Pension advice for 60 year old with no private pension

Donald Trump

Hi,


I know someone near enough retirement age. Unfortunately never really believed in "locking away" money and wouldn't have had a lot to lock away anyway. Doesn't trust financial institutions and thinks they are only out to rob the worker (well they are, but that doesn't mean that the worker can't also benefit). Has a small work-related pension but due to being kept on a bad non-fulltime status in work for decades, didn't build up the years they should have. I don't mean they weren't working fulltime, just that the employer kept people on short term contracts for decades. Unfortunately the person didn't appreciate the implications of that at the time.



This person is now around 60 years old with a few years to retirement. Actually in a reasonable financial situation at the minute. I was trying to advise them to be looking into a private pension and lashing in all the money that tax is currently being paid out at 40% on. Regardless of the return, they should be able to save a bit of tax.


I understand that it is "late" but what would be a good strategy/product to maximize benefit? Would there be any available? Say they could lash 20k a year in for 5 years (say 12k net of tax). At the end of 5 years there'd be a pot of 100k there. Is there a product where they could get say 10k a year for maybe 11 years for that? Or even just the pot spread out over 10 years.



I don't think they'd agree to an annuity kind of thing bought up front where an amount is paid for life with no balance remaining. I try to tell them not to worry about that because the pot would be to look after them for the rest of their life and not to worry about anyone else after that but they still don't see it quite that way.




I know that options are limited, but would there be any suitable products that you could suggest?

endacl

If they have a house, sell it and move somewhere really really cheap.

Failing that, you’ll need a time machine and a good talking to ready to deliver when you arrive a decade or two ago.

Donald Trump

endacl wrote: »

If they have a house, sell it and move somewhere really really cheap.

Failing that, you’ll need a time machine and a good talking to ready to deliver when you arrive a decade or two ago.

First part is useless. And has nothing got to do with the question asked which was whether it would be possible to get a pension product that would maximize tax savings now given current starting point.



Second is also useless as even if I had that time machine, they weren't previously in a position to put much aside. Not everyone has had things as easy as you might have yourself!


If you don't have any useful suggestions, you don't need to clutter up the thread with inane shite.



Thanks

realitykeeper

I don`t trust financial institutions either. I do understand there are benefits in that the money you put toward your pension is not taxed but I do not trust the government to manage the economy. If I am wrong to think like this, I will know when the next recession comes. Financial institutions must pay up and if they can`t, the state might have to pay for them and if the state cannot pay, then the people who took care of their own financial plans without recourse to a pension should be relatively better off.

Henry Ford III

PPP/PRSA for cash accumulation followed by an ARF for gradual drawdown sounds ok.

Get proper advice though.

ted1

Is it legal for someone to be kept on such a contract for so long ? Would he have got a company one had he been permanent? Might be worth talking to a solicitor to see

Jim2007

realitykeeper wrote: »

I don`t trust financial institutions either. I do understand there are benefits in that the money you put toward your pension is not taxed but I do not trust the government to manage the economy. If I am wrong to think like this, I will know when the next recession comes. Financial institutions must pay up and if they can`t, the state might have to pay for them and if the state cannot pay, then the people who took care of their own financial plans without recourse to a pension should be relatively better off.

Total nonsense as usual from this trolly. Just when you think he has gone away he pops up again posting the exact same bit of trash that he does every time. Just ignore.

Jim2007

Donald Trump wrote: »

I know that options are limited, but would there be any suitable products that you could suggest?

As you say yourself, there is very little you can do. You are right to try and find something that will allow them to max the tax gains, but it would all need to be a product that is very close to cash, given the time frame, which of course does not make it very attractive to the financial institutions.

Maybe talk to a broker to see if they can come up with anything as it is their daily bread and butter.

_Brian

Typical “don’t trust anyone” rubbish and then expecting someone to pull a rabbit out of a hat at the last minute.

I suppose their employer conspired with the government and banks and everyone to keep them on bad conditions, nothing they did themselves??

It really is too late to do anything at 60 for a retirement at 66.

The best thing they can do is tell as many people as possible just how foolish they’ve been and hope someone will learn from their mistake.

SCOOP 64

The comments on here, the ops friend wont starve to death after 66,still get state pension and sounds like he has savings,so just some advice on what best to do with it, be it late in the day.

Jim2007

SCOOP 64 wrote: »

The comments on here, the ops friend wont starve to death after 66,still get state pension and sounds like he has savings,so just some advice on what best to do with it, be it late in the day.

The main idea was to see if there was a way to benefit from the tax savings at least....

Donald Trump

SCOOP 64 wrote: »

The comments on here, the ops friend wont starve to death after 66,still get state pension and sounds like he has savings,so just some advice on what best to do with it, be it late in the day.

Exactly. Nobody is asking for amazing returns. It's a question on how to maximize tax benefits.


Say the man has 60k in savings. He can forgo 12k a year in income to put 100k into a pension pot. Then start drawing it down. Seems like a no-brainer.



I am also aware though that there is the 4% pension levy thing. I wanted to know whether there were any other drawbacks. I assumed that some people on here would be knowledgeable so I'm asking those and am grateful for their answers.

cnocbui

Your 'friend' needs to think of moving to Bulgaria, just as many Greek pensioners and others form other European countries are doing who don't have sufficient retirement income. There is no magic solution at age 60, other than that sort of game changer. Far too late.

Donald Trump

cnocbui wrote: »

Your 'friend' needs to think of moving to Bulgaria, just as many Greek pensioners and others form other European countries are doing who don't have sufficient retirement income. There is no magic solution at age 60, other than that sort of game changer. Far too late.

Note that I never said the person is in any danger of being poor or struggling.



It is a question of how to maximize potential tax benefits. I assume they are paying top rate of tax and I believe that an individual can put pre-tax money into a pension.

I'm no Warren Buiffet but I believe that if they can delay the consumption of that 12k now and pull it out of some kind of cash-fund pension in 5 years as 20k then I think that would be a good return!


Nothing to do with moving to Bulgaria or anywhere else

lalababa

Would he not get the state pension? And the little work pension he has. And his savings. He won't be paying rent? And if that's not enough a few days work? Pensioners don't pay tax AFAIK below 30k?
He should be in a comfortable enough place financially unless he has an expensive lifestyle: new cars/holidays/restaurants/pub drinks like a fish??

Donald Trump

lalababa wrote: »

Would he not get the state pension? And the little work pension he has. And his savings. He won't be paying rent? And if that's not enough a few days work? Pensioners don't pay tax AFAIK below 30k?
He should be in a comfortable enough place financially unless he has an expensive lifestyle: new cars/holidays/restaurants/pub drinks like a fish??

It's not a question about lifestyle.


It's a question about maximizing potentially available tax benefits now!


I might have mentioned it in one or two earlier posts

cnocbui

Donald Trump wrote: »

Note that I never said the person is in any danger of being poor or struggling.



It is a question of how to maximize potential tax benefits. I assume they are paying top rate of tax and I believe that an individual can put pre-tax money into a pension.


So it beats me as to why you think that moving to Bulgaria is going to give him this, or similar, tax benefit for his last few years employment. It's irrelevant.

You implied that the person in question has no substantial savings whatsoever:

Unfortunately never really believed in "locking away" money and wouldn't have had a lot to lock away anyway.

Now you are suddenly changing the story from 'wouldn't have a lot to lock away anyway' to: 'I never said the person is in any danger of being poor or struggling.'

You are contradicting yourself. Which is it? Wittering away about tax advantages and 'strategies' and 'most efficients' for someone with a hypothetical paltry €60K is just whistling in the wind if your original statement about inadequate savings is true. It's not going to make a meaningful difference to the fact of a wholly inadequate capital base to fund retirement from. If someone doesn't have sufficient capital squirelled away by 60, they are effectively borked, and the Bulgarian option is immensely sensible as it would make a real difference whereas all your tax efficiencies are wholly irrelevant.

SteM

Donald Trump wrote: »

I'm no Warren Buiffet but I believe that if they can delay the consumption of that 12k now and pull it out of some kind of cash-fund pension in 5 years as 20k then I think that would be a good return!

It would be a fantastic return but where did you get the number from though?

The Money Market category average for Irish individual pensions funds for 5 years to 01/01/2019 was .75%.

The best performing cash fund during that time period grew 5.25%.

My understanding is that people that have been paying into a pension their whole lives would transfer to a cash fund closer to retirement because it's low risk but low return, they're essentially protecting their lifetime investment.

Your friend should see an independent financial adviser asap.

Donald Trump

cnocbui wrote: »

You implied that the person in question has no substantial savings whatsoever:



Now you are suddenly changing the story from 'wouldn't have a lot to lock away anyway' to: 'I never said the person is in any danger of being poor or struggling.'

You are contradicting yourself. Which is it? Wittering away about tax advantages and 'strategies' and 'most efficients' for someone with a hypothetical paltry €60K is just whistling in the wind if your original statement about inadequate savings is true. It's not going to make a meaningful difference to the fact of a wholly inadequate capital base to fund retirement from. If someone doesn't have sufficient capital squirelled away by 60, they are effectively borked, and the Bulgarian option is immensely sensible as it would make a real difference whereas all your tax efficiencies are wholly irrelevant.

You trying to offload a half built Bulgarian apartment you foolishly bought during the Celtic tiger or something?




You need to understand the difference between past tense and present tense. "wouldn't have had a lot to lock away anyway" is past tense and refers to locking cash into a financial product. A person can be relatively well off and secure in terms of assets but not have a lot of liquidity. C'mon, this is basic 101 stuff. This is supposed to be the "Banking, insurance and pensions" forum. I'm not expecting everyone to be an expert but I wouldn't have expected to be getting aggressively attacked by people who don't appear to know basic concepts and want to spin their own facts.




Regardless of that, it's irrelevant to the question at hand. This is only a distraction and an attempt to pull the direction of the thread off into some argumentative tangent. Does it matter if the person had an income of 10k a year or 500k a year in the past? Answer is no. Question is that they are not currently availing of pension tax benefits and I think they are missing an opportunity. You are free to promote Bulgaria all you like. I don't care

Squatter

ted1 wrote: »

Is it legal for someone to be kept on such a contract for so long ? Would he have got a company one had he been permanent? Might be worth talking to a solicitor to see

This.

Although he probably doesn't trust lawyers and would be horrified at the thought of paying for legal advice!

Donald Trump

SteM wrote: »

It would be a fantastic return but where did you get the number from though?

Simplified (not exact) reasoning below. Made up numbers



Suppose Pat and Mike both have an income of 70k currently. Twins so both are 60 years old. Both retire at 65. Consider the last marginal 20k. Focus on that for this discussion.



Pat decides to bung that 20k into some sort of pension and effectively have an income (for current income tax purposes) of 50k. Repeat for 5 years. There is now 100k in the pension pot which will be taxed when withdrawn. Assume that when withdrawn, it will be at the lower rates (or even within tax credits etc).


Now, Mike takes the other option and takes their full 70k and pay tax on it. Mike pays 40% on that extra 20k. So it becomes 12k. Which he is free to do what they like with. He puts it in the Bank




Pat has a pension fund of 100k. Mike has savings of 60k. Pat will pay tax on his income as he withdraws it from the pension. Mike can do what he wants with his savings. Difference is that if neither has any other income, Mike can pay little to no tax on his pension pot.


Who will be better off?

cnocbui

Donald Trump wrote: »

You trying to offload a half built Bulgarian apartment you foolishly bought during the Celtic tiger or something?

You need to understand the difference between past tense and present tense. "wouldn't have had a lot to lock away anyway" is past tense and refers to locking cash into a financial product. A person can be relatively well off and secure in terms of assets but not have a lot of liquidity. C'mon, this is basic 101 stuff. This is supposed to be the "Banking, insurance and pensions" forum. I'm not expecting everyone to be an expert but I wouldn't have expected to be getting aggressively attacked by people who don't appear to know basic concepts and want to spin their own facts.

Regardless of that, it's irrelevant to the question at hand. This is only a distraction and an attempt to pull the direction of the thread off into some argumentative tangent. Does it matter if the person had an income of 10k a year or 500k a year in the past? Answer is no. Question is that they are not currently availing of pension tax benefits and I think they are missing an opportunity. You are free to promote Bulgaria all you like. I don't care

my level of financial understanding is such that your whole thread seems to be a deliberate wind up. I'll gladly leave you and anyone who can't see through your nonsense to it.

Donald Trump

Squatter wrote: »

This.

Although he probably doesn't trust lawyers and would be horrified at the thought of paying for legal advice!

"This" is current legislation.
"This" was not always the case.




Look, if you don't know the answer to what I asked (which I assumed was a simple question) then start your own thread on this other matter and I will explain more of it to you. It's not relevant

Donald Trump

cnocbui wrote: »

my level of financial understanding is such that your whole thread seems to be a deliberate wind up. I'll gladly leave you and anyone who can't see through your nonsense to it.

I can assure the right learned gentleman that there is tax relief for pensions. It is not a wind up. It might be too advanced of a topic for you right now, but don't worry. Perhaps in a few years you will be able to grasp it.

AndrewJRenko

What kind of salary will he be earning for the remaining working years?

Squatter

My considered advice is to find a large plastic parking cone and sit on it.

Donald Trump

AndrewJRenko wrote: »

What kind of salary will he be earning for the remaining working years?

Assume that he will be paying tax at the higher rate for the next few years. I am not asking people for an Investment Policy Statement tailored for any specific individual.



Just whether there are people here who have experience with some types of product that might be available that could save a chunk of that 40% tax right now. (I know there are percentage limits of salary that you can contribute etc.)


The product need to be would be short term, qualify for the pension relief, close to risk-free


Simple request and hardly a wind up. You don't need to know a persons entire history to answer it

Donald Trump

Squatter wrote: »

My considered advice is to find a large plastic parking cone and sit on it.

Well at least that solves the mystery of how you chose your username.




:pac:

ghostdancer

for the tax benefits I would assume it would make sense, same as putting money into a pension pot at any other age really.
they'd probably be best sitting down with an IFA and figuring out how much they can put away, and what their requirements are for draw-down.

Donald Trump

ghostdancer wrote: »

for the tax benefits I would assume it would make sense, same as putting money into a pension pot at any other age really.
they'd probably be best sitting down with an IFA and figuring out how much they can put away, and what their requirements are for draw-down.

Well the extra advantage would be that they don't have to wait too long for it. If I forego 12k and stick 20k into a pension and say get a 2% real return on that then I'll have roughly 40k real after 35 years.
There might be a chance that the utility of that 12k might be worth more to me now than the 40k in 35 years. I might be able to buy a nicer house or invest it some other way. But if I only have 5 years to wait and I don't have needs/plans/use for the money now, it's additional incentive to stick it away in what would effectively be a medium term savings account


Anyway, I digress

JimBurnley

The contributions your friend can make depends on their current earnings. As he is aged over 60, he can contribute 40% of his total earnings (total earnings in this calculation is limited to €115k). So for instance, if he earns €50k, he can contribute €20k a year. In this example, €20k is the maxm from all pension contributions, so if he is still paying to his company scheme (say €2k a year) then he can make an additional €18k contribution.

It's also worth noting that you can backdate contributions by one year, so he can retrospective pay a 2018 contribution as well as 2019 this year, the deadline for backdating is the end of October of the following year (so 30/10/19 is the deadline for the 2018 tax year).

You are correct that there is tax relief on these contributions.

As suggested above, an ARF/AMRF would be the best product if he wishes to gradually drawdown his income rather than purchase an annuity. There are some restrictions on these.

Hope that helps somewhat on the potential options, but I would definitely recommend your friend see a financial adviser as everyone's personal situations are different. They should be able to advise accordingly and will also go through the restrictions mentioned above in more detail.

The J Stands for Jay

Put the money into a PRSA or personal pension, invested in a cash fund. No returns, but at this stage the tax relief is providing the returns.

Then retire taking 25% tax free and the rest in an ARF, assuming there's no complications with the earlier pension.

The J Stands for Jay

Donald Trump wrote: »

I am also aware though that there is the 4% pension levy thing. I wanted to know whether there were any other drawbacks. I assumed that some people on here would be knowledgeable so I'm asking those and am grateful for their answers.

What's this 4% levy you're on about? Do you meam the 0.6%/0.75%/0.15% levy theu had going for a few years?

Or are you getting mixed up with AMRF withdrawals?

The J Stands for Jay

SteM wrote: »

It would be a fantastic return but where did you get the number from though?

The Money Market category average for Irish individual pensions funds for 5 years to 01/01/2019 was .75%.

The best performing cash fund during that time period grew 5.25%.

My understanding is that people that have been paying into a pension their whole lives would transfer to a cash fund closer to retirement because it's low risk but low return, they're essentially protecting their lifetime investment.

Your friend should see an independent financial adviser asap.

The return is from tax relief.