€1M Pension Fund?

JMR

I heard a financial advisor say on an RTE programme a few days ago that to achieve approx. €3000 per month from a pension fund from 65 to death you need a pension pot of approx. €1M.

Does this sound about right?

Tow

Yes, the figures are frightening.

https://www.irishtimes.com/business/financial-services/public-sector-pensions-worth-millions-new-figures-show-1.3143604


https://app.datawrapper.de/_/49zWv

Squall Leonhart

To have 1,000,000 in a pension pot it would need to average a monthly contribution to your pension of 2,085 euro, each month for 40 years.

Now obviously that's grossly over simplified, as there will be tax reliefs on that, the amount tax relief available on changing every 10 years, as well as a hopeful compound interest effect on contributions, but you get the idea.

Suffice to say it is a colossal amount of money a private sector worker needs to put aside to achieve a public sector type pension, wholly unobtainable for the overwhelming majority.

MarcusP12

Maybe i'm missing something but based on current costs of living, 3K a month, in my mind at least, is a serious amount of money for the average person to retire on. Add to that the state pension also if its from a private pension. You're unlikely to have any major outgoings a month compared to when you're in your earlier years with mortgage payments and child care and maybe kids to put through college, unless you made some bad decisions later in life. We can all get by on a lot less than we earn now if we didn't have those outgoings...…..seems to be a bit sensationalist and unnecessarily dramatic to me....good luck to anyone who can afford to have that kind of pot but for the rest of us, I don't think we should be panicking too much either....

Horusire

Squall Leonhart wrote: »

To have 1,000,000 in a pension pot it would need to average a monthly contribution to your pension of 2,085 euro, each month for 40 years.

Now obviously that's grossly over simplified, as there will be tax reliefs on that, the amount tax relief available on changing every 10 years, as well as a hopeful compound interest effect on contributions, but you get the idea.

Suffice to say it is a colossal amount of money a private sector worker needs to put aside to achieve a public sector type pension, wholly unobtainable for the overwhelming majority.

To add my two cents.

As a current public sector employee who can retire at 50 after 31 years service I will get €190 per week of a pension.

Now obviously I wont be staying around for this but just wanted to make a comment that all public sector pensions are not created equal.

lawred2

JMR wrote: »

I heard a financial advisor say on an RTE programme a few days ago that to achieve approx. €3000 per month from a pension fund from 65 to death you need a pension pot of approx. €1M.

Does this sound about right?

you could die a week after retiring

some use that annuity would be then

eastie17

Yeah, whats the point, put what you can away, enjoy the rest and have the craic. Chances are you'll be downsizing the house when the kids are reared and can presumably release some equity from that as well depending on your situation.

lawred2

eastie17 wrote: »

Yeah, whats the point, put what you can away, enjoy the rest and have the craic. Chances are you'll be downsizing the house when the kids are reared and can presumably release some equity from that as well depending on your situation.

well I'd use the system that's there to put money away as tax efficiently as possible for an ARF when you retire.

You then have the option to blow it all or draw down from it when and where you need it..

annuities are a rubbish option

Squall Leonhart

MarcusP12 wrote:

Maybe i'm missing something but based on current costs of living, 3K a month, in my mind at least, is a serious amount of money for the average person to retire on. Add to that the state pension also if its from a private pension. You're unlikely to have any major outgoings a month compared to when you're in your earlier years with mortgage payments and child care and maybe kids to put through college, unless you made some bad decisions later in life. We can all get by on a lot less than we earn now if we didn't have those outgoings...…..seems to be a bit sensationalist and unnecessarily dramatic to me....good luck to anyone who can afford to have that kind of pot but for the rest of us, I don't think we should be panicking too much either....

It'd be taxable income, and wouldn't be in addition to a standard state pension, plus it won't be at today's cost of living.

But I take your point, most would live comfortably on lower pensions, but as less people own houses there will be more and more people renting for life. Try funding that on a state pension...

Stoner

Downsizing houses is a great idea. People don't want to, but there are single people in private and public 3 bed houses all over the country.
I guess we have a shortage of one or two bed smaller houses, so maybe it's not a great solution, but the shared living units for elderly people with social houses should be pushed.

I know of a couple of people who downsized to 1 bed apartments and in both cases it was a poorly planned disaster.

MarcusP12

Squall Leonhart wrote: »

It'd be taxable income, and wouldn't be in addition to a standard state pension, plus it won't be at today's cost of living.

But I take your point, most would live comfortably on lower pensions, but as less people own houses there will be more and more people renting for life. Try funding that on a state pension...

Fair point with regards to the renting situation....but unfortunately in life there will be plenty of people who will retire with not that much and plenty who will have more than they need.....i don't see that that situation is anything new with the information on which this thread is based. I think the housing crisis is more cause for concern for society in general than the fact u need a 1M pot to have 3k retirement because the reality is, your average pensioner will live a good life on a lot less.....

Henry Ford III

lawred2 wrote: »

you could die a week after retiring

some use that annuity would be then

If it had:-

1/. Spouses reversion

2/. A guaranteed period (5 years is typical).

3/. indexation in payment

It might not be so bad. But in general with ultra low interest rates annuities are very pricey.

p.s. Some of it might be "ARFable?".

sonyvision

1 million wouldn't be to far away from achievable. According to Zurich paying at 7'650 per annum into a pot with 40 years contribution at an average growth rate of 3/4% would net you over 1m. That's 637.5 per month befor tax relief if your on the higher bracket.

Squall Leonhart

sonyvision wrote:

1 million wouldn't be to far away from achievable. According to Zurich paying at 7'650 per annum into a pot with 40 years contribution at an average growth rate of 3/4% would net you over 1m. That's 637.5 per month befor tax relief if your on the higher bracket.

Well and good, but realistically how many people fresh out of college, or never having gone to college and in early stages of their career are in a position to pay that type of money per month to a pension? Precious few.

lawred2

sonyvision wrote: »

1 million wouldn't be to far away from achievable. According to Zurich paying at 7'650 per annum into a pot with 40 years contribution at an average growth rate of 3/4% would net you over 1m. That's 637.5 per month befor tax relief if your on the higher bracket.

was that calculated with or without Zurich taking their 'management fees'?

sonyvision

lawred2 wrote: »

was that calculated with or without Zurich taking their 'management fees'?

After I think. It obviously is assuming average growth and no booms or bust.

Well I doubt any body 21 fresh out of college can afford that, but again some people do work hard in the right industry and have the right benefits.

Plenty of folks I know studied finance all shy of 30 years old earning tidy sums in excess 50k a year with employeer pension contribution of 5% - 12% of there salaries (which is very tax efficient from both sides) not all based in Dublin either!

I do understand your regular joe blogs working minimum wage on a zero hour contract 1m pension pot is well out of reach

cordy1969

In Australia they have mandatory super/retirement funds contribution. Every employee now matter how old, whether casual or full time once you earn over $450 per calendar month before tax then your employer must by law deposit the equal of 9.5% of your income into a super/pension fund that can not be touched until retirement age.

Why the Irish don't have similar requirements is lost on me.

The J Stands for Jay

JMR wrote: »

I heard a financial advisor say on an RTE programme a few days ago that to achieve approx. €3000 per month from a pension fund from 65 to death you need a pension pot of approx. €1M.

Does this sound about right?

Nobody with the ability to get a find out that size would go near an annuity, so all these reports of the cost of a pension are pointless, unless to demonstrate the crazy level of pension provision in the civil service.

Going with an ARF should easily give a 4% safe withdrawal rate which would exceed the annuity rate as well as give a fund to the estate on death.

homewardbound11

JMR wrote: »

I heard a financial advisor say on an RTE programme a few days ago that to achieve approx. €3000 per month from a pension fund from 65 to death you need a pension pot of approx. €1M.

Does this sound about right?

Kind of weird really as if your 1million was without tax relief (580k )then you would have 30k for the guts of 20 years 600k) . Ie if you never locked it into a pension to gain relief but used these savings to invest elsewhere. I think the average male life expectancy is still under 85.

So after all aren’t you just as well as having a investment account and if you make a few percent gain then the lump sum of 580k would be achieved much more quickly and you can pass it on to your family if you pass away. You can retire when you want and draw down as much as you want

domrush

Squall Leonhart wrote: »

It'd be taxable income, and wouldn't be in addition to a standard state pension, plus it won't be at today's cost of living.

But I take your point, most would live comfortably on lower pensions, but as less people own houses there will be more and more people renting for life. Try funding that on a state pension...

Why wouldn' t an annuity be in addition to the state pension? The state pension is guaranteed for all no?

cordy1969

The State Pension (Contributory) is paid to people from the age of 66 who have enough Irish social insurance contributions. It is not means-tested. You can have other income and still get a State Pension (Contributory). This pension is taxable but you are unlikely to pay tax if it is your only income.

The J Stands for Jay

domrush wrote: »

The state pension is guaranteed for all no?

Oh dear.

domrush

Squall Leonhart wrote: »

To have 1,000,000 in a pension pot it would need to average a monthly contribution to your pension of 2,085 euro, each month for 40 years.

Now obviously that's grossly over simplified, as there will be tax reliefs on that, the amount tax relief available on changing every 10 years, as well as a hopeful compound interest effect on contributions, but you get the idea.

Suffice to say it is a colossal amount of money a private sector worker needs to put aside to achieve a public sector type pension, wholly unobtainable for the overwhelming majority.

Completely ignoring any investment returns or tax relief as you mentioned, so a useless figure for all intents and purposes. In reality the monthly figure out of your pocket (post tax) to achieve 1M would be less than half that.

domrush

McGaggs wrote: »

Oh dear.

Could you expand on that? Anyone working in Ireland for an extended period of time will get a pension. The pension may be reduced over time, or age at which it begins extended but beyond that why wouldn't anyone be expecting a state pension

lawred2

domrush wrote: »

Could you expand on that? Anyone working in Ireland for an extended period of time will get a pension. The pension may be reduced over time, or age at which it begins extended but beyond that why wouldn't anyone be expecting a state pension

Maybe he means that you shouldn't be banking on it..

Might be a thing of the past by the time some of us retire

Grassey

homewardbound11 wrote:

So after all aren’t you just as well as having a investment account and if you make a few percent gain then the lump sum of 580k would be achieved much more quickly and you can pass it on to your family if you pass away. You can retire when you want and draw down as much as you want

Sounds exactly like paying into a pension pot and taking an ARF to me....

Car99

The financial advisor reckons that to achieve approx. €3000 per month from a pension fund from 65 to death you need a pension pot of approx. €1M , anyone know how much a garda pension pot would need to be to pay out 3k a month from the age of 50 with a 100k cash pay out on retirement day ? Would about €1.7 million be correct? We are one wealthy state.

The J Stands for Jay

domrush wrote: »

Could you expand on that? Anyone working in Ireland for an extended period of time will get a pension. The pension may be reduced over time, or age at which it begins extended but beyond that why wouldn't anyone be expecting a state pension

There is no guarantee that there will be a pension. It can be stopped at any time. It could be reduced in value, whether by inflation it legislation, so as to be worthless. The age for payment is likely to get closer to 80. There is no fund to pay it from, it depends on the goodwill of the taxpayer of the day. There's not likely to be much after the ministerial pensions are paid from the taxes collected.

Eggs For Dinner

Horusire wrote: »

To add my two cents.

As a current public sector employee who can retire at 50 after 31 years service I will get €190 per week of a pension.

Now obviously I wont be staying around for this but just wanted to make a comment that all public sector pensions are not created equal.

What do you think your public sector pension should pay you for possibly 40 years, having worked for only 31 years? Add in the option to lock that in at 50 and either chill or supplement it with other work. Jaysus!

AndrewJRenko

McGaggs wrote: »

There is no guarantee that there will be a pension. It can be stopped at any time. It could be reduced in value, whether by inflation it legislation, so as to be worthless. The age for payment is likely to get closer to 80. There is no fund to pay it from, it depends on the goodwill of the taxpayer of the day. There's not likely to be much after the ministerial pensions are paid from the taxes collected.

Unfortunately, the fund that was there to pay for future pensions was cleared out to pay for our banking and property crisis. And I'm sure you know that 'ministerial pensions' are a drop in the ocean of overall public expenditure, so I'm not sure why you would mention them in this context? They have also been dramatically reduced for those appointed after 2010.

Eggs For Dinner wrote: »

What do you think your public sector pension should pay you for possibly 40 years, having worked for only 31 years? Add in the option to lock that in at 50 and either chill or supplement it with other work. Jaysus!

Anyone who retires early from the public sector has their pension actuarially reduced to account for less years paying in and more years drawing down. There is no extra cost to the State. Newer staff don't have the option of retiring early.

homewardbound11

Grassey wrote: »

Sounds exactly like paying into a pension pot and taking an ARF to me....

Except for the crucial part - the last bit . Draw down before retirement .

Taxburden carrier

AndrewJRenko wrote: »

Unfortunately, the fund that was there to pay for future pensions was cleared out to pay for our banking and property crisis. And I'm sure you know that 'ministerial pensions' are a drop in the ocean of overall public expenditure, so I'm not sure why you would mention them in this context? They have also been dramatically reduced for those appointed after 2010.



Anyone who retires early from the public sector has their pension actuarially reduced to account for less years paying in and more years drawing down. There is no extra cost to the State. Newer staff don't have the option of retiring early.

The public sector pension pyramid scheme will eventually shut down the country financially.

Atlantic Dawn

Taxburden carrier wrote: »

The public sector pension pyramid scheme will eventually shut down the country financially.

It's way too generous, almost €100 more a week than citizens of the UK get, completely unsustainable. House prices will make it even worse in that productive people can't afford to have children who will later work and contribute towards these pensions.

Ignore, I thought you meant the state pension

NinjaTruncs

McGaggs wrote: »

There is no guarantee that there will be a pension. It can be stopped at any time. It could be reduced in value, whether by inflation it legislation, so as to be worthless. The age for payment is likely to get closer to 80. There is no fund to pay it from, it depends on the goodwill of the taxpayer of the day. There's not likely to be much after the ministerial pensions are paid from the taxes collected.

Sure by increasing the age at which we get it, is the current plan to increase it until 68 or 69?, They have already greatly reduced the value of the state pension for those in there 40's, god know what will happen to those in there 20's.

AndrewJRenko

Atlantic Dawn wrote: »

It's way too generous, almost €100 more a week than citizens of the UK get, completely unsustainable. House prices will make it even worse in that productive people can't afford to have children who will later work and contribute towards these pensions.

I think yer man was referring to pensions for public sector employees, not the standard State pension for older people. I'm not sure why he picked that one particular contractual obligation of the State, especially in the light of the substantial reductions from 2003 and 2013. It would be interesting to compare the expenditure for both sets of pensions - public sector staff vs standard state pension.

Jim2007

cordy1969 wrote: »

In Australia they have mandatory super/retirement funds contribution. Every employee now matter how old, whether casual or full time once you earn over $450 per calendar month before tax then your employer must by law deposit the equal of 9.5% of your income into a super/pension fund that can not be touched until retirement age.

Why the Irish don't have similar requirements is lost on me.

Most of the EU/EEA/CH are either already operating a similar system or are on the way to getting there. Ireland will have to do the same as well because there is no other way to make it add up.

When I moved to Switzerland at 27 I had to pay 7% and the employer 14%. Twenty eight years later when I stopped it was 11% and the employer 22%. There was no choice, it was mandatory and that was that.

AndrewJRenko

Jim2007 wrote: »

Most of the EU/EEA/CH are either already operating a similar system or are on the way to getting there. Ireland will have to do the same as well because there is no other way to make it add up.

When I moved to Switzerland at 27 I had to pay 7% and the employer 14%. Twenty eight years later when I stopped it was 11% and the employer 22%. There was no choice, it was mandatory and that was that.

Mandatory pensions are imminent for Ireland
https://www.irishtimes.com/business/personal-finance/workers-could-have-6-of-pay-put-into-mandatory-pension-1.3604345

Grassey

homewardbound11 wrote:

Except for the crucial part - the last bit . Draw down before retirement .

You didn't mention that. Only retire when you want and draw down what you want, when you want.

So by retire, you could do that from 50 onwards from your job. And surely the tax benefits paying into the pension to give you the same size pot as paying full whack into an investment fund makes more sense? Unless you are managing to gain huge investment growth over and above that of the pension fund?

JMR

Thanks for all the replies, good info and certainly food for thought.
I'm a proprietary director myself so the benefits of paying into a pension fund are obvious.

With a fund value of approx. €150k I didn't think I was doing too badly at 43 years of age, guess I'll have to increase the contributions!

JMR

JMR wrote: »

Thanks for all the replies, good info and certainly food for thought.
I'm a proprietary director myself so the benefits of paying into a pension fund are obvious.

With a fund value of approx. €150k I didn't think I was doing too badly at 43 years of age, guess I'll have to increase the contributions!

doesnt it get far more tax efficient to do so as one approaches retirement age in any case

JMR

[Deleted User] wrote: »

doesnt it get far more tax efficient to do so as one approaches retirement age in any case

Don't think it can be any more tax efficient than it is to be honest and as far as I know the rules don't take into account how near to retirement you are. I'm no expert though

The J Stands for Jay

[Deleted User] wrote: »

doesnt it get far more tax efficient to do so as one approaches retirement age in any case

No, they just let you put more in.

The J Stands for Jay

AndrewJRenko wrote: »

Unfortunately, the fund that was there to pay for future pensions was cleared out to pay for our banking and property crisis. And I'm sure you know that 'ministerial pensions' are a drop in the ocean of overall public expenditure, so I'm not sure why you would mention them in this context? They have also been dramatically reduced for those appointed after 2010.



Anyone who retires early from the public sector has their pension actuarially reduced to account for less years paying in and more years drawing down. There is no extra cost to the State. Newer staff don't have the option of retiring early.

I just get annoyed at the ministerial double dipping. The whole suite of government pensions is overly generous. If they were funded it wouldn't be so bad...

lawred2

Jim2007 wrote: »

Most of the EU/EEA/CH are either already operating a similar system or are on the way to getting there. Ireland will have to do the same as well because there is no other way to make it add up.

When I moved to Switzerland at 27 I had to pay 7% and the employer 14%. Twenty eight years later when I stopped it was 11% and the employer 22%. There was no choice, it was mandatory and that was that.

one can only dream...

if mandatory pensions did come in here - could you imagine IBEC's response? Companies paying 5% - 7% are not the norm here and you'd swear they were doing you a massive favour.. 22%?? lol

Even the likes of Australia sees fit to have a real and meaningful super annuation system in place..

But then Ireland still has some growing up to do as a society and realizing that we're all in it together. Is it any wonder countries like Switzerland have such high standards of living.

Mandatory pension contributions at a meaningful level (double digits) is what's needed now in Ireland. Not talking about it. It's quite clear and has been for a while that the state pension system is just not affordable in its current guise.

lawred2

AndrewJRenko wrote: »

Mandatory pensions are imminent for Ireland
https://www.irishtimes.com/business/personal-finance/workers-could-have-6-of-pay-put-into-mandatory-pension-1.3604345

6% - it's a start but not enough.

What happens for all those employees in the state whose employer classes 5% contribution as a benefit.

Can no longer be considered a benefit if it's mandatory.

Tow

cordy1969 wrote: »

In Australia they have mandatory super/retirement funds contribution

Why the Irish don't have similar requirements is lost on me.

It was supposed to be introduced in 2019, then 2020, but PAYE Modernisation took precedence. The Public Sector are being hit with ASC for the Pensions next year as it is.

Pension Auto Enrollment is happening, but appears to have been pushed out to 2022.