Does it really pay to have a skilled job?

Eman_321

I was told something that was always on the edge of my thoughts since I started full time job but I never fully focused on it.

So basically, a friend earns 4 times as much as his girlfriend. She, 28k with little experience on a low-skilled job, and himself 100-120k, 10yrs experience on a high skilled job.

That looks great, on gross, but after tax he has just slightly over double her take home pay.
We were stunned for a while and wondering why we never looked closely at how much we were losing.

How is this allowed to happen, especially here in Ireland? Where is the incentive to work and improve oneself?

ted1

Eman_321 wrote: »

I was told something that was always on the edge of my thoughts since I started full time job but I never fully focused on it.

So basically, a friend earns 4 times as much as his girlfriend. She, 28k with little experience on a low-skilled job, and himself 100-120k, 10yrs experience on a high skilled job.

That looks great, on gross, but after tax he has just slightly over double her take home pay.
We were stunned for a while and wondering why we never looked closely at how much we were losing.

How is this allowed to happen, especially here in Ireland? Where is the incentive to work and improve oneself?

He should be dumping money into a pension which reduces tax bill.
Also skilled workers tend to be self employed so with a good accountant can reduce their tax bill

Wildly Boaring

He's taking home what 75k and she 25k??

She has to work for 3 years to get his one. Thats a serious difference.

The tax take has to come from somewhere

Eman_321

ted1 wrote: »

He should be dumping money into a pension which reduces tax bill.
Also skilled workers tend to be self employed so with a good accountant can reduce their tax bill

He could have but we are skeptics of this financial system And a pension scheme beyond our control with a promise of what may or may not be there is not really enticing.

We shouldn't have to jump through hoops to enjoy hard earned money? Just doesn't seem right.
Oh, and sadly not self employed :-(

Eman_321

Wildly Boaring wrote: »

He's taking home what 75k and she 25k??

She has to work for 3 years to get his one. Thats a serious difference.

The tax take has to come from somewhere

Apparently less than 75k. Slightly above 4.4k net

Sure it has to, but if one is not going to get much benefit why bother? Where is the incentive. Sounds to me like the only reason why a lot of workers choose not to stay in low skilled jobs is for, at least some passion or pleasure of their job and probably comfortable, and extra perks compared to a low-skilled job.

BrianBoru00

Assuming PAYE employees hes taking home about €1100 a week, shes taking home €420 without taking pensions into account.

Comparing both - they'll both have to pay similar amounts for car tax ,insurance, upkeep, room & board, travel.

The lower paid can just about cover those expenses which everyone has so the higher paid has a lot more disposable income

Wildly Boaring

But you do see the benefit.

You have good roads, drinking water, hospitals and schools etc.

People love to talk this country down, we are well off, could be better.

The problem right now is narrow tax base. We just break even. You can't tax much from The 28k wage. You cant take water apparently. Motor tax will fall with EV until it changes. Property tax takes in v little.


No one wants to be the one providing the tax take but those on 120k must.

3 times the income after tax is a substantial amount.

relax carry on

Eman_321 wrote: »

Apparently less than 75k. Slightly above 4.4k net

Sure it has to, but if one is not going to get much benefit why bother? Where is the incentive. Sounds to me like the only reason why a lot of workers choose not to stay in low skilled jobs is for, at least some passion or pleasure of their job and probably comfortable, and extra perks compared to a low-skilled job.

The benefit is the state. The benefit is the functional society you exist in. The state requires funding for it to function and that comes in part from direct taxes.

According to the Deloitte tax calculator a single person on 120K in a standard PAYE employment with standard credits etc takes home €70,799 meaning he suffers 41% deductions.

Someone on 28k takes home €23,963 meaning they suffer 14.4% deductions.

That's progressive taxation. Those who earn more pay more.

ted1

BrianBoru00 wrote: »

Assuming PAYE employees hes taking home about €1100 a week, shes taking home €420 without taking pensions into account.

Comparing both - they'll both have to pay similar amounts for car tax ,insurance, upkeep, room & board, travel.

The lower paid can just about cover those expenses which everyone has so the higher paid has a lot more disposable income

What stage does FIS, rent supplements etc cut out. ?

BrianBoru00

ted1 wrote: »

What stage does FIS, rent supplements etc cut out. ?

In general you wont get rent supplement if working more than 30 hours, not sure about FIS but those figures are based on a regular working person.

That's a whole different ball game when you start talking about council houses etc.

Greentree_uk

Eman_321 wrote: »

Apparently less than 75k. Slightly above 4.4k net

Sure it has to, but if one is not going to get much benefit why bother? Where is the incentive. Sounds to me like the only reason why a lot of workers choose not to stay in low skilled jobs is for, at least some passion or pleasure of their job and probably comfortable, and extra perks compared to a low-skilled job.

What you really have to be asking is just how people are affording to love fever the high rates of tax we pay! Nice houses, I could probably afford a nice house but not able to furnish it drive the car and live the lifestyle! Just how do people do it!

Victor

Eman_321 wrote: »

So basically, a friend earns 4 times as much as his girlfriend. She, 28k with little experience on a low-skilled job, and himself 100-120k, 10yrs experience on a high skilled job.

So, he is earning 3.6-4.2 times what she is.

Gross|Net
28,000|23,963
100,000|61,199
120,000|70,799

If they are paying rent of €1,200 per month split evenly.

Gross|Net|Rent|Net less rent
28,000|23,963|7,200|16,763
100,000|61,199|7,200|53,999
120,000|70,799|7,200|63,599

After tax and rent, he is still getting 3.2-3.8 times what she is.

Eman_321

Wildly Boaring wrote: »

But you do see the benefit.

You have good roads, drinking water, hospitals and schools etc.

People love to talk this country down, we are well off, could be better.

The problem right now is narrow tax base. We just break even. You can't tax much from The 28k wage. You cant take water apparently. Motor tax will fall with EV until it changes. Property tax takes in v little.


No one wants to be the one providing the tax take but those on 120k must.

3 times the income after tax is a substantial amount.

And to @BrianBoru since you made similar points, yes I understand that the higher income earners shoulder the burden of keeping the country functioning but how do much bigger countries like US do it, with their low taxes?
And I know it's probably unlikely but what happens when the high earners have had enough and leave in droves, or more realistically speaking the economy grinds to a halt?

"3 times the income after tax is a substantial amount." - lol not sure what this is suggesting.

Eman_321

Greentree_uk wrote: »

What you really have to be asking is just how people are affording to love fever the high rates of tax we pay! Nice houses, I could probably afford a nice house but not able to furnish it drive the car and live the lifestyle! Just how do people do it!

That would have been a better question in hinsight. And I would like to know too!

Eman_321

Victor wrote: »

So, he is earning 3.6-4.2 times what she is.

Gross|Net
28,000|23,963
100,000|61,199
120,000|70,799

If they are paying rent of €1,200 per month split evenly.

Gross|Net|Rent|Net less rent
28,000|23,963|7,200|16,763
100,000|61,199|7,200|53,999
120,000|70,799|7,200|63,599

After tax and rent, he is still getting 3.2-3.8 times what she is.

Thanks for laying it down. Perhaps, his net is skewed for some reason.

judeboy101

The problem I see is that progressive taxation is inversely related to social benefits. The more you earn the less you or your dependants can access. The much haunted tax relief on pension contributions is pointless when the state can periodically raid it, engaging the benefit.

AndrewJRenko

Eman_321 wrote: »

He could have but we are skeptics of this financial system And a pension scheme beyond our control with a promise of what may or may not be there is not really enticing.

We shouldn't have to jump through hoops to enjoy hard earned money? Just doesn't seem right.
Oh, and sadly not self employed :-(

I'm confused now. Is this about you or about your friend?

How has he managed to reach a high earning position without having the brains to actually understand how pensions in general, and pension tax relief in particular actually work?

Eman_321

AndrewJRenko wrote: »

I'm confused now. Is this about you or about your friend?

How has he managed to reach a high earning position without having the brains to actually understand how pensions in general, and pension tax relief in particular actually work?

Him, is it because I said "we"? That was to imply the general public not me or my friend.

And he does understand it works. But like I said in a previous post and as the post before this pointed out, we don't have faith in pension funds.

Cyrus

AndrewJRenko wrote: »

I'm confused now. Is this about you or about your friend?

How has he managed to reach a high earning position without having the brains to actually understand how pensions in general, and pension tax relief in particular actually work?

Pension tax relief is a deferral of tax not an avoidance of it, what is your point anyway because he earns more he can put more into a pension ?

_Brian

Eman_321 wrote: »

I was told something that was always on the edge of my thoughts since I started full time job but I never fully focused on it.

So basically, a friend earns 4 times as much as his girlfriend. She, 28k with little experience on a low-skilled job, and himself 100-120k, 10yrs experience on a high skilled job.

That looks great, on gross, but after tax he has just slightly over double her take home pay.
We were stunned for a while and wondering why we never looked closely at how much we were losing.

How is this allowed to happen, especially here in Ireland? Where is the incentive to work and improve oneself?

He has almost three times her spending power, that’s a significant amount. It affords a much better standard of living and more leisure spending.

What do you expect, it’s only work, a small portion of either of their lives. It doesn’t make him more important or nicer, it just gives him more money.

So your question is does it pay, yes , nearly three times as much.

Avatar MIA

judeboy101 wrote: »

The much haunted tax relief on pension contributions is pointless when the state can periodically raid it, engaging the benefit.

What are you on about? Next time you're in the pub enjoy your pint, and leave the bar stool economics alone.

Heres Johnny

He probably enjoys 800 or so disposable income after essentials taken care of whereas she has little or nothing.

Also, on pensions, there are risk free pensions invested in cash only which will not grow but still get the full tax relief.

Your friend is doing himself a massive disservice by not using this relief for himself on a salary the size of his and can't really give out about tax to be honest.

AndrewJRenko

Cyrus wrote: »

Pension tax relief is a deferral of tax not an avoidance of it, what is your point anyway because he earns more he can put more into a pension ?

No, it will result in tax avoided, because of the generous general tax credits

and the additional tax credits for older people.


But regardless of that, my point is:


1) Is this story about the OP or about his friend?
2) Is it really credible that somebody got themselves into a high-earning position without actually understanding how pensions work, the risk/reward ratio, the risk of losing money on deposit to inflation and the very substantial tax benefits available?


That's my point anyway.

Wildly Boaring

Eman_321 wrote: »

And to @BrianBoru since you made similar points, yes I understand that the higher income earners shoulder the burden of keeping the country functioning but how do much bigger countries like US do it, with their low taxes?
And I know it's probably unlikely but what happens when the high earners have had enough and leave in droves, or more realistically speaking the economy grinds to a halt?

"3 times the income after tax is a substantial amount." - lol not sure what this is suggesting.

It's always been thus and the economy has never ground to a halt. The rest of us know what rate we're taxed at.

The US doesn't manage. It's got a debt of I think 4 trillion and growing daily. Too big to fail? The have to grow themselves out of it at all times

Look at the Nordic countries if you wanna see taxation so you can have some return.

I don't earn as much as your buddy and could afford nice stuff by living down the country and living mortgage free. You/he got a plan??

After his rent anyone down the sticks might have more disposable income.

My point on 3 times as much is what do you expect? 5, 6 times? That make you feel better about being "skilled"

By the way never find out a brickies wages (are they skilled?) Some of them be taking home as much as your buddy

ahnowbrowncow

Wildly Boaring wrote: »

My point on 3 times as much is what do you expect? 5, 6 times? That make you feel better about being "skilled"

By the way never find out a brickies wages (are they skilled?) Some of them be taking home as much as your buddy

Trades people are making a killing at the moment. Earning very high wages and, from my experience, none of them are returning their correct income

Eman_321

AndrewJRenko wrote: »

No, it will result in tax avoided, because of the generous general tax credits

and the additional tax credits for older people.


But regardless of that, my point is:


1) Is this story about the OP or about his friend?
2) Is it really credible that somebody got themselves into a high-earning position without actually understanding how pensions work, the risk/reward ratio, the risk of losing money on deposit to inflation and the very substantial tax benefits available?


That's my point anyway.

1) Why would I resort to elaborate stories? Plus, I'm single :-)
2) I believe so. A lot of people can be high earners but lack economic knowledge. But he is way smarter than me so I'm pretty sure he understands those points.
What I'm certain that he (and I do not like) is the lack of control of the funds. If you are lucky, sure, the payoff is higher but your prudency will still be penalized.

Evd-Burner

AndrewJRenko wrote: »

2) Is it really credible that somebody got themselves into a high-earning position without actually understanding how pensions work, the risk/reward ratio, the risk of losing money on deposit to inflation and the very substantial tax benefits available?

I work for a large multinational who will match our contributions plus an extra 1% up to a maximum of 8%. You would be surprised at how many people who are far higher up than me who put in the minimum amount possible and are probably on a gross of 150k or more. All of these people I would consider highly educated and extremely good at what they do, they seem to be completely ignorant of how pensions work. So yes I would consider it to be highly credible that somebody got themselves into a position without understanding how pensions work.

Eman_321

Wildly Boaring wrote: »

It's always been thus and the economy has never ground to a halt. The rest of us know what rate we're taxed at.

The US doesn't manage. It's got a debt of I think 4 trillion and growing daily. Too big to fail? The have to grow themselves out of it at all times

Look at the Nordic countries if you wanna see taxation so you can have some return.

I don't earn as much as your buddy and could afford nice stuff by living down the country and living mortgage free. You/he got a plan??

After his rent anyone down the sticks might have more disposable income.

My point on 3 times as much is what do you expect? 5, 6 times? That make you feel better about being "skilled"

By the way never find out a brickies wages (are they skilled?) Some of them be taking home as much as your buddy

Mortgage free? Do you mean you rent? Do you work in Dublin etc.? Personally, I don't see the problem living down the country if there is supporting infrastructure.

52% tax just seems a bit much. Who wouldn't like to feel like they are working for themselves?

Well, he is going back home to Germany.

I'm sure brickies are skilled? I wonder if they are happy/content too 🤔

Eman_321

ahnowbrowncow wrote: »

Trades people are making a killing at the moment. Earning very high wages and, from my experience, none of them are returning their correct income

Haha :-)

Cyrus

Evd-Burner wrote: »

I work for a large multinational who will match our contributions plus an extra 1% up to a maximum of 8%. You would be surprised at how many people who are far higher up than me who put in the minimum amount possible and are probably on a gross of 150k or more. All of these people I would consider highly educated and extremely good at what they do, they seem to be completely ignorant of how pensions work. So yes I would consider it to be highly credible that somebody got themselves into a position without understanding how pensions work.

I don’t think people are ignorant to how pensions work rather people at a certain point in life have just had kids maybe just took out a large mortgage and aren’t prioritising their pension over what’s actually in front of them right now, in time they will prioritise a pension normally mid 40s onwards and they earn enough that it’s not too late.

150k year seems like a fortune but depending on your circumstances it isn’t always

Eman_321

Eman_321 wrote: »

He could have but we are skeptics of this financial system And a pension scheme beyond our control with a promise of what may or may not be there is not really enticing.

We shouldn't have to jump through hoops to enjoy hard earned money? Just doesn't seem right.
Oh, and sadly not self employed :-(

To get a salaried position on ,€100k + you'll have jumped through plenty hoops.

To become self employed with an executive pension (you control) and other tactics you can retain up to 75% of your gross income easily enough while being 100% compliant ....

Well worth the hoop jumping imo

Dick Pickle

Avatar MIA wrote: »

What are you on about? Next time you're in the pub enjoy your pint, and leave the bar stool economics alone.

https://m.independent.ie/business/personal-finance/pensions/the-punt-noonans-raid-on-pensions-is-proving-costly-30437318.html

Basically theft

Turnipman

Dick Pickle wrote: »

https://m.independent.ie/business/personal-finance/pensions/the-punt-noonans-raid-on-pensions-is-proving-costly-30437318.html

Basically theft

Nope. Merely a claw back of a small element of the generous tax-relief allowed to people contributing to their pension funds, in order to help rescue a bankrupt State.

No doubt it annoyed the pension sellers who, presumably, would have experienced a small reduction in the commission that they gained from the said pension funds.

Victor

judeboy101 wrote: »

The problem I see is that progressive taxation is inversely related to social benefits. The more you earn the less you or your dependants can access.

A few things:
* Generally, the more you earn, the less you need social supports.
* Generally, the more you earn, the greater benefit you receive from the presence of a stable state and a stable society.
* Generally, the more you earn, the more you can afford to pay.

The much haunted tax relief on pension contributions is pointless when the state can periodically raid it, engaging the benefit.

An annual tax of 1% for a few years in a life time, when your pension grows by several % per year?

Eman_321 wrote: »

52% tax just seems a bit much. Who wouldn't like to feel like they are working for themselves?

But almost nobody pays 52% tax. Most people have additional credits for health, pensions, etc. Also consider negative taxes like children's allowance.

Gross Net Effective tax rate
10,000 10,000 00.0%
30,000 25,388 15.4%
100,000 61,199 38.8%
300,000 157,199 47.6%
1,000,000 493,199 50.7%
3,000,000 1,453,199 51.6%
10,000,000 4,813,199 51.9%

Eman_321 wrote: »

how do much bigger countries like US do it, with their low taxes?

Low income taxes, but high property taxes. Would you like to pay five times as much in property taxes?

The San Francisco property tax rate is 1.188%, compared to 0.18-0.25% (based on an old valuation) in Ireland.

Wildly Boaring

Eman_321 wrote: »

Mortgage free? Do you mean you rent? Do you work in Dublin etc.? Personally, I don't see the problem living down the country if there is supporting infrastructure.

Mortgage free. Had a plan. Saved like hell. Bought a cheap house. I've 3 years more than your buddy with 10.

I do not work in Dublin. Have done previously when stuck. But put in years working in places like Offaly longford Kerry monaghan. Paid v little rent.

You want infrastructure when down the country? We all may need to pay higher tax to achieve

Dick Pickle

Turnipman wrote: »

Nope. Merely a claw back of a small element of the generous tax-relief allowed to people contributing to their pension funds, in order to help rescue a bankrupt State.

No doubt it annoyed the pension sellers who, presumably, would have experienced a small reduction in the commission that they gained from the said pension funds.

Not necessarily. If you had a DC pension with no employee contributions you still you had your pension raided

Turnipman

Dick Pickle wrote: »

Not necessarily. If you had a DC pension with no employee contributions you still you had your pension raided

So the capital value of something that "you" hadn't even paid for was reduced slightly? Well, cry me a river!

Dick Pickle

Turnipman wrote: »

So the capital value of something that "you" hadn't even paid for was reduced slightly? Well, cry me a river!

Typically pensions are considered a compensation package from employers so yes it was theft.

Avatar MIA

Dick Pickle wrote: »

Not necessarily. If you had a DC pension with no employee contributions you still you had your pension raided

No employee contribution, but you were still robbed?

Hang on until I find a wall to bang my head.

Dick Pickle

Avatar MIA wrote: »

No employee contribution, but you were still robbed?

Hang on until I find a wall to bang my head.

Point stands pensions can be robbed. A precedent has been set

Avatar MIA

Dick Pickle wrote: »

Point stands pensions can be robbed. A precedent has been set

So you recommend a high earner should not avail of substantial tax breaks by investing in a pension, despite decades of such workers benefiting in the past.

AndrewJRenko

Eman_321 wrote: »

1) Why would I resort to elaborate stories? Plus, I'm single :-)
2) I believe so. A lot of people can be high earners but lack economic knowledge. But he is way smarter than me so I'm pretty sure he understands those points.
What I'm certain that he (and I do not like) is the lack of control of the funds. If you are lucky, sure, the payoff is higher but your prudency will still be penalized.

What do you mean by 'lack of control'. Your choice of funds is limited by your trustees if you're in a company scheme. You usually have some degree of choice on risk/return ratio.

What other investments give you a 40% tax saving and better control?


It sounds like your skepticism is based on lack of knowledge.

AndrewJRenko

Dick Pickle wrote: »

Point stands pensions can be robbed. A precedent has been set

It was taxed, not robbed. And the tax was tiny compared to the tax relief. And anything can be taxed.

Dick Pickle

AndrewJRenko wrote: »

It was taxed, not robbed. And the tax was tiny compared to the tax relief. And anything can be taxed.

Robbed. Tax relief a moot point

AndrewJRenko

Cyrus wrote: »

I don’t think people are ignorant to how pensions work rather people at a certain point in life have just had kids maybe just took out a large mortgage and aren’t prioritising their pension over what’s actually in front of them right now, in time they will prioritise a pension normally mid 40s onwards and they earn enough that it’s not too late.

150k year seems like a fortune but depending on your circumstances it isn’t always

Missing out on a matching contribution, a 100% immediate return on your investment is not just ignorance - it is insanity. You could borrow from the CU at 8% to get the funds and still come out ahead.

JustJoe7240

Eman_321 wrote: »

I'm sure brickies are skilled? I wonder if they are happy/content too 🀔

Are you assuming that because bricklayers have a laborious job, they must not be happy or content? Many bricklayers are very happy in their work, very well paid, working outside, getting lots of exercise.

AndrewJRenko

Dick Pickle wrote: »

Robbed. Tax relief a moot point

You didn't think it was moot when you availed of it. It was the main reason for putting money into your pension. So if a small amount of it has been clawed back in the most extreme financial crisis, then boo hoo hoo.

Anything can be taxed. That's democracy.

Turnipman

Dick Pickle wrote: »

Point stands pensions can be robbed. A precedent has been set

Nonsensical abuse of the verb "rob".

What occurred was that a short-term pensions levy was introduced by a democratically elected government at a time of national crisis.

Irish people are well used to such levies, we're still paying a few thanks to various cock-ups in the (disgracefully badly regulated) Insurance business in both the previous and the current millennium.

And long before that deceased spoofer Brian Lenihan junior introduced the USC "levy" people in employment paid both health and training levies on top of their PAYE and PRSI contributions.

So by all means whine about the pensions levy, but please don't abuse the English language by describing it as "theft".

Avatar MIA

Dick Pickle wrote: »

Robbed.

Even the article you linked said it was legal.

For you to make up the law and declare it robbery you would need to have set up your own state and judicial system. That's treacherous.

Are you a traitor?

AndrewJRenko

Dick Pickle wrote: »

Robbed. Tax relief a moot point

Have you reported this robbery to the Gardai? It sounds like you've read one too many articles in one of DOBs rags.

368100

AndrewJRenko wrote: »

No, it will result in tax avoided, because of the generous general tax credits

and the additional tax credits for older people.


But regardless of that, my point is:


1) Is this story about the OP or about his friend?
2) Is it really credible that somebody got themselves into a high-earning position without actually understanding how pensions work, the risk/reward ratio, the risk of losing money on deposit to inflation and the very substantial tax benefits available?


That's my point anyway.

Re point 2 its absolutely credible. Ive a brother who is GM of a large Hotel on a good salary...He ultimately manages the budgets and has been quite successful.

Then it comes to his own finances, he has no pension. I work in banking and have tried unsucessfully for years to get through to him that he needs to put one in place to take advantage of tax relief.....some people are just blinkered when it comes to their own affairs.

He has an old investment policy that he gets no tax relief on and whose fees are 3 times what they should be.....ive given up