Why are people obsessed with getting a pension

partyguinness

BailMeOut wrote: »

Is CGT on the sales price or on profit you made from the house?

Yes it is on the net profit- you can write off selling and buying expenses, any costs that went on improvements and before you could write off the mortgage interest paid but that may be gone now.

There is also a small annual allowance.

A tax on the 'gain' so to speak.

Geuze

BailMeOut wrote: »

Is CGT on the sales price or on profit you made from the house?

CGT is a tax on GAINS, as can be seen from the name of the tax.

It is a tax on gains made from disposing of assets.

Geuze

partyguinness wrote: »

Yes it is on the net profit- you can write off selling and buying expenses, any costs that went on improvements and before you could write off the mortgage interest paid but that may be gone now.

There is also a small annual allowance.

A tax on the 'gain' so to speak.

Mortgage interest is not relevant to CGT. It never was.

Mortgage interest is an allowable expenses against the income tax on rental income.

.......

partyguinness wrote: »

Yes it is on the net profit- you can write off selling and buying expenses, any costs that went on improvements and before you could write off the mortgage interest paid but that may be gone now.

There is also a small annual allowance.

A tax on the 'gain' so to speak.

You also pay tax on all rental income - not just the profit portion of it.

And you have to maintain the property, and you take a big risk if a tenant decides to stop paying but stay put.

There is zero tax benefit.

I think the idea of buy to let versus a pension is a pretty bad one financially.

hmmm

....... wrote: »

I think the idea of buy to let versus a pension is a pretty bad one financially.

It's also putting all your eggs in one basket - Irish property and the rental market. It's poor financial planning - if it works well and good, but it's too big a risk in my view.

Having a rental property or two might be fine if you have some diversification. If you're buying equities, effectively what you're buying is a tiny part of multiple companies, usually spread all over the world.

relax carry on

....... wrote: »

You also pay tax on all rental income - not just the profit portion of it.

And you have to maintain the property, and you take a big risk if a tenant decides to stop paying but stay put.

There is zero tax benefit.

I think the idea of buy to let versus a pension is a pretty bad one financially.

You pay income tax on your taxable profit after allowable expenses and capital allowances. You pay USC on taxable profit after allowable expenses but before capital allowances. You pay CGT on your taxable gain if you have one when you sell the property.

Unless you have zero expenses to reduce your taxable rental income, I don't see how you pay tax on all your rental income.

Most rental property owners would likely have a mortgage which they are paying down either fully or partially with the rental income leaving them with an asset at the end of the loan which may have increased in value.

AndrewJRenko

relax carry on wrote: »

Most rental property owners would likely have a mortgage which they are paying down either fully or partially with the rental income leaving them with an asset at the end of the loan which may have increased in value.

Though the capital repayments on the mortgage aren't valid expenses when calculating your taxable profit.

partyguinness wrote: »

It is hard not to suspect that the whole pensions industry is a bit of a cod.

As alluded to by the OP, you are meant to save for 40 years into some pension product sold by a financial institute to live for say 10-15 years if you are lucky to live that long in the first place.

Sure it make perfect sense on the face of it but by the time you are 70 odd, your expenses will have plummeted (hopefully) and you'll be some auld lad with replacement hips sitting on a big wad of cash that you have feck all interest in spending it. Trips to the GP will be the highlight of the week. And all the while the pension provider have made a nice earning from your contributions.

Personally it would make more sense to invest in a few buy to lets (easier said than done I know). At least you have regular income coming in during your fit and healthy years and hopefully a solid asset that will appreciate into the future.

It seems like you are wishing your life away- storing up for retirement. Feck that- you only get one life.

The whole pension industry is built around the generous tax relief you get on contributions. It's an unbeatable benefit.


And your pension fund manager won't be ringing you at 10pm on a Saturday night to fix a broken toilet.

donkey balls

I am with my current employer over 3 years now and have just over 60k in total contributions, I am trying to get the younger lads working there to put more into the AVC as well as the older lads.

Some have come around to my thinking others saying ah we have years to go :eek:Some of the older lads are going start putting more AVC in once their mortgages are cleared.

Donald Trump

Midlife crisis man wrote: »

About myself: I don't have a pension. I came from a poor background and was never thought about the importance of financial awareness.

Good chance that you might end up poorer than you started unfortunately if that is your way of thinking

Jim2007

partyguinness wrote: »

It is hard not to suspect that the whole pensions industry is a bit of a cod.

One can only hope that you are joking, because if not you are setting yourself up for a very miserable future.

partyguinness wrote: »

As alluded to by the OP, you are meant to save for 40 years into some pension product sold by a financial institute to live for say 10-15 years if you are lucky to live that long in the first place.

These days people retire early and with medical advances people live longer, so it is not at all unrealistic to expect to live say 25 years and to be active as well. So if you want to spend your retirement sitting around at home while your friends are off enjoy extra holidays etc.. because they have the savings to do so and you don't. That is your business.

partyguinness wrote: »

Sure it make perfect sense on the face of it but by the time you are 70 odd, your expenses will have plummeted (hopefully) and you'll be some auld lad with replacement hips sitting on a big wad of cash that you have feck all interest in spending it.

Except your expenses are more likely to have increased rather than declined. You'll have time on your hands and be looking for something to do or you will have medical issues and most like want to have additional medical services etc that are not covered by insurance.

partyguinness wrote: »

Personally it would make more sense to invest in a few buy to lets (easier said than done I know). At least you have regular income coming in during your fit and healthy years and hopefully a solid asset that will appreciate into the future.

Clearly you have very little understanding of being a landlord nor even seem to appreciate that most people who went with this idea have been wiped out, stitting on negative equity or are only now starting to see a recovery.

partyguinness wrote: »

It seems like you are wishing your life away- storing up for retirement. Feck that- you only get one life.

You are right, you do only live once. The question is do you want to live 20+ years if it in misery.

partyguinness

I was being deliberately provocative. Surprised it took this long for someone to take the bait.

Jim2007 wrote: »

Except your expenses are more likely to have increased rather than declined. You'll have time on your hands and be looking for something to do or you will have medical issues and most like want to have additional medical services etc that are not covered by insurance.

Not sure I would necessarily agree with that.

- You eat and drink less as your metobolism slows
- You no longer have a commute and associated costs
- Car insurance drops if you even bother to maintain a car
- Children grown up- hopefully
- Mortgage should be paid off although it would be unusual to retire with a mortgage
- Expensive gadgets and fashion- could you be bothered
- Expensive boozy weekends away with the lads- no way

Sure other sedate interests take over.

Jim2007 wrote: »

Clearly you have very little understanding of being a landlord nor even seem to appreciate that most people who went with this idea have been wiped out, stitting on negative equity or are only now starting to see a recovery.

I have a wonderful understanding of what is like to be a landlord- I am one and I run my own business. You seem to assume that every landlord bought in 2006/2007 at the height of the market to fill up houses with Poles and happy days. I worked in a property related professional services industry in Ireland from 2002 to 2010. Trust me- I saw some eye watering transactions that stunned me. Plenty of budding landlords sat in front of me with dreams of easy money- I saw the very worst of the Celtic Tiger excesses and I am just glad I got out with little damage. Lost a couple of grand on BOI and Anglo shares but that was a luck escape. At one stage I nearly bought a BTL for €200k that was selling for €40k 3 years later. I imagine they are now in a negative equity wonderland. Don't assume everyone fits that bill.

Jim2007 wrote: »

You are right, you do only live once. The question is do you want to live 20+ years if it in misery.

Who said anything about misery? There are other options out there:-

- Savings
- Business assets- My business is worth nearly £400k net
- Inheritance even

Of course having a pension is a good idea but I do cast a jaundice eye over it. There are other options to supplement paying in. My point is that don't put all your eggs in one basket and of course everyone has different circumstances and paying in is the only option.

The Government will simply take its chunk in due course to pay for your care home fees. I see it in the UK now- elderly people deliberately running down their assets/savings etc so the Gov has nothing to take and just rely on the NHS as pay back for years of taxes. What happens in the UK now will happen in Ireland further down the line.

I am just a little loathe to hand over my hard earned money on a regular basis to some suit to see it locked away for decades and with a very real possibilty that I may never see a penny of it. And guess what? I am a suit and i don't plan on retiring.

AndrewJRenko

partyguinness wrote: »

Of course having a pension is a good idea but I do cast a jaundice eye over it. There are other options to supplement paying in. My point is that don't put all your eggs in one basket and of course everyone has different circumstances and paying in is the only option.

Any professional pension fund does exactly this - your investment is spread all over the world, across different industry sectors. So if (for example) the US finance sector crashes, this might affect 2% or 3% of your investment, while your investments in the Korean tech sector booms.


It is the only option to avail of the very generous tax relief.

BailMeOut

The golden rules for personal finance are

1. Pay off your debts
2. Save for a rainy day
3. Secure your retirement years

Everyone should be doing these three things.

Squall Leonhart

BailMeOut wrote: »

The golden rules for personal finance are

1. Pay off your debts
2. Save for a rainy day
3. Secure your retirement years

Everyone should be doing these three things.

Fair enough, but not strictly independently in that order. Doing all 3 simultaneously would be good for most people.

Paying down debts ASAP will save money on interest, and "earn" you more money than if you had it just sitting in a savings account, but sustainable debt isn't a bad thing.

Eg, putting 100 a month towards a loan and 100 a month to savings may serve you better than putting 200 a month to your loan and 0 to your savings.

Unexpected car repairs, home repairs etc can land you in a sticky situation if you've no money to pay for it. Being 6mths from clearing your loan instead of 12 won't help in that situation.

decky1

If your not interested in a pension make sure you save a bit of money some way or another i did neither when i was younger regret it a bit now, i'm not near pension age yet but you need a bit of back up in later life , things can change so quickly.

Squall Leonhart

decky1 wrote: »

If your not interested in a pension make sure you save a bit of money some way or another i did neither when i was younger regret it a bit now, i'm not near pension age yet but you need a bit of back up in later life , things can change so quickly.

I think a benefit of a pension, tax aside, growth aside, is that its locked away savings. Regular savings can be dipped in and out of. If everybody had free access to their pension whenever they wanted it then lots would get to pension age with nothing left because they bought that car, built that extension, took that holiday, etc etc

Jim2007

Squall Leonhart wrote: »

I think a benefit of a pension, tax aside, growth aside, is that its locked away savings. Regular savings can be dipped in and out of. If everybody had free access to their pension whenever they wanted it then lots would get to pension age with nothing left because they bought that car, built that extension, took that holiday, etc etc

There is a lot of research in the are of Behavioural Finance to support your opinion. The best excuse used is that if I do this I will actually save money and so I will be able to build the fund back up quickly and even add more because of my new reduction in living costs... except it never happens.

DSN

Incredibly condesending attitude by some towards retired people here. Am laughing at the idea that when I retire I'll want to get rid of all expensive gadgets, netflix, spotify & be happy with odd day trips to the seaside for holidays. If anything I hope that since I'll have more time I'll be looking to do even more stuff. I think that attitude is very outdated & certainly not working all my life to end up just 'existing' on whatever the state pension ends up being. Always put even a little bit aside for pension even when was on low wages. Yes could die 2moro (could say that about anything) or worse end up with some awful illness & not enjoy it (in which case i'll be glad to have money to pay for good care). Dont stick your head in the sand until it's too late.

For many struggling to pay rent and with little hopes of buying their own place to live the concept of saving for retirement isn't a priority.

BailMeOut

Augeo wrote: »

For many struggling to pay rent and with little hopes of buying their own place to live the concept of saving for retirement isn't a priority.

but it is because of the fact a people may never own their own homes means that a pension is more important than ever before. There is always some amount, even if tiny, you can save even if you are struggling.

Jim2007

Augeo wrote: »

For many struggling to pay rent and with little hopes of buying their own place to live the concept of saving for retirement isn't a priority.

Most people in mainland do not own their own home, nor have they any desire to do so. People need to realise that a housing policy based on people taking on huge amounts of debt or relying on social services to but a roof over peoples heads does not work, it never has.

In investing terms we consider a portfolio with over around 7% of it holds in property to be a high risk portfolio. Yet in Ireland we encourage to put 100% of their savings into property! No wonder Irish households lost more in family wealth during the last recession than most mainland Europeans.

The housing shortage in Ireland will not be solved until people see through the marketing nonsense about getting on the property ladder and realise that renting is an acceptable alternative and in fact is more appropriate for most people.

.......

Jim2007 wrote: »

The housing shortage in Ireland will not be solved until people see through the marketing nonsense about getting on the property ladder and realise that renting is an acceptable alternative and in fact is more appropriate for most people.

We dont have a functioning rental market. And never have done.

Squall Leonhart

Valid points Jim, but I know that I for one would not like to be in my 60s or above and trying to rent in the likes of Dublin with no income bar a pension which is likely to be substantially lower than a working income.

I don't believe Ireland is set up to accommodate this and there will be a lot of people in a lot of bother in the next 20-30 years.

Jim2007

Jim2007 wrote: »

.............

In investing terms we consider a portfolio with over around 7% of it holds in property to be a high risk portfolio. .............

In investing terms lots of the portfolio in equities is also high risk.

"Yet in Ireland we encourage to put 100% of their savings into property" ........... I'm not sure who encourages that to be honest.

Geuze

The Govt decided to go ahead with auto-enrolment yesterday.




Regina Doherty was on Morning Ireland just now.

19 issues were decided at cabinet yesterday.

Decisions were deferred on 5 issues

1) The rate of the government contribution
2) What happens on retirement
3 & 4) The structure and governance of the Central Processing Authority
5) The number of pension providers.



https://www.askaboutmoney.com/threads/cabinet-approves-auto-enrolment-scheme.214772/#post-1631445

Geuze

The key features agreed today include:

Current and new employees aged between 23 and 60 years of age and earning €20,000 or above per annum across all employments will be automatically enrolled;
Employees earning below €20,000 per annum and employees aged under 23 and over 60 will be able to ‘opt-in’ to the system;
There will be no employee waiting period before enrolment;
Employees who are existing members of a pension scheme/contract which meets prescribed minimum standards and contribution levels will not be automatically enrolled;
Employers will be required to make a matching (tax deductible) contribution on behalf of the employee i.e. at a specified contribution rate;
Employer contributions will be limited to a qualifying earnings threshold of €75,000 – which will be reviewed over time;
Contributions during the first six months of membership will be compulsory;
Member opt-out of the system will be facilitated in a two month ‘opt-out window’ (between the start of the 7th month and the end of the 8th month);
Thereafter, a limited number of ‘Savings Suspension periods’ will be facilitated for members who wish to temporarily cease making contributions. Employer and State contributions will also cease in this scenario;
Members who opt-out will be automatically re-enrolled after three years but will have the ability to opt-out again under the same circumstances outlined above; and

Early access to accumulated retirement savings may be provided on the grounds of ill health and enforced workplace retirement.
A Central Processing Authority (CPA) will be established by the State and will be responsible for sourcing, on a competitive basis via an open tender, a limited number of Registered Providers to provide a defined suite of retirement savings options;
The CPA will establish minimum standards for service delivery and product features required of all providers, e.g., the number of investment fund options for members, service response times, etc.;
Employees will be automatically enrolled with the Central Processing Authority by their employer on commencement of employment;
Employees (rather than employers) will be responsible for selecting a provider and a savings fund option. In the absence of any savings decision, the enrolled employee will be automatically allocated to the default fund of one of the Registered Providers on a carousel basis;
The initial contract period for service delivery by Automatic Enrolment Registered Providers will operate for a period of ten years;
The CPA will seek to set annual administrative, management and investment charges of no more than 0.5% of assets under management. This charges cap will apply to all providers;
Each Registered Provider will be obliged to offer a similar range of ‘standard choice’ savings fund options including a default fund for those who elect not to exercise choice;
These funds will operate on a Defined Contribution basis;
These products may incorporate a ‘lifestyle’ or ‘target date fund’ investment approach and will be defined by reference to risk profile;
Members will be entitled to transfer funds accumulated in the automatic enrolment system (contributions plus investment returns minus investment and management fees) between the savings products;
Invested funds and scheme membership will follow the member when members change employments.

FernandoTorres

Why are they limiting it to a few selected providers with 10 year contracts? Sounds rife for a dodgy bidding process. Surely they should just set minimum criteria and then let any company set up a qualifying product. If they actually have people's best interests at heart then competition is healthy.


I hope they allow some flexibility in terms of investment options and don't just have "easy to understand" rubbish lifestyle options. Also they badly need to look at options at retirement. Forcing people to buy an annuity is archaic, it should be more in line with what the UK and Australian systems allow.

Jim2007

FernandoTorres wrote: »

Why are they limiting it to a few selected providers with 10 year contracts? Sounds rife for a dodgy bidding process. Surely they should just set minimum criteria and then let any company set up a qualifying product. If they actually have people's best interests at heart then competition is healthy.

Because this thing is going to have to be supervised a lot more closely and dramatic reform of the pensions industry is required. And no competition is not in the people's best interests when all the options are lousy.

FernandoTorres wrote: »

I hope they allow some flexibility in terms of investment options and don't just have "easy to understand" rubbish lifestyle options. Also they badly need to look at options at retirement. Forcing people to buy an annuity is archaic, it should be more in line with what the UK and Australian systems allow.

Those archaic method as you put it work where as those 'new' methods do no. Allowing people to manager their own funds results in very few of them even ending up with the money they put in.. The average US citizen on a self directed pension fund ends up with assets of about 23k on retirement age... the average Swiss citizen on a state directed pension fund ends up with about 500k.. stick with the Swiss!

There are 94 authorised pension funds in Switzerland and they all must operate according to state rules:
- No entry or exit fees
- No transaction costs
- Portfolio must be in accordance with the state guidelines
- Holdings in the portfolio must be chosen from a list of state approved a securities
- Fund must meet a minimum annual return set by the state.

Now the last point is interesting because it basically amounts to a guaranteed return on equities and if the fund fails to meet the return, then the asset manager must come up with the difference. It's a complicated calculation and it does not mean a fund can't generate a loss, it makes it very difficult to do so.

Here is the thing in the 30 years I've been involved in the Swiss pension industry, not one of those companies have decided to get out of the business or report a loss. That and the fact that there are several other companies trying to be authorised, suggests there is money to made even with the restrictions.

Don't be fooled into thinking that completion is always good for the public.. in fact if the industry is supporting the idea, it probably is not.

lawred2

lawred2 wrote: »

me and you will pay for it

and his pension

sweet deals all round

Taxes on the pensions of people who saved for their pensions.

The J Stands for Jay

FernandoTorres wrote: »

I hope they allow some flexibility in terms of investment options and don't just have "easy to understand" rubbish lifestyle options. Also they badly need to look at options at retirement. Forcing people to buy an annuity is archaic, it should be more in line with what the UK and Australian systems allow.

Those lifestyle options usually end up being a bag idea for most people.

There already is flexibility in retirement options here. Loads of people don't end up with annuities. The UK system has only recently changed to be more flexible, but it still isn't as flexible as our system (it forces them to buy an annuity eventually, I think at age 75).