Plans to encourage people to save in a pension

hmmm

Apparently the government wants to encourage private pension saving. This coming after several years of major and arbitrary changes to pensions, and the unprecedented direct and ongoing theft of savings in private pension plans to pay for government spending.

"Minister for Social Protection plans to encourage more people to sign up for private pensions"
http://www.rte.ie/news/2012/1230/pensions.html

Is this a joke? Even the fact that they had to state "The National Treasury Management Agency will supervise the scheme so the State will be unable to access the fund for general spending." shows just how much damage this government has done to the confidence of potential pension savers.

What's to stop them changing the law in the future to get their hands on these savings, they've already shown they have no comprehension that people will only invest in a 20/30/40 year pension if they have confidence the money will be there for them at the end. This is what happens when a bunch of politicians who get their pensions paid by the taxpayer don't understand the mentality of private citizens who have to save for their own pension.

AlekSmart

hmmm wrote: »

Apparently the government wants to encourage private pension saving. This coming after several years of major and arbitrary changes to pensions, and the unprecedented direct and ongoing theft of savings in private pension plans to pay for government spending.

"Minister for Social Protection plans to encourage more people to sign up for private pensions"
http://www.rte.ie/news/2012/1230/pensions.html

Is this a joke? Even the fact that they had to state "The National Treasury Management Agency will supervise the scheme so the State will be unable to access the fund for general spending." shows just how much damage this government has done to the confidence of potential pension savers.

Snow joke Hmmmm....But you're dead right.

Our Government Policy still remains firmly focused upon getting the Property Market restarted,by stimulating the financial institutions into lending for mortgage purposes again.

Which brings us neatly back to whether it is good sense to be encouraging people to BUY their residential propperty rather than diverting THAT funding into a sustainable Pension Plan,whilst exercising far greater control over the private rental sector.

They cannot do BOTH :eek:

Farmer Pudsey

The big issue here is the NTMA be any better than existing pension providers. While the NTMA has a good record managing the national debt over the last 20 odd years has it the expertise to manage a pension fund. The level of fees in pension funds in Ireland is atrocious and there returns record leve a lot to be desired. The history of state managed pension/insurance is not great either look at the VHI. The big issue is why save for a pension if your funds are badly managed and if at the end of the day the state pension will be means tested.

Workers need clarity as the the longterm position of the OAP as will it turn into a slush fund for the long term unemployed.

rumour

Farmer Pudsey wrote: »

The big issue here is the NTMA be any better than existing pension providers.

Surely the big issue is whether or not the government will decide in the future to rob your pension fund to top up their own.

coolshannagh28

Investing in a pension in the private sector is a lose ,lose situation . The pension providers rip you off on fees and lose at least 2/3rd of your money if mine is anything to go by .Then the government comes along and takes the rest .
The idea mooted by the government has merit but it would need to have guaranteed returns and assurances that it wouldnt be looted .

Diarmuid

Considering the government's reaction to the current deficit and the upcoming pension time bomb, you'd have to be a complete idiot to believe that any saving they put away over the next few years wont be raided by future governments ,

GCU Flexible Demeanour

I think the key element of the story is this

It is believed that the Minister will give more details about the plans in the new year and its introduction is to happen when the economy shows signs of a recovery in the coming years.

There's no immediate plan to do this, and I'd wonder why the idea is being floated now.

On the general issue, I'd suspect all forms of pension related saving have a strong element of Ponzi about them. There just aren't cast-iron savings mediums into which you can put your money, that are certain to hold their value for decades to come. As we're coming to learn, even First World Government debt isn't an 100% certain bet. Even if there was some 100% certain bet, the fact that everyone would be chasing the same asset with their pension savings would mean that the returns would be negligible.

Plus, shoehorning savings into the kind of stable, pedestrian investment that would be attractive for pension funds must surely undermine economic growth - and, ultimately, the ability of even those pedestrian investment products to deliver their pedestrian returns.

Total mugs game. If you want a secure pension, have loads of babies and find a planet that can support infinite economic growth. Oh, can't do that either. Maybe I just need to get my head around the idea that retirement is inevitably becoming a redundant concept.

Manach

GCU Flexible Demeanour wrote: »

Maybe I just need to get my head around the idea that retirement is inevitably becoming a redundant concept.

Become an elected official or director of a Government agency, retirement problem solved. Simples.

hmmm

GCU Flexible Demeanour wrote: »

There just aren't cast-iron savings mediums into which you can put your money, that are certain to hold their value for decades to come.

"Cast Iron" savings are generally low interest products that ultimately fail to keep up with inflation. The point of long term savings such as a pension is that you can afford to invest in higher risk products which should, over the long term, earn a reasonable return. This has been the case to date.

Much of the moaning about pension returns has been based on short term returns. If you want to invest for the short term, don't do it in a pension.

GCU Flexible Demeanour

hmmm wrote: »

The point of long term savings such as a pension is that you can afford to invest in higher risk products which should, over the long term, earn a reasonable return. This has been the case to date.

Would it be more correct to say that in the early years of pension contributions, a saver can take higher risk investments, but over time needs to put increasing amounts of those savings into low-risk investments. And that a pension fund, therefore, needs to have a mix of assets such that will enable it to both pay out what is expected to the current cohort of pensioners, while accumulating enough to cover the future needs of the current cohort of contributors.

All of which is a bit wordy. But I'm sure you'll appreciate that the point I'm driving at is a bald statement like This has been the case to date doesn't capture the issues in play, and the reasons why we might reasonably doubt (to quote the ads) that past performance is a reliable indication of what the future can be expected to bring.

Farmer Pudsey

hmmm wrote: »

"Cast Iron" savings are generally low interest products that ultimately fail to keep up with inflation. The point of long term savings such as a pension is that you can afford to invest in higher risk products which should, over the long term, earn a reasonable return. This has been the case to date.

Much of the moaning about pension returns has been based on short term returns. If you want to invest for the short term, don't do it in a pension.

I have to disagree what is shortterm. The record of most pension providers in Ireland is abysmal. Even often after 10 years+ most pension funds are lower than the funds put in. You have to remember that in the case of a pension fund the money is put in year after year. However I do not believe that 10 year's is short term. However it is a stacked deck no matter how bad a pension fund preforms the yearly maintenance fee is taken off the total fund.

When you take into account initial and ongoing fees most people would be as well off if they managed them themselves in deposit accounts/bonds and property ( with access to the tax relief). I have had experience in these and often even after tax relief ( at the high rate) punters are often at best breaking even.

This is not a recent phenomem it has been a regular issue for the last 40 years.

juan.kerr

Defined benefit or defined contribution? No prizes for guessing.

I have no faith in any government or state agencies ability to administer a private sector pension scheme while the public sector pension timebomb remains unresolved.

Don't be surprised if the private sector pension contributions under this scheme end up directly or indirectly funding public sector defined benefit pensions.

jimmycrackcorm

The government needs to implement financial services rules such as are the RDR introduced into the UK from January first. Those rules are that in buying a financial product all the charges and commission must be outlined in plain view. Otherwise people will get stung as they have been done for years.

opti0nal

juan.kerr wrote: »

Don't be surprised if the private sector pension contributions under this scheme end up directly or indirectly funding public sector defined benefit pensions.

You mean like how social welfare contributions put into the National Pension Reserve Fund ended being used to support private sector banks and their amazing pensions?

funnyname

Time to adopt a system like they have in Oz and move everyone (private & public sectors) on to a defined contribution pension. They did it in 1992 and here we are in 2012 with a pension time bomb tick louder and louder.

GCU Flexible Demeanour

funnyname wrote: »

Time to adopt a system like they have in Oz and move everyone (private & public sectors) on to a defined contribution pension. They did it in 1992 and here we are in 2012 with a pension time bomb tick louder and louder.

But surely this just assures the current cohort of pensioners of their income - the people actually making the contributions will be left high and dry, as they're not going to have the same cohort of contributors coming behind them.

juan.kerr

opti0nal wrote: »

You mean like how social welfare contributions put into the National Pension Reserve Fund ended being used to support private sector banks and their amazing pensions?

Yes, that's exactly what I meant.

The same banks that were regulated by the public sector. And bailed out by politicians and their public sector advisors.

The same 'amazing pensions' that the entire private sector gets, along with the job security.

What's a few thousand versus a few hundred thousand among friends?

Smcgie

I will NEVER pay into a private pension - why would I pay some other man to gamble my money (At my risk) on stocks & bonds.

I don't mean to be pretentious but the whole business model of pensions is based on attracting people who understand nothing about the capital markets.

Try harder Joan, you ain't getting my money

Gumbo

It's about time IMO..
The moment I started working full time, my dad made sure I opened a private pension fund. I opened a PRSA with AIB and contrary to what some posters on here would have you believe, mine is performing well and has increase in value by 25% approx since.

It's not right that people can spend 40 years working and get the state oap while their next door neighbour that sponged for 40 years gets the same oap.

K-9

juan.kerr wrote: »

Yes, that's exactly what I meant.

The same banks that were regulated by the public sector. And bailed out by politicians and their public sector advisors.

The same 'amazing pensions' that the entire private sector gets, along with the job security.

What's a few thousand versus a few hundred thousand among friends?

Stick to the topic in the opening post please, let's not have another public vs. private sector battle thread.

hmmm

funnyname wrote: »

Time to adopt a system like they have in Oz and move everyone (private & public sectors) on to a defined contribution pension. They did it in 1992 and here we are in 2012 with a pension time bomb tick louder and louder.

I think it's right to encourage people to save into a pension, but what does my head in is the mixed signals from government.

Because you're unable to access any money in a pension until you retire, savers need confidence that the rules won't change over that period. That is an absolute priority for long term planning.

Over the past few years successive Irish governments have fiddled with the pension system almost every year. This culminated in the unprecedented step of directly taking money from capital held in private pensions - the only reason they did this was because people were locked into a pension, unlike say bank account holders who could have moved their money. It's little short of theft of private savings from those "stupid enough" to have trusted the Irish government and saved in a pension.

Lots of other small but important rules have changed such as limits on the pension cap, changes to ARF imputed distributions, and there is still debate in the media about whether higher pensions should see more tax.

This same government is now going to try and "encourage" pension saving? They'll presumably spend lots of money on expensive reports, set up a committee or two and spend lots more taxpayers money on setup and advertising - meanwhile their own actions have caused massive damage to discourage pension saving.

AlekSmart

kceire wrote: »

It's about time IMO..
The moment I started working full time, my dad made sure I opened a private pension fund. I opened a PRSA with AIB and contrary to what some posters on here would have you believe, mine is performing well and has increase in value by 25% approx since.

It's not right that people can spend 40 years working and get the state oap while their next door neighbour that sponged for 40 years gets the same oap.

As a matter of interest Kceire,would you have taken such a step had your Father not ensured that you did ?

Fair play to him...(He's not of German stock is he ?)

nogoodnamesleft

The UK has a larger ticking time bomb that Ireland has which is one of the reasons of the recent pension reforms in October 2012.

http://www.bbc.co.uk/news/business-19589265

Employers are legally obliged now to pay into a pension fund. I am paying into a pension fund since I started working after I finished university at 22. Its only right that a person who has the means and frequently contributes to a PRSA should be better off financially:

1) not to become a burden on a more stressed state future pension pot when I eventually retire and give it to those who genuinely need it to survive. (due to the age of future population, longer lifespan etc).
2) Ensure that I and possibly my future family are financially stable.

I have had issues with my pension fund in Ireland when I was here as it was on a medium risk investment (it initially lost half its value when the recession first hit however it recovered to near parity over 2 years ago.

This was due to to a certain pension provider (wholly unprofessional) who recently asked would I like to invest with them. I will never ever give them any business

Gumbo

AlekSmart wrote: »

As a matter of interest Kceire,would you have taken such a step had your Father not ensured that you did ?

Fair play to him...(He's not of German stock is he ?)

No, north Dublin born and bred
Tbh I probably would of. I came out of school in 2000 and spent a year doing a PLC course in engineering before starting as a junior in a consulting engineers office in 2002 on sh1t money but I did get my DIT fees paid for my structural engineering course part time up until 2007.

I had just missed the SSIA thing so I wanted to set up something to save a few quid anyway, I'm just that way inclined tbh.

Glad I did now as its a nice little nest egg to add to my current employers pension that I pay into now

Browney7

GCU Flexible Demeanour wrote: »

But surely this just assures the current cohort of pensioners of their income - the people actually making the contributions will be left high and dry, as they're not going to have the same cohort of contributors coming behind them.

Thats not the way a defined contribution pension works. What you put in grows or falls in value depending on the markets (equities properties bonds etc) and when you reach retirement age whats in the fund is yours to buy an annuity or put into an ARF.

There is a certain ponzi scheme element to a defined benefit pension alright where if the scheme goes insolvent and the sponsoring employer is unable or unwilling to pump cash into the scheme the scheme may be wound up and under current legislation members currently in receipt of benefits are protected and any money left over for remaining members (often nothing) is split accordingly amongst people remaining and it gets transferred to a DC scheme.

A lot of people with their own private dc pensions love to blame the managers when things go wrong but often either they chose or were "advised" by brokers to invest in their chosen fund

GCU Flexible Demeanour

Browney7 wrote: »

Thats not the way a defined contribution pension works. What you put in grows or falls in value depending on the markets (equities properties bonds etc) and when you reach retirement age whats in the fund is yours to buy an annuity or put into an ARF.

Indeed, I understand that. However, do consider what happens when everyone turns up with their accumulated contributions seeking to purchase an annuity, or some gadget that provides a regular, guaranteed income. Predictably, the price of such gadgets will increase to such an extent that the return is negligible.

Defined contribution, I'd suggest, is simply the first step in recognising that widespread saving cannot satisfy expectations of healthy pensions for all.

I'd suggest, in passing, to look past the concept of an annuity and ask what enables an annuity provider to supply a regular return.

opti0nal

GCU Flexible Demeanour wrote: »

I'd suggest, in passing, to look past the concept of an annuity and ask what enables an annuity provider to supply a regular return.

Bottom line: Where does the money come from? Who loses so you can gain?

srsly78

Smcgie wrote: »

I will NEVER pay into a private pension - why would I pay some other man to gamble my money (At my risk) on stocks & bonds.

Because the tax relief makes it basically free. If you pay higher rate tax then you should be taking advantage of this. If you do not pay higher rate tax then indeed it is a waste of money.

OMD

srsly78 wrote: »

Because the tax relief makes it basically free. If you pay higher rate tax then you should be taking advantage of this. If you do not pay higher rate tax then indeed it is a waste of money.

Tax relief does not make it "basically free".

srsly78

If you consider 1 euro in pension fund equivalent to 1 euro in personal bank account then yes it does. And that is even taking fees and disastrous performance into account.

Of course you could also choose to give your money to the government and have zero in your bank account.

OMD

kceire wrote: »

It's about time IMO..
The moment I started working full time, my dad made sure I opened a private pension fund. I opened a PRSA with AIB and contrary to what some posters on here would have you believe, mine is performing well and has increase in value by 25% approx since.

It's not right that people can spend 40 years working and get the state oap while their next door neighbour that sponged for 40 years gets the same oap.

Has the actual value of the money you put in increased by 25% or have AIB simply told you the overall fund value has increased 25%?

OMD

srsly78 wrote: »

If you consider 1 euro in pension fund equivalent to 1 euro in personal bank account then yes it does. And that is even taking fees and disastrous performance into account.

Of course you could also choose to give your money to the government and have zero in your bank account.

I don't understand what you are saying. If you put €100 in a pension fund it will cost you €100. If you are paying top rate of tax you will effectively save €53 or so in tax so the payment will now cost €47. That is not the same as been free. You could say (possibly) that it only costs you half. You have to remember you will have to pay tax on the money when you retire at the tax rates applicable then (less tax free allowance, if such a thing still exists then)

Farmer Pudsey

srsly78 wrote: »

Because the tax relief makes it basically free. If you pay higher rate tax then you should be taking advantage of this. If you do not pay higher rate tax then indeed it is a waste of money.

Even at the higher rate of tax the returns on pension funds is questionable because of the costs involved.

If you start a pension fund

Year one nearly if not all the first years funds are swallowed up in fees

Year two on a percentage of the money that is invested is lost in the bid offer spread ie you might be buying units at 1.01 but if you sell you only get .99. Also a percentahe of the overall funf is taken every year to manage it usually(I may be wrong) around 2% even if the fund is not preforming.

What will this mean it means that funds have to earn over 5% a year for to even break even over the first 10 years. Even after that they need to earn 3% a year again to break evens. This is not even to match inflation. If you adjust for inflation of 2% it mans funds need 7% a year for the first 10 years and 4%/year after that. For the risk involved the present setup of pension funds is crazy.

It would make much more sence for a person to manage there own invest in Government bonds and control the fund themselves. There is no reason for the levels of fees in pension funds except for to allow some guys and its mostly guys to go around in suits and driving fancy cars.

srsly78

kceire wrote: »

It's not right that people can spend 40 years working and get the state oap while their next door neighbour that sponged for 40 years gets the same oap.

Ah now that isn't entirely accurate. You get a whopping tenner extra for those 40 years of contributions over the sponger.

But hang on, they give the spongers an extra tenner when then turn 80, making it all even? When did they change this?

http://www.citizensinformation.ie/en/social_welfare/social_welfare_payments/older_and_retired_people/state_pension_contributory.html
http://www.citizensinformation.ie/en/social_welfare/social_welfare_payments/older_and_retired_people/state_pension_non_contributory.html

srsly78

OMD wrote: »

I don't understand what you are saying. If you put €100 in a pension fund it will cost you €100. If you are paying top rate of tax you will effectively save €53 or so in tax so the payment will now cost €47. That is not the same as been free. You could say (possibly) that it only costs you half. You have to remember you will have to pay tax on the money when you retire at the tax rates applicable then (less tax free allowance, if such a thing still exists then)

I'm sorry, to continue this conversation I would have to bill you :pac:

Consider that when you do pay tax on this money in later life, it may not be at the marginal rate.

OMD

srsly78 wrote: »

I'm sorry, to continue this conversation I would have to bill you :pac:

Consider that when you do pay tax on this money in later life, it may not be at the marginal rate.

It is still not free or anywhere close to it. You can charge all you like, I'd never pay you based on your comments here

Gumbo

OMD wrote: »

Has the actual value of the money you put in increased by 25% or have AIB simply told you the overall fund value has increased 25%?

In the statements I have a cash out option/transfer option and the actual funds that would get released to another fund now is at around 25% more than what I actually paid in.

Now I'm probably dismissing a few factors like inflation etc, but the point still stand that people constantly say private sector pensions have been wiped out when they haven't in most cases.

I'll update this postbin 34 years and see if my funds have actually increased

hmmm

My pension is up considerably since the severe falls in 2007. Most of the people complaining have done one or all of the following:
1. Paid too much in fees
2. Taken on too much risk
3. Stopped investing when markets were low
4. Not taken into account how much tax relief is worth

DanWall

One thing that bothers me, is that my Defined Benefit pension was converted to an Annuity but the Annuity is not Guaranteed if the company goes insolvent, I loose it all.
Also the government has added USC to private pensions over a certain limit, whats to stop them taking more?

mix_up

Farmer Pudsey wrote: »

Even at the higher rate of tax the returns on pension funds is questionable because of the costs involved.

If you start a pension fund

Year one nearly if not all the first years funds are swallowed up in fees

Year two on a percentage of the money that is invested is lost in the bid offer spread ie you might be buying units at 1.01 but if you sell you only get .99. Also a percentahe of the overall funf is taken every year to manage it usually(I may be wrong) around 2% even if the fund is not preforming.

What will this mean it means that funds have to earn over 5% a year for to even break even over the first 10 years. Even after that they need to earn 3% a year again to break evens. This is not even to match inflation. If you adjust for inflation of 2% it mans funds need 7% a year for the first 10 years and 4%/year after that. For the risk involved the present setup of pension funds is crazy.

It would make much more sence for a person to manage there own invest in Government bonds and control the fund themselves. There is no reason for the levels of fees in pension funds except for to allow some guys and its mostly guys to go around in suits and driving fancy cars.

i own a few etf,s which offer me exposure to global markets , costs me less than half of one percent per year in managment fees and at the end of the day its the same market which pension funds buy into

only drawback is no tax write off but with that seriously cut , i dont think im any worse off

Pottler

One of my new employees was telling me a bit about this yesterday. He had a pension with his last employer, which he paid into heavily - €38k over a very few short years. He showed me a letter which his pension provider sent him- he has the choice of drawing down a lump sum at age 50(later this year) or waiting till he is 65 and drawing down monthly.

The current value of his 38k payments? 12k.

Pension? No ta. I'd rather the 38k on deposit and draw it down whenever I felt like it, tbh, rather than think on the nice new car my pension adviser had bought with the commission I'd paid. And my residual 12k.. Beating inflation? They wish..

spank_inferno

My father has been working in for a property management & construction company for the last 12 years.

He wasn't given a choice but to pay into a CIF pension.
He has no control, no say, no choice.

He's now 13 years before retirement.
His last statement showed that his retirement fund is approx 40% of the total amount of contributions.

So the shower that "managed" his pension have wan*ked away 60% of it.
It would be 60% better off had he just put it under his duvet.

If compulsory for all people, it is just a penal tax on workers, nothing more.
Money Going into a government fund we will never see the full benefit of.

sock puppet

spank_inferno wrote: »

My father has been working in for a property management & construction company for the last 12 years.

He wasn't given a choice but to pay into a CIF pension.
He has no control, no say, no choice.

He's now 13 years before retirement.
His last statement showed that his retirement fund is approx 40% of the total amount of contributions.

So the shower that "managed" his pension have wan*ked away 60% of it.
It would be 60% better off had he just put it under his duvet.

If compulsory for all people, it is just a penal tax on workers, nothing more.
Money Going into a government fund we will never see the full benefit of.

I would imagine any kind of state run pension scheme would be passively managed by a company such as Blackrock like with NEST, and would track world equities. So unless the world economy becomes well and truly ****ed that wouldn't really happen. NEST is pretty low cost though. In fact a lot of pension providers are worried that the government may lift the ceiling on contributions and take away their business!

nice_guy80

I need the money NOW

not in 30 years when I retire.

Farmer Pudsey

sock puppet wrote: »

I would imagine any kind of state run pension scheme would be passively managed by a company such as Blackrock like with NEST, and would track world equities. So unless the world economy becomes well and truly ****ed that wouldn't really happen. NEST is pretty low cost though. In fact a lot of pension providers are worried that the government may lift the ceiling on contributions and take away their business!

I do not think so too risky you would have to spread over different area's however just investing in government bonds returning 3-4%/ year longterm would be goo enough no risk small retrn no fee's. This would out preform most pension funds at present. The other choice would be to split it to twenty different fund managers and cull the worst preforming every 5 years.

Lorna Dooley

The best thing is to save save save all pension schemes in Germany and in Ireland all have disadvantages they earn from your money, I think they are only good for people who can't save and leave the money there. Set up an old age account and put in a direct debit!

opti0nal

Farmer Pudsey wrote: »

I do not think so too risky you would have to spread over different area's however just investing in government bonds returning 3-4%/

But, which government? There's nothing to stop a future government reneging or defaulting.

tenton

7 8, 9 years ago the government had a plan to get people to save for a pension for their old age. They even gave tax incentives to encourage people to get in to this net. It was called section 23/section 27/ section 50. See how that turned out for the poor suckers the government caught.

starlit

How long will the pensions be saved?? In all fairness like anything could happen with them but hopefully won't be affected ever but then again whose to say the travel pass go and be means tested based on age/location/necessity rather than anything else?

Diarmuid

nice_guy80 wrote: »

I need the money NOW

not in 30 years when I retire.

What are you going to live on when you have no income?

You want it now, you need it in 30 years