Why are people obsessed with getting a pension

rhubarbcustard

Emmie Sparse Starlight wrote: »

You are too far from retirement to take those types of moves to low or zero risk.

Thanks both. I'll sort it asap back to default and just let it do its thing.

kippy

Ace2007 wrote: »

How is it impossible to back up?

CARE scheme is a reduction on the final salary based scheme - are you saying that's not true?


CARE scheme is considerable better than DC. In the DC world the member takes all the risks.

Even just do some simple math and you can see how much of a DC fund value you would need to get the same pension as one would in a CARE scheme.

Very rough calcs 30 year old with 60k salary joins the CARE scheme in 2018 and works until their NRA - 68. 38 years service, should see a lump sum of ~90K, and pension of 18k + state pension.

An annuity with the same level of increases would be approve 26/1 at the moment - maybe a little dear, so 18K*26 = 468K +90K = 558K,

DC contribution rates vary per industry from very generous to terrible. So assume employee puts in 5% and employer 10%, so 15% per annum, so 9k per year. you would probably end up with a fund of maybe 400k if your lucky with investment return - which will reduce as you get closer to retirement.

So DC you take all the risk, there is no guarantee how much your fund will be at retirement, nor is there any guarantee how much an annuity will cost you. So purely from a pension/annuity point of view a CARE scheme is much better than a DC scheme.

Its impossible to back up because there are far too many variables

Why are you calculating pension contributions on the private side but not on the public side?
Are you taking ng account of the COAP contribution which would be in addition to a private sector pension at retirement but part of 2 of the 3 public sector pensions?

Ace2007

kippy wrote: »

Its impossible to back up because there are far too many variables

Why are you calculating pension contributions on the private side but not on the public side?
Are you taking ng account of the COAP contribution which would be in addition to a private sector pension at retirement but part of 2 of the 3 public sector pensions?

You can calculate the contributions if you want on the CARE side, which be around 5k a year increasing year on year, but at the end of the day, if the market crashes, or whatever it doesn't matter as the state pays out your pension, unlike in the DC Scheme, whereby you get whatever your fund can buy.

I have ignored the state pension in both calcs, I said public CARE would be 18k + state pension, so then I ignore the state pension when comparing it to a private DC scheme.

You'll see I also assume that the DC scheme doesn't have state offset in the calcs like many schemes still have. Just think how much more one would have to save if the state pension offset is applied to their DC contributions...

Squall Leonhart

This whole thing gives me a headache.

I read about people saying "aim for a pension pot of at least 800,000" or "I'll retire when I hit the million mark".

It seems like a ferocious amount of money needs to be paid in each and every month to achieve these levels.

Current pension pot value is a meagre 18,000eur. I am coming up on 33.

I guess I need to up my game! I'm putting 8.5% and my employer 4%.

ytpe2r5bxkn0c1

Squall Leonhart wrote: »

This whole thing gives me a headache.

I read about people saying "aim for a pension pot of at least 800,000" or "I'll retire when I hit the million mark".

It seems like a ferocious amount of money needs to be paid in each and every month to achieve these levels.

Current pension pot value is a meagre 18,000eur. I am coming up on 33.

I guess I need to up my game! I'm putting 8.5% and my employer 4%.

You are forgetting that the funds are invested over a considerable period and the power of compounded interest/return. A monthly input of €1000 to a fund averaging a 5% return, and increasing payments by a mere 1.5% Per annum, gives over €1million after 30 years.

Squall Leonhart

Emmie Sparse Starlight wrote: »

You are forgetting that the funds are invested over a considerable period and the power of compounded interest/return. A monthly input of €1000 to a fund averaging a 5% return, and increasing payments by a mere 1.5% Per annum, gives over €1million after 30 years.

Thanks Emmie Sparse Starlight.

I'm doing the sums and a monthly contribution of 1,000 doesn't seem possible, even including employer contributions. I might get to 700 moving some things about.

The 5% average return, how realistic is this? I know some people will say 10% is possible, but I err on the side of caution and have used 3% iny compound interest calcs.

With 30 years at above figures, a 500K pot seems possible.

Bobeagleburger

Squall Leonhart wrote: »

Thanks Srameen.

I'm doing the sums and a monthly contribution of 1,000 doesn't seem possible, even including employer contributions. I might get to 700 moving some things about.

The 5% average return, how realistic is this? I know some people will say 10% is possible, but I err on the side of caution and have used 3% iny compound interest calcs.

With 30 years at above figures, a 500K pot seems possible.

Remember though, in 10 years you may be earning more and therefore able to contribute more.

Put in what you can afford now.

ytpe2r5bxkn0c1

Squall Leonhart wrote: »

Thanks Srameen.

I'm doing the sums and a monthly contribution of 1,000 doesn't seem possible, even including employer contributions. I might get to 700 moving some things about.

The 5% average return, how realistic is this? I know some people will say 10% is possible, but I err on the side of caution and have used 3% iny compound interest calcs.

With 30 years at above figures, a 500K pot seems possible.

Check the performance of various funds. The average annualised rate over the past ten years has been 8.8%. See what your pension fund has been achieving.

Your contribution should keep pace with salary increases, so that €700 will grow over the years too.

AndrewJRenko

Ace2007 wrote: »

How is it impossible to back up?

CARE scheme is a reduction on the final salary based scheme - are you saying that's not true?


CARE scheme is considerable better than DC. In the DC world the member takes all the risks.

Even just do some simple math and you can see how much of a DC fund value you would need to get the same pension as one would in a CARE scheme.

Very rough calcs 30 year old with 60k salary joins the CARE scheme in 2018 and works until their NRA - 68. 38 years service, should see a lump sum of ~90K, and pension of 18k + state pension.

An annuity with the same level of increases would be approve 26/1 at the moment - maybe a little dear, so 18K*26 = 468K +90K = 558K,

DC contribution rates vary per industry from very generous to terrible. So assume employee puts in 5% and employer 10%, so 15% per annum, so 9k per year. you would probably end up with a fund of maybe 400k if your lucky with investment return - which will reduce as you get closer to retirement.

So DC you take all the risk, there is no guarantee how much your fund will be at retirement, nor is there any guarantee how much an annuity will cost you. So purely from a pension/annuity point of view a CARE scheme is much better than a DC scheme.

I'm not sure where you got your figures from, but I'm seeing fairly different figures from a number of standard pension calculations. So a lot depends on the return.



Your comments on risk are a little simplistic too. DB scheme members run the much larger risk of having to rely on a 'promise'. Public sector DB scheme members know there is no pot of money with their name on it. They are exposed to the many risks you've outlined yourself of the sustainability or otherwise of public pensions.

AndrewJRenko

Franz Von Peppercorn wrote: »

There’s something particularly despicable about civil servants complaining about the “generous” tax relief the people paying for the civil servants incredible generous pensions get while it’s the private sector workers who end up in penury if they don’t set up a private pension. Meanwhile the private sector pays for all of that, and in return gets the worst public service is Europe.

Just to be clear, the generous tax relief is available to all - public sector and private sector. I saw a report recently claiming that most of the generous tax relief is in fact, claimed by public sector staff, though it wasn't clear to me if the data behind that claim was sound.


The generous tax relief is another government subsidy to the so-called 'squeezed middle'. It's crazy to be subsidising higher-rate tax payers like this, and much of the benefit ends up with the pensions industry rather than the pensioners.



And private sector workers don't have a monopoly on 'ending up in penury'. Low level public sector staff end up with little or no occupational pension on top of the standard old age pension, despite having made contributions for years. They'd take your arm off for the chance of getting a DC pension based on those contributions.


Availing of a tax relief does not negate an opinion on the validity of that tax relief. I thought the SSIA scheme was madness, but I made sure I availed of the benefit as long as it was available.

Monife

AndrewJRenko wrote: »

And private sector workers don't have a monopoly on 'ending up in penury'. Low level public sector staff end up with little or no occupational pension on top of the standard old age pension, despite having made contributions for years. They'd take your arm off for the chance of getting a DC pension based on those contributions.

Also, if a PS worker joins at 18 and retires at 68, they will have paid 50 years worth of pension contributions but only receive the benefit of 40 years. There is no facility to stop paying once you hit the 40 year mark.

Ace2007

Monife wrote: »

Also, if a PS worker joins at 18 and retires at 68, they will have paid 50 years worth of pension contributions but only receive the benefit of 40 years. There is no facility to stop paying once you hit the 40 year mark.

They could leave and get a job in the private sector and earn more money in the present day, and still have a full pension in the public sector at retirement.

Monife

Ace2007 wrote: »

They could leave and get a job in the private sector and earn more money in the present day, and still have a full pension in the public sector at retirement.

Most people in their late 50s/early 60s don't want to change careers or move jobs at that point in their life. Not to mention age discrimination is still prevalent and it's highly likely a younger candidate will be chosen over them.

relax carry on

Ace2007 wrote: »

They could leave and get a job in the private sector and earn more money in the present day, and still have a full pension in the public sector at retirement.

How would someone who leaves the public sector still have a full pension in the public sector at retirement?

Ace2007

relax carry on wrote: »

How would someone who leaves the public sector still have a full pension in the public sector at retirement?

If they left the public sector with 40 years service they would have a full pension. So in theory if they joined at age 20, and left at 60. They get full pension at 65.

Now I’m not sure how many would fall into that category to be honest. I’d say the majority of people won’t for all sorts of reasons,

Viscount Aggro

Theres a large number of foreign workers in Ireland, especially in the tech sector.
What are they doing for pensions? A lot of them are only here for a few years.

cormie

cormie wrote: »

I think if say for example, you're self employed with no dependents and think with that money you'd be putting away, you'd be able to generate more money for the future, by having that money available to invest now, and still have it available now should things get tight, or you find out you're terminally ill or something like that instead of not being able to touch it until you reach a certain age, then it makes a lot of sense not to put money towards a pension.

Self employed executive pension can be accessed at 50.
Planning in the event of being terminally ill, critical illness cover is your friend for that situation.

Monife

Ace2007 wrote: »

If they left the public sector with 40 years service they would have a full pension. So in theory if they joined at age 20, and left at 60. They get full pension at 65.

Now I’m not sure how many would fall into that category to be honest. I’d say the majority of people won’t for all sorts of reasons,

The new scheme, for 2013 entrants and beyond, the retirement age is linked to the state pension age, currently 68. For pre 2013 but post 2004, their pension is integrated with the state pension, which means at 65, they will get their full pension minus the state pension amount, which for some, would be too small to retire on.

The government brought in a lovely deal for these workers, they can continue working until they get their state pension but will only be paid at the first point of the scale. So if their salary at 64 was say approx 38 grand (for a clerical officer), their salary at 65 would be approx 23 grand.

Ace2007

Monife wrote: »

The new scheme, for 2013 entrants and beyond, the retirement age is linked to the state pension age, currently 68. For pre 2013 but post 2004, their pension is integrated with the state pension, which means at 65, they will get their full pension minus the state pension amount, which for some, would be too small to retire on.

The government brought in a lovely deal for these workers, they can continue working until they get their state pension but will only be paid at the first point of the scale. So if their salary at 64 was say approx 38 grand (for a clerical officer), their salary at 65 would be approx 23 grand.

I don't see what this has got to do with the question I was responding to. If you have 40 years service, you could leave the PS, go work in Private sector, and still be entitled to your full PS pension.

Ace2007

Viscount Aggro wrote: »

Theres a large number of foreign workers in Ireland, especially in the tech sector.
What are they doing for pensions? A lot of them are only here for a few years.

They all have DC pensions, if they leave within 2 years, they can take a ROC less tax, if they stay more than 2 years, then leave, they can leave their pot and let it grow, or take could take the value of the pot and transfer it to another pension scheme, assuming whatever country they go to allows for this.

AndrewJRenko

Ace2007 wrote: »

I don't see what this has got to do with the question I was responding to. If you have 40 years service, you could leave the PS, go work in Private sector, and still be entitled to your full PS pension.

Just what every 58 year old wants to hear - go find a new job in a new sector in a fairly ageist society, with a one-year probationary period because of some fairly arbitrary pension rule.

Monife

Monife wrote: »

...
The government brought in a lovely deal for these workers, they can continue working until they get their state pension but will only be paid at the first point of the scale. So if their salary at 64 was say approx 38 grand (for a clerical officer), their salary at 65 would be approx 23 grand.

Fair play to the government on that one.
The 65+ clerical officer won't be doing much for them to be fair.

Ace2007

AndrewJRenko wrote: »

Just what every 58 year old wants to hear - go find a new job in a new sector in a fairly ageist society, with a one-year probationary period because of some fairly arbitrary pension rule.

You say every 58 year old, as if there are thousands of them out there affected, I'd hazard a guess that it's a small minority that it may affect.

Firstly - you say a new sector - why does it have to be a new sector - how many public jobs don't have a private element - hospitals/schools all have private elements that would pay more now but have poorer retirement benefits in comparison.

Secondly, for these people, their pension is based off their salary at retirement, not on their salary when they hit the 40 year mark, so they are actually benefiting by getting the additional pension.

Thirdly, if there are people in their 30s/40s thinking that could be me in 20 years time, no one is forcing them to stay - go work in the private sector of they don't like the idea of paying towards their guarantee pension.

AndrewJRenko

Ace2007 wrote: »

You say every 58 year old, as if there are thousands of them out there affected, I'd hazard a guess that it's a small minority that it may affect.

Firstly - you say a new sector - why does it have to be a new sector - how many public jobs don't have a private element - hospitals/schools all have private elements that would pay more now but have poorer retirement benefits in comparison.

Secondly, for these people, their pension is based off their salary at retirement, not on their salary when they hit the 40 year mark, so they are actually benefiting by getting the additional pension.

Thirdly, if there are people in their 30s/40s thinking that could be me in 20 years time, no one is forcing them to stay - go work in the private sector of they don't like the idea of paying towards their guarantee pension.

It probably is a fairly small minority, but regardless, why should people be making career decisions like this over arbitrary rules like this? The rule should be changed - if you're not getting benefit, you shouldn't be making pension contributions.

Ace2007

AndrewJRenko wrote: »

It probably is a fairly small minority, but regardless, why should people be making career decisions like this over arbitrary rules like this? The rule should be changed - if you're not getting benefit, you shouldn't be making pension contributions.

you say not getting benefit, but their pension is still linked to their finally salary, not their salary after 40 years service.

Monife

Ace2007 wrote: »

you say not getting benefit, but their pension is still linked to their finally salary, not their salary after 40 years service.

Their final salary and their salary after 40 years are likely to be the same. Do you think PS workers get an increment EVERY year? There is a top point on each scale and once you reach that, there are no further pay increases (unless unions negotiate same).

AndrewJRenko

Ace2007 wrote: »

you say not getting benefit, but their pension is still linked to their finally salary, not their salary after 40 years service.

The vast majority of people with 40 years service would be at the top of their salary scale, so there would be no salary changes in those final years. There may be a small number who get promotions in those later years, but that would be a very small number.

Geuze

Ace2007 wrote: »

If you have 40 years service, you could leave the PS, go work in Private sector, and still be entitled to your full PS pension.

Correct.

But this doesn't just apply to the PS.

You could leave any employment which has a DB pension, with a full DB pension, after doing the full service to accrue a full DB pension, and then get a job somewhere else.

Example:

join bank in 1970 aged 20
leave in 2010 with 40 years service, aged 60, full DB pension
get a job somewhere else

This is unremarkable.

Ace2007

Geuze wrote: »

Correct.

But this doesn't just apply to the PS.

You could leave any employment which has a DB pension, with a full DB pension, after doing the full service to accrue a full DB pension, and then get a job somewhere else.

Example:

join bank in 1970 aged 20
leave in 2010 with 40 years service, aged 60, full DB pension
get a job somewhere else

This is unremarkable.

A lot of schemes had a min age of 25 before joining, to avoid this issue.obv some won’t but the numbers affected are so small, why? Because how many people stay in a private company for their entire life and never have taken unpensionable service? For instance unpaid maternity leave isn’t pensionable, career breaks, PT hours reduce service, all sorts of reasons why the numbers affected as tiny in the overall context.

Ace2007

AndrewJRenko wrote: »

The vast majority of people with 40 years service would be at the top of their salary scale, so there would be no salary changes in those final years. There may be a small number who get promotions in those later years, but that would be a very small number.

You said yourself the numbers we are talking about is small, so to say number of promotions would be small, or majority would be at top of scale.

What if unions renegotiate pay scales? Should someone who has 40 years service have that paid allowed for in pensionable salary calcs or is it ok to cap them at their 40 years pay for pension?

No doubt people will say that they should have it as their pension are the same that would say they shouldn’t have to pay contributions.

At the end of the day no matter what way you try to spin abnormalities, the same cost of a pension in the DC world is something only a handful of people could afford.

Like for like comparisons - public nurse v private nurse for instance. One accepts greater pay in retirement v one accepts better pay now.