Compulsory Pension Contributions?

Sleepy

Anyone else thing this idea seems a little daft in a country with such high personal debt?

Maybe I'm looking at this too much through the lens of my own circumstances but I'm finding it hard to believe that this is a good idea in the current climate. Had it been introduced in the early 90's, it could well have helped avoid some of the worst excesses of the boom but it seems ludicrous to implement this during a recession.

This will further damage the financial position of those with large personal debt. No pension will return an interest rate anything like that charged on existing credit card / unsecured personal loan debt so it's more in their interest to repay that debt before accruing any long-term savings.

Such a large deduction from take-home pay will act as a barrier to accepting employment opportunities or even "force" some to leave the workplace. Hardly a good idea with such high unemployment rates and a welfare system that many already consider more attractive than the employment available to them.

As much as I dislike the argument being used in relation to government spending, less money in people's pockets will lower domestic demand for consumer goods/services. While not a huge issue on it's own due to the open nature of our economy, it will contribute to the failure rate of high-street business and the promotion of the black economy.

Diarmuid

It wouldn't be a bad idea for everyone in the country to fund their own pension. Obviously once you wash that idea through the Dail and the vested interests that prompt them along, it will have turned into some nightmare solution into which the Government will dip every time they are unable to balance the books

antoobrien

Sleepy wrote: »

Such a large deduction from take-home pay will act as a barrier to accepting employment opportunities or even "force" some to leave the workplace.

While 15% is high I don't think the concept is outrageous. There is a well known future pensions problem, that will have to be dealt with and sooner is better. However, I think the initial contributions should be much lower, e.g. in the region of 5%, I don't know what costings they have based 15% on, but I agree it may well be too high for some.

If the proposals would allow people the opportunity to say choose to swap flexitime for contributions (no extra cost to the employer, the time worked has to be paid for regardless), I think it could help. And yes I know flexitime & overtime is not available to everyone and that it will take money out of the pocket.

To give a flavour of the schemes that are available, the scheme I'm in has a minimum 10%* contribution if we want to have make AVC through salary deductions. I'm currently totalling about 13.5% on 37,500 gross. Hiking it to 15% isn't that big a deal from where I'm sitting. It'd mean a half day less holiday time to me and I usually carry over time.

*It's technically a 2% employee + 8% employee contribution (the proposal says total contributions), however the employer share is taken from a flexible benefits fund that the employee controls. If I wanted the cash, I could just take the 2% pension deduction and not "buy" a pension contribution.

ednwireland

i wouldnt have a problem with it except its basically being forced through by the financial industry lobby as a way of generating more business (and they dont care two hoots whether your pension pays out at the end or not)

Max Powers

Is this heading for a situation where, you worked all/most of your life so you dont get a state pension?

woodoo

I pay between just under 8% for my public service pension. I think everyone should have to pay 8%. Even people on the dole.

KyussBishop

Considering how many people have lost their pensions in the current crisis, and that through historical precedent there is a greater-than-zero chance of future pensions being wiped in future economic crisis, then people should absolutely not be forced to take a pay cut, to put into a financial fund that they can't be sure to see a return from in the future.

Darwin

woodoo wrote: »

I pay between just under 8% for my public service pension. I think everyone should have to pay 8%. Even people on the dole.

A pension you will probably never see if you are planning on retiring after 2020, given 1) the NPRF has been plundered 2) your contributions are not ringfenced and 3) the timebomb that is the aging population in Ireland and Europe.

thebman

It makes no sense given the government feel they can steel money out of your pension whenever they have a budget deficit.

First I would need a written guarantee that the government won't steel money out of my pension again....

I would also need a ban on charging for managing pensions. Take a cut of the gains made in the fund, if you don't make any gains, your incompetent and deserve to go bankrupt rather thank charging expenses and leaving people with a pension fund that has lost money.

clairefontaine

Given the whole idea of bank guarantee has been so compromised by what happened in Cyprus as well as the gross insolvency of so many banks, including possibly the ECB, I would say the government doesn't have enough credibility for this.

PhilMcGee

Using made up numbers her but
Say you get a contrib pension of €200 pw now in return for your prsi.
What will happen now is that you will have to keep paying the same prsi under a different heading. You will pay a compulsory pension tax.
you will get that same contrib pension amount of €200, which will be means tested to make it plus your new pension equal €200, but are now paying for it along with the prsi you were already paying.

You will just lose on this. Its another tax raising trick.

Same as bin and water charges. You already paid for them in you tax. Then come extra charges for bins and water. You pay the same amount of tax. You are now paying twice for the same service.

waster81

Most developed countries have this system introduced or are about to

We need to reform and put these new rules in place

We can no longer afford to keep subsidising people who won't save for their future,

We are broke our pension bill is going out of control and people need to start saving for their future

We are lagging behind a raft of developed countries including new zealand, australia, denmark, holland etc

coffee_cake

It was unclear from the article I read whether this should be 15% paid by the person themselves, or 15% as the total of contribution from employer, state, and individual. (Or 15% each, which seems unlikely)
http://www.independent.ie/business/personal-finance/pensions/million-of-us-face-paying-15pc-of-wages-into-pensions-29205237.html

Workers, employers and the State should contribute 15pc of salary to the new scheme, it says.

I would like to see the actual report before concerns over "big deductions"

PhilMcGee

I already pay and have been paying towards a state contributory pension in my PRSI. I wouldnt mind doing it this new way, but only if I get back what I already pay and have paid towards my contributory pension already.

Any other way and it means I am paying twice for the same thing.

The Muppet

Public Servants already have a compulsory pension scheme, I think it only fair that it be extended to all workers or Public servants should be given an option to opt out.

KyussBishop

clairefontaine wrote: »

Given the whole idea of bank guarantee has been so compromised by what happened in Cyprus as well as the gross insolvency of so many banks, including possibly the ECB, I would say the government doesn't have enough credibility for this.

Agreed, though out of curiosity, where did you hear that the ECB can become insolvent? (central banks with the capability of creating money, can't become insolvent, unless politically forced to)

clairefontaine

KyussBishop wrote: »

Agreed, though out of curiosity, where did you hear that the ECB can become insolvent? (central banks with the capability of creating money, can't become insolvent, unless politically forced to)

There has been a lot of talk about it. I'm pretty sure I heard it on Keiser. But I cant be sure about that. I think he said it was actually insolvent.

http://www.forbes.com/sites/karlwhelan/2012/08/06/is-the-ecb-risking-insolvency-does-it-matter/

sock puppet

thebman wrote: »

I would also need a ban on charging for managing pensions. Take a cut of the gains made in the fund, if you don't make any gains, your incompetent and deserve to go bankrupt rather thank charging expenses and leaving people with a pension fund that has lost money.

I presume you mean actively managed pensions, as you can hardly blame the pension provider if your passively managed fund declines in value after a stock market crash.

clairefontaine

sock puppet wrote: »

I presume you mean actively managed pensions, as you can hardly blame the pension provider if your passively managed fund declines in value after a stock market crash.

There is another problem.

People invested in funds and they crashed after 911.

Then they used real estate because it felt safer.

Look waht happened there.

Then they looked at gold.

Gold has also plumetted.

So what's left?

Back to stuffing the mattress?

hmmm

It makes sense to encourage people to save for retirement, and other countries have brought in similar schemes that have been a success. However, the government's recent theft of private pensions is a big problem for confidence, and I certainly don't want to see any scheme that requires government involvement.

hmmm

clairefontaine wrote: »

So what's left?

Back to stuffing the mattress?

Invest it in a cash pension if you couldn't be bothered doing basic research and instead rely on soundbites.

halkar

Compulsory Pension Contributions will be just another tax. We already pay that in the name of PRSI. If anyone wants more for their pension there are many private pension funds (mine fields) available. Prsi is already a scam. Someone earns 100k for 20 years gets the same pension as someone earns 10k for 20 years after paying much more to the pension funds. It is same with dole too.

thebman

sock puppet wrote: »

I presume you mean actively managed pensions, as you can hardly blame the pension provider if your passively managed fund declines in value after a stock market crash.

If they want to charge fees, it is because they are unwilling to stand over their product. It is because they don't feel safe putting the profits of their company in the same system they think you should put your retirement fund which is just insane that anyone should buy a product from such a company.

They shouldn't even be allowed offer a product like that TBH.

hmmm

thebman wrote: »

If they want to charge fees, it is because they are unwilling to stand over their product. It is because they don't feel safe putting the profits of their company in the same system they think you should put your retirement fund which is just insane that anyone should buy a product from such a company.

They shouldn't even be allowed offer a product like that TBH.

Then you don't understand equity funds or shares in general. There is no guarantee that you will make a profit, so you need to invest in a mix of risk assets that suit your risk profile, diversify, and leave your money invested for the long term.

If you want a "guaranteed" return, put your pension into a cash fund. You'll be wiped out by inflation however. The rest of us will get on with making money, but please don't come crying to us trying to get your hands on our pensions when you end up with none.

KyussBishop

clairefontaine wrote: »

There is another problem.

People invested in funds and they crashed after 911.

Then they used real estate because it felt safer.

Look waht happened there.

Then they looked at gold.

Gold has also plumetted.

So what's left?

Back to stuffing the mattress?

Ya pretty much; once one bubble bursts (be that tech stocks, housing, gold, oil etc.), the financial actors that created it just take their winnings and move the money into inflating yet another area of the markets, and start the whole bubble mill rolling again (in a while, they'll get back around to houses again eventually, since it's one of the most profitable bubbles).

The free-market-fundamentalist myth is that the rich create jobs, but what we see is that the rich in finance create bubbles, simply because it's far more profitable to loot the economy through instability, than do something actually beneficial in the real economy.

These same types usually decry inflation where it is merely suspected it might happen through government spending (even when you present policies, which specifically limit that by inflation targets), and decry government inefficiency, but they are hypocrites, because they favour deregulation which allows private financial actors to create inflation (bubbles), which is both inefficient and loots the economy (unsustainable bubbles are like a ponzi scheme really), and can lead to massive economic damage like the property bubble.


This is why I'm never surprised to learn, that a lot of the time, the most vociferous economically right-wing posters either work in banking/finance, or are moving towards it; usually (though granted, not always) you'll find such a conflict of interest motivating these views.

Particularly, you'll find hypocritical tacit-support of this scheme among some of them (and a lack of interest in condemning it among many more, where most other taxes would receive vociferous condemnation); tax is bad where it goes to public use, but is apparently good when it goes to financial use.

Farmer Pudsey

hmmm wrote: »

Then you don't understand equity funds or shares in general. There is no guarantee that you will make a profit, so you need to invest in a mix of risk assets that suit your risk profile, diversify, and leave your money invested for the long term.

If you want a "guaranteed" return, put your pension into a cash fund. You'll be wiped out by inflation however. The rest of us will get on with making money, but please don't come crying to us trying to get your hands on our pensions when you end up with none.

PhilMcGee wrote: »

I already pay and have been paying towards a state contributory pension in my PRSI. I wouldnt mind doing it this new way, but only if I get back what I already pay and have paid towards my contributory pension already.

Any other way and it means I am paying twice for the same thing.

The Muppet wrote: »

Public Servants already have a compulsory pension scheme, I think it only fair that it be extended to all workers or Public servants should be given an option to opt out.

Before the government contemplate such a scheme there will have to be some radical reforms.

We cannot have a situation where there is a basic pension and it is toped up if you never work and yet those that are on low wages have to save to top up there's.

Pension companies should be forced to minimise costs at present most funds return virtually nothing after fees and contributors end up with only the tax relief to make a return. It has been continualy shown that you need to be in the high tax bracket to make it worth you while contributing to a scheme. There should be a measure to allow people to manage there own funds and not have it handed to fund managers that take huge fees and fail to generate viable returns.

Yes the public is now making a contribution however they are guaranteed set pension in most cases up to now. These new schemes will be defined contributions not defined benefits.

USC/PRSI will have to be reformed if such a scheme comes. At present to an employee these count for nearly 9%@ incomes of 30K and 10% for incomes around 60K. Employer PRSI is about 12%. If it contributions were split 50/50 then 15% of net income would be taken straight away this would be allowing for tax relief and employment would be nearly 20% of net wages for employers.

I do not think this would be sustainable.

NIMAN

The Gov is going to get a lot of flack on this one, but its something that has to be done, whether we all like it or not. And its not just an Irish thing, all Gov's will have to prepare for pension provision in the future as its a timebomb in many countries.

There simply will not be enough young, working people to pay for the number retired, so I do think its fair enough to get people to save or pay into a pension for their own future. The State can't be expected to pay a pension out to people who have not saved adequately for their future.

The only thing that would worry me is that any money I put away will not be tax'd or dipped into.

woodoo

halkar wrote: »

Compulsory Pension Contributions will be just another tax. We already pay that in the name of PRSI. If anyone wants more for their pension there are many private pension funds (mine fields) available. Prsi is already a scam. Someone earns 100k for 20 years gets the same pension as someone earns 10k for 20 years after paying much more to the pension funds. It is same with dole too.

PRSI isn't enough

kippy

Too many unanswered questions for a real comment on it so far but the "concept" is a good one. How the "concept" will be converted into reality is the big one.
Until the reports details are out that is the unknown.


Personally, I think, the NPRF is a good idea an were it utilised better in future I would be all for it.
I often wonder why state pension funds aren't spent directly on funding major infrastructural projects where income is almost guaranteed into the future. (Toll roads, electrical and comunications infrastructure, indeed the impending water infrastructural changes)

hmmm

kippy wrote: »

I often wonder why state pension funds aren't spent directly on funding major infrastructural projects where income is almost guaranteed into the future. (Toll roads, electrical and comunications infrastructure, indeed the impending water infrastructural changes)

Mostly because a basic principle of investing is to diversify your investments - both to maximise return but also to minimise risk. If the NPRF wanted to put some of its money into Irish infrastructure investments that would be fine, but only some.

kippy

hmmm wrote: »

Mostly because a basic principle of investing is to diversify your investments - both to maximise return but also to minimise risk. If the NPRF wanted to put some of its money into Irish infrastructure investments that would be fine, but only some.

Indeed, I wasn't suggesting throw the whole lot in there, however going on past experiences when the opportunity was there to invest in roads (with lifelong tolls) etc, it wasn't done.