Pensions ARE taxed

veryangryman

I always got told when working to donate to pensions because they're "tax free"

But have since learned that they take PAYE and USC tax out of it same as regular income after you retire.

Thoughts on this being a cop-out...?

PS - Sorry for boring the holes off ye googling for porn and the likes today.

Peatys

veryangryman wrote: »

I always got told when working to donate to pensions because they're "tax free"

But have since learned that they take PAYE and USC tax out of it same as regular income after you retire.

Thoughts on this being a cop-out...?

PS - Sorry for boring the holes off ye googling for porn and the likes today.

You don't pay tax on it going into the fund. You pay tax on it when you use it as income.

Not a cop out.

Cuddlesworth

veryangryman wrote: »

I always got told when working to donate to pensions because they're "tax free"

But have since learned that they take PAYE and USC tax out of it same as regular income after you retire.

Thoughts on this being a cop-out...?

PS - Sorry for boring the holes off ye googling for porn and the likes today.

We have a taxation system that taxes more income the more you earn. You won't make as much with your pension, but you will pay far less tax on the income when you do get it.

Odyssey 2005

veryangryman wrote: »

I always got told when working to donate to pensions because they're "tax free"

But have since learned that they take PAYE and USC tax out of it same as regular income after you retire.

Thoughts on this being a cop-out...?

PS - Sorry for boring the holes off ye googling for porn and the likes today.

I don't have to Google for porn,I know where to find it. !!
Sorry bout your pension

banie01

The initial contribution to your pension pot is tax free up to your limit.
That contribution is then invested until retirement.
When you draw down an annuity on retirement, the income doled out from your annuity is liable for tax in the year it's paid to you as it's an income.
I'd much rather invest in a pension tax free and pay tax at retirement with my full allowances available, than pay tax at source and again at drawdown.

The current method means that the "income" is only taxed once.
What would your alternative be?

mrcheez

Only PRSAs get taxed PAYE and USC afaik.

Standard pensions just get PAYE but no USC

ytpe2r5bxkn0c1

mrcheez wrote: »

Only PRSAs get taxed PAYE and USC afaik.

Standard pensions just get PAYE but no USC

Only social welfare pensions are exempt from USC. Pre retirement access to AVCs are also exempt. But all private pensions are subject to PAYE and USC.



Private pensions are extremely tax efficient.

setanta1000

There is also the ability to take a certain portion of your pension as a tax free lump sum on retirement subject to conditions afaik

ytpe2r5bxkn0c1

setanta1000 wrote: »

There is also the ability to take a certain portion of your pension as a tax free lump sum on retirement subject to conditions afaik

Absolutely, I'm not sure of the current limits but in my own case it was a six figure sum.

Beasty

Legend Stale Quintet wrote: »

in my own case it was a six figure sum.

€1,000.00?


:pac:

veryangryman

Odyssey 2005 wrote: »

I don't have to Google for porn,I know where to find it. !!
Sorry bout your pension

Thanks. Enjoy your porn.

mrcheez

Legend Stale Quintet wrote: »

Only social welfare pensions are exempt from USC. Pre retirement access to AVCs are also exempt. But all private pensions are subject to PAYE and USC.



Private pensions are extremely tax efficient.

Ah right, I thought there was a benefit in choosing a standard private pension over a PRSA due to less taxation

dxhound2005

veryangryman wrote: »

I always got told when working to donate to pensions because they're "tax free"

But have since learned that they take PAYE and USC tax out of it same as regular income after you retire.

Thoughts on this being a cop-out...?

PS - Sorry for boring the holes off ye googling for porn and the likes today.

Cultivate the company of the people who told you the truth. Stay away from those who misled you.

Capt'n Midnight

Instead of paying into a pension just put your money into savings.

The interest is taxed at 37%

veryangryman

Capt'n Midnight wrote: »

Instead of paying into a pension just put your money into savings.

The interest is taxed at 37%

I'm not denying that Pensions are fare more efficient. Just that they're not as rosy as originally thought.

Also, one must ponder whether they'll live that long, what cool stuff the money can do for them while they still have their marbles etc etc

McMurphy

I remember in Australia I had a choice when taking out superannuation.

Taxed going in, tax free going out.

Or tax free going in, taxed going out.

Was a few years back, so don't remember the finer details of it, but either way I was liable to pay tax on it.

Death and taxes.

mrcheez

Capt'n Midnight wrote: »

Instead of paying into a pension just put your money into savings.

The interest is taxed at 37%

Surprised no-one has mentioned the other benefit of pensions is the value *can* go up if you invest in the right funds.

Typically better than a savings account in the long run

VinLieger

veryangryman wrote: »

Just that they're not as rosy as I originally thought.

Fyp

Victor

veryangryman wrote: »

I always got told when working to donate to pensions because they're "tax free"

You contribute to your pension, not donate.

But have since learned that they take PAYE and USC tax out of it same as regular income after you retire.

No. Extra tax credits and reduced PRSI.

Assetbacked

Peatys wrote: »

You don't pay tax on it going into the fund. You pay tax on it when you use it as income.

Not a cop out.

But it would be illogical to tax it going into the fund and then again when it comes out. It's a complete misnomer.

Assetbacked

mrcheez wrote: »

Surprised no-one has mentioned the other benefit of pensions is the value *can* go up if you invest in the right funds.

Typically better than a savings account in the long run

I think what happened in 2008 directly refutes that.

valoren

There needs to be Individual Savings accounts for stocks and share here which are allowed to grow tax free (considering you will be depositing money which has already been taxed e.g. saving 10% of your salary every month).

You can save up to a maximum amount every year to boost your pot every year. The capital gains should be allowed to grow i.e. selling shares within the account at a profit are not taxed for CGT. CGT is effectively a punishment for being right despite you taking on the relative risk of the investment i.e. ah so you invested 10k savings in a risky stock 5 years ago and it happened to become a 10 bagger? You now owe revenue 30k, thank you very much. Is it any wonder the incentive to invest isn't there.

The key difference with an ISA and a pension is that with the ISA you will have direct access to the money at all times. There is no lock in as with a pension, which for me, is a major deterrent from setting up a pension. If you ever needed the money, then it is available.

I guess the whole pension industry is predicated on the idea that people are too stupid to see what a good company is and that it might be a good idea to lend them your savings in order for them to continue being good companies. Just put it all in an index tracker and hope for the best. The case for indexing uses Warren Buffet's advice for what to do with his assets after he dies which is to put it in an index tracking the S&P 500. That is good, safe advice for many but the question for me is how come Berkshire became what it is via concentrated common stock positions held for decades such as Amex, Coke, Wells Fargo and now Apple? He held 5% of Disney stock in 1966 ($4 million) and sold it a year later for $6 million. Today that stake would be worth $12 billion alone.

Financial topics are increasingly complex and this inhibits interest in the basic idea of taking your money from your labour and putting it to work by having partial ownership (i.e. a claim on future profits) of some of the world's best companies. The idea is that you open a pension, which charges fees, let the fund managers play around with your pooled money, continually fail to beat the benchmark indexes, have you do that for decades with the hope and a prayer that when you retire there is a bull market in stocks and you can then use that lump sum payment and hope it doesn't run out before you die.

Whereas a better approach is to open an ISA as early as possible with all the advantages it affords savers and investors. Save some money, save your kids' money in their accounts, learn to invest (teach your kids how to invest) prudently for decades in the best businesses in the world that are truly exceptional due to competitive advantages that are hard to replicate and difficult to destroy and that if you get your hands on one at a decent price, you hold onto it not matter what, through bubbles that burst and booms that crash.

They allow you to own a part of them, they pay out increasing cash dividends to you and then at some foreseeable point in the future, through a combination of capital gains, that ever increasing passive dividend income and the miracle of compound interest, you will wake up one day, and determine that the value of your asset (the business you own) and the dividends can cover your living expenses and you can retire. If you so wish to.

You could still open a pension or do nothing at all but it would be great to have the option of an ISA. If anything it would alleviate the future social welfare payments for a population that will be living longer.

veryangryman

veryangryman wrote: »

I'm not denying that Pensions are fare more efficient. Just that they're not as rosy as originally thought.

Also, one must ponder whether they'll live that long, what cool stuff the money can do for them while they still have their marbles etc etc

Live as long as what? if you set aside 63k to buy a small annuity you can throw the rest in an arf and spend it as you want, iirc

valoren wrote: »

The key difference with an ISA and a pension is that with the ISA you will have direct access to the money at all times. There is no lock in as with a pension, which for me, is a major deterrent from setting up a pension. If you ever needed the money, then it is available.

I have a feeling you're looking for an arf as well

cbreeze

Plus, while the State Pension (Contributory) is not taxed, it has the effect of reducing your tax credits and reducing the amount taxable at the 20% band so you pay more at 40%, but I understand (could be wrong) that the Christmas bonus is tax free.

valoren

bluewolf wrote: »

Live as long as what? if you set aside 63k to buy a small annuity you can throw the rest in an arf and spend it as you want, iirc



I have a feeling you're looking for an arf as well

ARF only invest in funds afaik and after you retire?
The ISA would be before retirement, at any age, but have the same accessibility and the options to invest in securities (stocks, funds, bonds, commodities etc)

Spook_ie

The basics are that ALL income with a few exemptions are subject to tax, regardless of age, creed religion etc.

There are tax efficient ways to invest such as pension funds etc. but you do need to rely on someones expertise somewhat, that's why rich people and TDs etc have tax advisers to minimise their tax obligations.

Spook_ie

cbreeze wrote: »

Plus, while the State Pension (Contributory) is not taxed, it has the effect of reducing your tax credits and reducing the amount taxable at the 20% band so you pay more at 40%, but I understand (could be wrong) that the Christmas bonus is tax free.

State pension is tax declarable therefore if your income exceeds the tax threshold you will pay tax.

Marcusm

veryangryman wrote: »

I always got told when working to donate to pensions because they're "tax free"

But have since learned that they take PAYE and USC tax out of it same as regular income after you retire.

Thoughts on this being a cop-out...?

PS - Sorry for boring the holes off ye googling for porn and the likes today.

You don’t pay tax on the contributions to the fact bd, income and gains roll up tax free during that period and you can take a decent slug out tax free on retirement. The regular income you get from it is taxable. Overall still a very tax enhanced position.

animaal

The biggest risk I see with pensions is government policy.

We've already had one raid on pension funds.

As the number of pensioners grows, we're likely to see more cost-saving measures. Perhaps:

- more raids on pension funds
- reduction/elimination of tax free lump sums
- Means test the contributory pension. I.e. those who put money aside for a pension lose out. Because "fairness".
- Further reductions in tax relief (e.g. I already pay USC/PRSI on employee contributions to my own pension. And USC/PRSI again later when I draw down)

Alternative measures to reduce the annual cost of pensions would hit everybody including those who have made no provision for themselves, and we couldn't be having that!

It would take a fund of approx. 300k to replace the contributory pension. I'm not confident that I'll much better off in later life, having scraped for years to put money into a pension.

Squall Leonhart

valoren wrote: »

There is no lock in as with a pension, which for me, is a major deterrent from setting up a pension. If you ever needed the money, then it is available.

I see where you're coming from, but in my opinion if most people had access to their pension funds to do as they wished, they wouldn't have a pension left by the time they came to retire. I include myself in that.

One of the positive features of a pension for me is I can put away money, and not be tempted to withdraw it.

Squall Leonhart

animaal wrote: »

As the number of pensioners grows, we're likely to see more cost-saving measures. Perhaps:

- Means test the contributory pension. I.e. those who put money aside for a pension lose out. Because "fairness".

This is my biggest fear regarding pensions. I'll have made the effort for years, made sacrifices each month make sure I've had money put aside for old age, and when I get there that I'll be penalised for my diligence, and Johnny NeverPaidAPension will still be handed state money where I won't.

VinLieger

Squall Leonhart wrote: »

This is my biggest fear regarding pensions. I'll have made the effort for years, made sacrifices each month make sure I've had money put aside for old age, and when I get there that I'll be penalised for my diligence, and Johnny NeverPaidAPension will still be handed state money where I won't.

The state pension will eventually have to be put down even though no politician will admit to it yet. It is completely unfundable in the long term in its current state, mainly thanks to the grey votes constant intransigence to even let the issue be discussed.

Franz Von Peppercorn

VinLieger wrote: »

The state pension will eventually have to be put down even though no politician will admit to it yet. It is completely unfundable in the long term in its current state, mainly thanks to the grey votes constant intransigence to even let the issue be discussed.

Starving pensioners isn’t a good look.

Squall Leonhart

I think one of the most unjust things at present regarding pensions is the difference between contributory and non-contributory.

Be unemployed your entire life, never pay any PRSI, get €232.00 a week of a state pension.

Work for your entire life and average out 48 weekly PRSI contributions per year and get €243.30 a week state pension.

40 years of working and paying taxes will get you an extra €11.30 a week.
It's pathetic.

Franz Von Peppercorn

Squall Leonhart wrote: »

I think one of the most unjust things at present regarding pensions is the difference between contributory and non-contributory.

Be unemployed your entire life, never pay any PRSI, get €232.00 a week of a state pension.

Work for your entire life and average out 48 weekly PRSI contributions per year and get €243.30 a week state pension.

40 years of working and paying taxes will get you an extra €11.30 a week.
It's pathetic.

You only get that if you work 40 years of 50 weeks as far as I know. Any gaps and you get less if the gaps were, say, in another country with no reciprocal pension agreement.

Spook_ie

animaal wrote: »

The biggest risk I see with pensions is government policy.

We've already had one raid on pension funds.

As the number of pensioners grows, we're likely to see more cost-saving measures. Perhaps:

- more raids on pension funds
- reduction/elimination of tax free lump sums
- Means test the contributory pension. I.e. those who put money aside for a pension lose out. Because "fairness".
- Further reductions in tax relief (e.g. I already pay USC/PRSI on employee contributions to my own pension. And USC/PRSI again later when I draw down)


Alternative measures to reduce the annual cost of pensions would hit everybody including those who have made no provision for themselves, and we couldn't be having that!

It would take a fund of approx. 300k to replace the contributory pension. I'm not confident that I'll much better off in later life, having scraped for years to put money into a pension.

If you were scraping for years to put money into a pension other than state pension then you weren't paying tax etc. on contributions unless your pension advisor really ****ed up.

Spook_ie

Squall Leonhart wrote: »

This is my biggest fear regarding pensions. I'll have made the effort for years, made sacrifices each month make sure I've had money put aside for old age, and when I get there that I'll be penalised for my diligence, and Johnny NeverPaidAPension will still be handed state money where I won't.

If you paid enough contributions via PRSI you will get a state pension plus your private pension, do well enough and you'll be in the 40% tax bracket

valoren

valoren wrote: »

ARF only invest in funds afaik and after you retire?
The ISA would be before retirement, at any age, but have the same accessibility and the options to invest in securities (stocks, funds, bonds, commodities etc)

ahh right i am with you now

i think it's important to make sure the pension stays locked in to retirement. the investment options im happy with the current range

Squall Leonhart

Not quite, 48 contributions will do you, no need for the full 50, they're not monsters you know

Squall Leonhart

Spook_ie wrote: »

If you paid enough contributions via PRSI you will get a state pension plus your private pension, do well enough and you'll be in the 40% tax bracket

As it stands at present, correct.

What I was saying was I am fearful of making all the efforts and sacrifices of paying into a pension at the moment, only for government policy to change due to an aged population, where they decide that they'll remove the automatic entitlement to state pension once at set retirement age.

megaten

Squall Leonhart wrote: »

As it stands at present, correct.

What I was saying was I am fearful of making all the efforts and sacrifices of paying into a pension at the moment, only for government policy to change due to an aged population, where they decide that they'll remove the automatic entitlement to state pension once at set retirement age.

Worry about yourself not others.

Spook_ie

Squall Leonhart wrote: »

As it stands at present, correct.

What I was saying was I am fearful of making all the efforts and sacrifices of paying into a pension at the moment, only for government policy to change due to an aged population, where they decide that they'll remove the automatic entitlement to state pension once at set retirement age.

In which case you will be glad that you scraped up a private pension to supplement the missing state pension.

The whole problem is we have too many benefiting from state pensions and not enough people contributing back into it, aka a pension hole, add into that a welfare state that pays more than other countries to people on the dole, add the increasing medical costs keeping people alive longer and the whole thing is a ticking bomb.

Squall Leonhart

megaten wrote: »

Worry about yourself not others.

Spook_ie wrote: »

In which case you will be glad that you scraped up a private pension to supplement the missing state pension.

I get what you're both saying.... but at the risk of sounding petulant, it would be unfair to be penalised for saving hard for your life to the point that the state decides they'll withhold paying you a pension, but will then turn around and provide pension money to somebody who hasn't all their life. Sure, there are people who cannot afford to pay single penny into a pension, but the vast majority who don't can afford, but choose to live for the moment instead. Why should these be rewarded for their spendthriftness.

valoren

Wouldn't something like these be nice?

https://www.moneysavingexpert.com/savings/stocks-shares-isas/
https://www.moneysavingexpert.com/savings/lifetime-isas/

s7ryf3925pivug

So I suppose you put money in that would be taxed at the higher tax rate, up to the cutoff for the lower tax rate in your expected pension.

megaten

Squall Leonhart wrote: »

I get what you're both saying.... but at the risk of sounding petulant, it would be unfair to be penalised for saving hard for your life to the point that the state decides they'll withhold paying you a pension, but will then turn around and provide pension money to somebody who hasn't all their life. Sure, there are people who cannot afford to pay single penny into a pension, but the vast majority who don't can afford, but choose to live for the moment instead. Why should these be rewarded for their spendthriftness.

Well, its the same as the dole threads, if you genuinely think someone else is going to be better off you can do the same. Most things in life are about improving your odds, not a guarantee.

Squall Leonhart

Can't argue with that Megaten.

Franz Von Peppercorn

megaten wrote: »

Worry about yourself not others.

? He is

Ray Palmer

Squall Leonhart wrote: »

I get what you're both saying.... but at the risk of sounding petulant, it would be unfair to be penalised for saving hard for your life to the point that the state decides they'll withhold paying you a pension, but will then turn around and provide pension money to somebody who hasn't all their life. Sure, there are people who cannot afford to pay single penny into a pension, but the vast majority who don't can afford, but choose to live for the moment instead. Why should these be rewarded for their spendthriftness.

You are completely right on your points. If you save additional money for a pension you should also get the state pension as you are also paying into it via PRSI. The belief that you pay for your parents pension and need your children to pay for yours is the problem. That is not the agreement nor how pensions work. You pay into a fund for yourself not your parents. It is not means tested it is based on contributions.

Luckily there are laws in both Ireland and the EU that will not allow the state pension to be removed.

In saying all that there are ways and means to bring in changes. They are reviewing pension and contributions and everyone will be forced to contribute to a private pension is likely. The state pension will be reduced directly or by inflation by the time many retire.

There simply won't be a large enough pension pot for the rates now paid.

There are many cases where people who do save have to pay more than somebody who never saved. Nursing home care being the most obvious. If you own a home a third of its value will go to the state for the care but free if you never owned or family are still living there. Medical cards are similar.

I can see the logic of the have nots getting free stuff as they may not have ever had any saving due to a poor paying job. However I know people from school who have never worked a day in their lives who have council housing while I bought my home and other property. We are from the same economic and social backgrounds. Some are just lazy and others not very bright. Can't really expect a guy who isn't able to do much other than semi-skilled jobs under direction to make a good living.

VinLieger

Franz Von Peppercorn wrote: »

Starving pensioners isn’t a good look.

Not what was suggested at all by my post but keep strawmanning, one day you'll hopefully learn how to properly address factual arguments.


By 2040 there will by 2:1 workers vs pensioners compared to the 5:1 ratio we have now, so regardless if we kill it now or later the state pension is not fundable in the long term so we should kill it now so people in their 40's and 50's now with no savings or pension and counting on it can get the wake up call they need and stop ignorantly counting on the government to see them through their dotage.

Ray Palmer

VinLieger wrote: »

Not what was suggested at all by my post but keep strawmanning, one day you'll hopefully learn how to properly address factual arguments.


By 2040 there will by 2:1 workers vs pensioners compared to the 5:1 ratio we have now, so regardless if we kill it now or later the state pension is not fundable in the long term so we should kill it now so people in their 40's and 50's now with no savings or pension and counting on it can get the wake up call they need and stop ignorantly counting on the government to see them through their dotage.

That isn't how pension funds work. There is a fund that you contribute to. The current workers do not pay for those retired. The pension fund they contributed to pays their pension. The government borrowed from this fund and are paying it back.

Yes the pension fund has been badly managed but it isn't reliant on the ratios you suggest.

I contributed more to this pension fund then I will ever receive back but also have a private pension. I should not be denied my pension because I have a private fund as I made my contributions to the state. The fact it is counted by years and not contributions is unfair but to make it so I don't get anything would be criminal. The EU courts already made the government give pensions to the self employed as the state tried to deny them pension rights.