Pension 101

..Brian..

Hi Guys,

I've been thinking about pensions a bit lately and have tried reading a bit around the internet about them but am a bit lost. Where do I start? It seems to me you are paying all this money in over a period of time and then can be taxed on it?

Why not just set up a regular bank account and put money in that. You could then withdraw as much as you want no problem right? I'm sure it's not that simple, can someone enlighten me?

Also, my missus is Slovakian, we will end up moving there in the near future, 3 - 5 years maybe. If I set up a pension here what will happen then? Can you cancel it and withdraw your money whenever or what?

Thanks for your help, I'm sure I'll have more questions are you respond!

danthefan

You get income tax relief on pension contributions.

If you just set up a regular account you will obviously pay the full amount of tax on all the money that goes into it.

On top of that, my employer for example, pays into my pension as well as me. I currently have 3% of my salary going into my pension (which I intend on increasing soon), and my employers tops this up with a further 5% of my salary.

If you do set up a pension, cancelling it and withdrawing all the funds would just defeat the purpose of setting it up in the first place, it's meant to be for your retirement.

..Brian..

I understand cancelling it early goes against the point but what if I leave the country and take up permanent residence in Slovakia (also in EU)? Should I keep paying into an Irish pension or close it withdrawing the funds with a view to putting them into a Slovakian pension? Or would I better off just saving for now and stating a proper pension when i get over there?

Stupid question perhaps but when you say you get income tax relief on pension contributions does that mean I pay less tax each week to the tune of my pension contribution?

:EDIT: Also what happens if I set up a pension through my current job but change jobs in the future?

danthefan

..Brian.. wrote: »

I understand cancelling it early goes against the point but what if I leave the country and take up permanent residence in Slovakia (also in EU)? Should I keep paying into an Irish pension or close it withdrawing the funds with a view to putting them into a Slovakian pension? Or would I better off just saving for now and stating a proper pension when i get over there?

Stupid question perhaps but when you say you get income tax relief on pension contributions does that mean I pay less tax each week to the tune of my pension contribution?

:EDIT: Also what happens if I set up a pension through my current job but change jobs in the future?

If your company has a pension scheme there's a chance they will also make a contribution to it, my company more than doubles my contribution, up to a point.

The tax relief means that some of the money being put into your pension is taken before income tax is applied. So you do not pay income tax on that money. I've just looked at my payslip, it gives my gross pay, then my pension contribution, then my taxable pay which is (gross pay - pension). So I am not paying income tax at all on my pension contribution it seems, though it's a fairly small contribution.

I don't know about transferring pensions between countries and I'm not sure you can just close down a pension and withdraw the money either, someone else maybe can answer that.

Kristopherus

..Brian.. wrote: »

I understand cancelling it early goes against the point but what if I leave the country and take up permanent residence in Slovakia (also in EU)? Should I keep paying into an Irish pension or close it withdrawing the funds with a view to putting them into a Slovakian pension? Or would I better off just saving for now and stating a proper pension when i get over there?

Stupid question perhaps but when you say you get income tax relief on pension contributions does that mean I pay less tax each week to the tune of my pension contribution?

:EDIT: Also what happens if I set up a pension through my current job but change jobs in the future?

Have a look at the Pensions forum at www.askaboutmoney.com.

atkin

I have over the years resisted paying into a private pension or PRSA. I think they are beneficial if you pay tax at 48% .
My wage was always low so I needed the money to pay mortgage etc.
The instances of pension funds being raided still happens .The more common problems are companies that go bankrupt.
I think for the benefit of those shocked that they will not get their pension see http://www.finfacts.ie/irishfinancenews/article_1025907.shtml

These funds are usually invested in Equities and have upfront fees. The position of many of these funds is that they are still have deficits and negative returns at present.This is particularly true of those invested in Irish equities.You get the tax relief but on retirement you could be taxed on the payment.
I just invested money myself instead of a pension fund. I am still eligible for a state pension from PRSI and credits.

The government is trying to push private pensions for all workers but response remains muted . I suspect legislation will come into force in time to deduct from wages.

In the 70's and 80's there was no problem of funding pensions.I think some things were better then.

..Brian..

Thanks guys, much appreciated. Will have a nosey around the Ask About Money forums as well.

atkin

Check out this link.
http://www.independent.ie/business/irish/firms-may-force-pension-liabilities-on-to-the-state-29309765.html

I think pensions should be independent of company control.

Standard Defined Contribution schemes still have disadvantages with their returns and annuity rates.

I would take out a pension if I worked for a large multi national corporation but not a hole in the wall or Mick Wallace.

roro2

atkin wrote: »

Check out this link.
http://www.independent.ie/business/irish/firms-may-force-pension-liabilities-on-to-the-state-29309765.html

I think pensions should be independent of company control.

All this stuff is referring to Defined Benefit pension schemes. The OP is presumably referring to a standard Defined Contribution scheme - no company control, raiding of schemes, companies choosing liquidation, etc.

If you pay into a bank account, you're paying money from your taxed income. Full tax. Then any savings will be taxed on DIRT.
Then you receive a small pension later on, and pay smaller tax probably, if it's under the bands

These funds are usually invested in Equities and have upfront fees. The position of many of these funds is that they are still have deficits and negative returns at present.This is particularly true of those invested in Irish equities

Invest in a pension that's not in equities then
Or a self-scheme

atkin

How about a self scheme that gives you tax relief if you do not take out the money before retirement age.
This can be done quite easily with the Banks.There is a fixed amount to be saved each month that is capped to avoid using the account as a tax dodge.

Liam D Ferguson

atkin wrote: »

How about a self scheme that gives you tax relief if you do not take out the money before retirement age.
This can be done quite easily with the Banks.There is a fixed amount to be saved each month that is capped to avoid using the account as a tax dodge.

Is this a pension plan? If not, what is it?

http://www.zurichlife.ie/pensions/choice_of_pensions/self_directed_pensions.jsp

ooter

atkin wrote: »

How about a self scheme that gives you tax relief if you do not take out the money before retirement age.
This can be done quite easily with the Banks.There is a fixed amount to be saved each month that is capped to avoid using the account as a tax dodge.

do you know of any such schemes atkin?

atkin

ooter wrote: »

do you know of any such schemes atkin?

No sorry it was just an idea that popped to mind. I have no reason to take out a savings pension now.

atkin

http://www.independent.ie/business/irish/seven-company-pension-schemes-fold-each-month-29372438.html

Something to ponder about pensions.!!

Liam D Ferguson

atkin wrote: »

http://www.independent.ie/business/irish/seven-company-pension-schemes-fold-each-month-29372438.html

Something to ponder about pensions.!!

It's an interesting article. Anyone who is in a Defined Benefit pension scheme should take note. If the employer is no longer willing or able to pay for the benefits that the scheme promised, it's likely that the employers and scheme trustees will decide to wind up the scheme.

I can see these "Rolls Royce" Defined Benefit pension schemes becoming a thing of history, to be honest. I'd imagine that in time the only ones left will be the Public Service and a handful of large private sector employers.

atkin

Liam D Ferguson wrote: »

It's an interesting article. Anyone who is in a Defined Benefit pension scheme should take note. If the employer is no longer willing or able to pay for the benefits that the scheme promised, it's likely that the employers and scheme trustees will decide to wind up the scheme.

I can see these "Rolls Royce" Defined Benefit pension schemes becoming a thing of history, to be honest. I'd imagine that in time the only ones left will be the Public Service and a handful of large private sector employers.

I am inclined to agree.