units
rises or falls depending on the subsequent total value of
the fund divided by one million. The number of units in a
fund is not fixed (neither is the total fund) and can expand
or contract, depending on new investors or sales by
existing investors.
Income tax and capital gains tax are paid within the
fund itself, hence any increase in value is tax-free to the
individual investor. The primary aim of the funds is
capital growth, though most of the funds provide a
facility for taking a regular tax-free income through the
cashing-in of units at designated intervals. The point to
watch here is, again, that it is only the
real
income, as
defined earlier, that should be drawn if possible. Up to
£50,000, sometimes more, can generally be invested in
individual funds, though of course it would be wise to
spread an investment over several funds. Remember there
is no guarantee as to values — unit prices can go down as
well as up, though the record to date has been generally
very good. Some examples of average tax-free growth
rates over recent years are set out below.
A point worth noting is that some funds offer a
geographical spread of investments through investments
in the U.K., and the U.S., and elsewhere. Professional
advice on selecting suitable funds is important, as there
can be a wide range of interpretations that could be placed
on likely future performances of individual funds.
As legal advisers will be aware, investments for a Ward
of Court must be made from the list contained in the
Trustee (Authorised Investments) Act 1958 and
amendments, which exclude the investments mentioned
above. The authorised list is very restricted indeed, being
largely confined to deposits with recognised financial
institutions and government stocks, but one investment
which is allowed is the Bank of Ireland Gilt Edged Unit
Trust, which goes at least some way towards meeting the
investment criteria mentioned in this article.
As a final and important point, remember that some
investments pay commission to the intermediaries
involved and, indeed, some such advisers only offer
investments where commission can be obtained so that,
while not suggesting the investment advice may be
suspect, it may not be comprehensive and may not include
all necessary tax advice. •
• Partner, Peelo & Perry, Chartered
Accountants.
H
- - Safeguard
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T Systems
SAFEGUARD SYSTEMS IRELAND LTD.
LUCAN, CO. DUBLIN.
Telephone 01 - 580190
Full provision for V.A.T.
The Alternative to
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TAX-FREE GROWTH RATES
Average Growth Rate Over
1 year
3 years
5 years
7 years
(to 31 December 1982)
Irish Life Managed
+19.1%
+ 16.2%
+ 13.8%
+ 16.9%
New Ireland Property
+ 8.5%
+ 14.9%
+ 15.2%
_
Insurance Corporation Equity
+15.8%
+ 17.3%
-
_
Inflation
+12.3%
+ 17.9%
+ 15.4%
+ 15.5%
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