2008 financial crisis cut pensions in half

bo0li5eumx12kp

https://www.thisismoney.co.uk/money/news/article-4877618/Financial-crisis-robbed-pensioners-half-income.html

Thoughts on what potential coronavirus economic impact could mean (as to retirement funds)?

Salary Negotiator

Anyone nearing retirement should be well diversified into low risk assets.

Jim2007

Aron Jealous Loop wrote: »

https://www.thisismoney.co.uk/money/news/article-4877618/Financial-crisis-robbed-pensioners-half-income.html

Thoughts on what potential coronavirus economic impact could mean (as to retirement funds)?

People who did the same dump thing twice can only expect the same outcome.

Since you refer to a UK article, British investors and their advisors consistent ignore all the research showing that property is one of the highest risk asset classes available to investors and pile in. Consensus advice is that portfolios holding more than about 6%/7% in property are very high risk and yet British investors go 50% or in some cases even 100% into property.

The typical Brit/Irish investor that lost heavily:
- Concentrated their investment in a single high risk asset class
- Failed to diversify within that class
- Borrowed to do so
In other words ignored all the conventional rules of thumb, when it comes to investing.

The bottom line is that if you construct a high risk portfolio, you should not at all be surprised if you pay the price when a recession hits.

bo0li5eumx12kp

So an typical pension that you pay into and get back after retirement etc - just so we're clear, those were or were not affected in any way during/after the 2008 crisis?

And large savings accounts, affected or no?

NIMAN

Aron Jealous Loop wrote: »

So an typical pension that you pay into and get back after retirement etc - just so we're clear, those were or were not affected in any way during/after the 2008 crisis?

And large savings accounts, affected or no?

Of course pension funds were affected after the 2008 crisis. By their very nature, your money is invested by your pension company into various things such as property, stocks, shares, equities, bonds, gilts etc etc. And the financial crisis of that time meant these investments took a hit.

Same thing is happening now. My own pension fund took a 13% drop over the space of several weeks due to the coronavirus. May drop more.

As for savings accounts during 2008, I think you are trying to hint that people had money taken out of them by the government. Afaik I don't think that happened.

bo0li5eumx12kp

NIMAN wrote: »

Of course pension funds were affected after the 2008 crisis. By their very nature, your money is invested by your pension company into various things such as property, stocks, shares, equities, bonds, gilts etc etc. And the financial crisis of that time meant these investments took a hit.

Same thing is happening now. My own pension fund took a 13% drop over the space of several weeks due to the coronavirus. May drop more.

As for savings accounts during 2008, I think you are trying to hint that people had money taken out of them by the government. Afaik I don't think that happened.

So, this is predicted to be the worst economic disaster since the great depression.

Thousands of peoples pension could take a hit to the point that what, they won't have enough money to cover the grocery shopping?

Yeah where did I hear that, saving accounts with more than 20 k in them, anything above the 20 k was implicated somehow.

I heard that, and then forgot about it and thought no more of it but, seems as a economic disaster looms on the horizon, it's probably prudent to consider the possibilities.

NIMAN

By pension do you mean a pension people far from retirement are paying into with the hope of a decent income in their later days, or the old age pension old people get now (weekly?).

Cos people don't do the weekly shopping out of the first.

If it's the latter, Irish governments since 2008 have always looked after old folk. And benefit recipients in general. Not too many cuts worth talking about. If I remember correctly they did make a 0.5% charge on the values of private pensions sometime after 2008.

And again, your last comment suggests people literally had money taken out of their bank accounts. They didn't. Unless someone wants to correct me.

The J Stands for Jay

Aron Jealous Loop wrote: »

So, this is predicted to be the worst economic disaster since the great depression.

Thousands of peoples pension could take a hit to the point that what, they won't have enough money to cover the grocery shopping?

Yeah where did I hear that, saving accounts with more than 20 k in them, anything above the 20 k was implicated somehow.

I heard that, and then forgot about it and thought no more of it but, seems as a economic disaster looms on the horizon, it's probably prudent to consider the possibilities.

I wouldn't be getting too worried about a three year old Daily Mail article about the effect of events 10 years earlier on the incomes of pensioners in a foreign country.

Heres Johnny

The way I look at I'm putting 400 a month into a workplace pension, 200 from employer and 200 from me. My 200 costs me 120 euro after tax relief. So I'm getting 400 a month into a pension fund for 120 a month. I'm more than 30 years to retirement. The market can do what the hell it likes, I very much doubt the 400 going in will ever be less than the 120 it costs me. It would be nice if it didn't drop but that's life....

If it matches the 2008 drop I'm likely to lose the gains of tax relief but that's it, and that tax relief only exists because I'm paying into pension in first place.

However, many of my colleagues still on full pay and likely to remain on full pay have stopped their contributions, losing the tax relief and losing the employers contribution. Some of them have also lied to their banks and got mortgage moratorium.

Keep your head while those around you are losing theirs and you'll be OK.

bo0li5eumx12kp

NIMAN wrote: »

By pension do you mean a pension people far from retirement are paying into with the hope of a decent income in their later days, or the old age pension old people get now (weekly?).

Cos people don't do the weekly shopping out of the first.

If it's the latter, Irish governments since 2008 have always looked after old folk. And benefit recipients in general. Not too many cuts worth talking about. If I remember correctly they did make a 0.5% charge on the values of private pensions sometime after 2008.

And again, your last comment suggests people literally had money taken out of their bank accounts. They didn't. Unless someone wants to correct me.

As in, they've paid into a pension all their working lives, now they're receiving that pension - but due to the recession, a percentage gets cut.

That's what I mean - and the dude above said he's already got a 13% cut on his?

The J Stands for Jay

Aron Jealous Loop wrote: »

As in, they've paid into a pension all their working lives, now they're receiving that pension - but due to the recession, a percentage gets cut.

That's what I mean - and the dude above said he's already got a 13% cut on his?

Nobody took a decision to cut someone's pension. The value was less than it would have been had they crystallised its value on a different date

Salary Negotiator

Aron Jealous Loop wrote: »

As in, they've paid into a pension all their working lives, now they're receiving that pension - but due to the recession, a percentage gets cut.

That's what I mean - and the dude above said he's already got a 13% cut on his?

Nothing was cut.

His fund has reduced in value but that’s what happens to investments, their value fluctuates.

bo0li5eumx12kp

Salary Negotiator wrote: »

Nothing was cut.

His fund has reduced in value but that’s what happens to investments, their value fluctuates.

Which means he gets less money which means perhaps for certain people in certain situations, their financial security/well-being is thrown into question....?

A retired neighbour of mine back in 2008 had to return to work (from retirement) after the 2008 crash.

That's what I mean by uncertainty.

The J Stands for Jay

Aron Jealous Loop wrote: »

Which means he gets less money which means perhaps for certain people in certain situations, their financial security/well-being is thrown into question....?

A retired neighbour of mine back in 2008 had to return to work (from retirement) after the 2008 crash.

That's what I mean by uncertainty.

What's your question?

circular flexing

Aron Jealous Loop wrote: »

Which means he gets less money which means perhaps for certain people in certain situations, their financial security/well-being is thrown into question....?

A retired neighbour of mine back in 2008 had to return to work (from retirement) after the 2008 crash.

That's what I mean by uncertainty.

What kind of pension fund did your neighbour have?


My pension fund went down 15% recently but it doesn't have any impact because I'm still 25-30 years from retirement. Over time, the fund will hold assets that don't go down or up as much. The idea being that as I get closer to retirement, the money is more secure.

bo0li5eumx12kp

Well, he thought he was retired but had to go back to work to put food on the table.

I'm certain I heard it mentioned that, "more than 20 k in your account, you got skimmed", effectively.

People losing their pensions, this isn't common knowledge during/after a financial crash?

circular flexing

Aron Jealous Loop wrote: »

Well, he thought he was retired but had to go back to work to put food on the table.

So you have no idea basically?


To be clear, nobody was "robbed" of their pension but the value of their fund could go up and down. As mentioned though, the fund should be moved to a more stable asset class the close you are to retirement.

The J Stands for Jay

Aron Jealous Loop wrote: »

Well, he thought he was retired but had to go back to work to put food on the table.

I'm certain I heard it mentioned that, "more than 20 k in your account, you got skimmed", effectively.

People losing their pensions, this isn't common knowledge during/after a financial crash?

Sounds like he had a retirement fund rather than a pension.

No-one was skimmed for having €20k here. You would have noticed the uproar over that one. Unless you're thinking of Cyprus.

People don't lose their pensions. There's been some cases in the UK years ago, but they were massive frauds.

bo0li5eumx12kp

McGaggs wrote: »

Sounds like he had a retirement fund rather than a pension.

No-one was skimmed for having €20k here. You would have noticed the uproar over that one. Unless you're thinking of Cyprus.

People don't lose their pensions. There's been some cases in the UK years ago, but they were massive frauds.

When you go into a bank and speak to a pensions person - then start making your monthly contributions - I have no idea what goes on beyond that point.

A retirement fund sounds like money stockpile in an account somewhere.

So what - money stockpiles were pinches also?

anewme

Aron Jealous Loop wrote: »

And large savings accounts, affected or no?

What are you talking about ?

anewme

Aron Jealous Loop wrote: »

Yeah where did I hear that, saving accounts with more than 20 k in them, anything above the 20 k was implicated

Such rubbish.

NIMAN

Aron Jealous Loop wrote: »

As in, they've paid into a pension all their working lives, now they're receiving that pension - but due to the recession, a percentage gets cut.

That's what I mean - and the dude above said he's already got a 13% cut on his?

I was the dude above who said they lost 13% of the value of my pension.

It might even be more now, I just haven't checked it in a couple of weeks.

But my total pot of wealth decreased by that amount. It's not to say it won't go back up again in the next few years. That's what investments do, they go up and down. Believe me, overall it has gone up. I think between me and my employer contributions for the last 23 years, it's value was several times more than what has been put into it.

I don't retire for another 16yrs at least. Still plenty of time to get gains again.

The J Stands for Jay

Aron Jealous Loop wrote: »

When you go into a bank and speak to a pensions person - then start making your monthly contributions - I have no idea what goes on beyond that point.

A retirement fund sounds like money stockpile in an account somewhere.

So what - money stockpiles were pinches also?

An approved retirement fund is invested in the same range of funds as pension funds invest in before retirement. There is no-one taking money from bank accounts and convincing everyone not to talk about it

Bubbaclaus

OP sounds very confused about pensions and weirdly seems to be making something up about saving accounts. Odd.

anewme

Bubbaclaus wrote: »

OP sounds very confused about pensions and weirdly seems to be making something up about saving accounts. Odd.

Very odd.

Like why would he even think anyone would be allowed dip into someones savings account.?

bo0li5eumx12kp

NIMAN wrote: »

I was the dude above who said they lost 13% of the value of my pension.

It might even be more now, I just haven't checked it in a couple of weeks.

But my total pot of wealth decreased by that amount. It's not to say it won't go back up again in the next few years. That's what investments do, they go up and down. Believe me, overall it has gone up. I think between me and my employer contributions for the last 23 years, it's value was several times more than what has been put into it.

I don't retire for another 16yrs at least. Still plenty of time to get gains again.

So, your "investment", is that a typical pension when you go into the bank to speak to a pensions person?

That's your deal, right?

So for people retired and claiming their pension and a financial crises hits, it's entirely conceivable their pension income decreases to a point where they can basically no longer pay their bills (as happened to my neighbour)?

Saudades

Aron Jealous Loop wrote: »

Yeah where did I hear that, saving accounts with more than 20 k in them, anything above the 20 k was implicated somehow.

Are you thinking about the means-tested Non-Contributory state pension, which is - using your word - implicated, by any capital over 20k.

So capital (that being savings, shares, bonds, funds, cash-on-hands and property) up to the first 20k is assessed at Zero.

But then capital after the first 20k is means assessed at;
Next €10,000.00 - €1.00 per €1,000.00,
Next €10,000.00 - €2.00 per €1,000.00,
Balance - €4.00 per €1,000.00.

The J Stands for Jay

Aron Jealous Loop wrote: »

So, your "investment", is that a typical pension when you go into the bank to speak to a pensions person?

That's your deal, right?

So for people retired and claiming their pension and a financial crises hits, it's entirely conceivable their pension income decreases to a point where they can basically no longer pay their bills (as happened to my neighbour)?

Going to a bank to get a pension isn't the smartest thing to be doing.

It's entirely inconceivable that someone receiving a pension would have a decrease.

bo0li5eumx12kp

McGaggs wrote: »

Going to a bank to get a pension isn't the smartest thing to be doing.

It's entirely inconceivable that someone receiving a pension would have a decrease.

Umm, I mean, Irish life - they operate through AIB at the moment.

They're not the banking division but, technically, you still go into the bank to speak with the pensions dude.

What you're posting makes no sense.
First off, I'm a pensions blank slate.
Secondly, your mate above described the process of pension'ing as investments which can lose value during economic down time, thus ones receipt of cash is reduced.

So, my neighbour that had to go back to work after the 2008 crisis being on a pension full time cause he couldn't make ends meet - what was that, was he spoofing me or what?

circular flexing

Aron Jealous Loop wrote: »

Umm, I mean, Irish life - they operate through AIB at the moment.

They're not the banking division but, technically, you still go into the bank to speak with the pensions dude.

What you're posting makes no sense.
First off, I'm a pensions blank slate.
Secondly, your mate above described the process of pension'ing as investments which can lose value during economic down time, thus ones receipt of cash is reduced.

So, my neighbour that had to go back to work after the 2008 crisis being on a pension full time cause he couldn't make ends meet - what was that, was he spoofing me or what?

Investments do go up and down. But your pension should not be invested in anything remotely risky at the time you reach retirement age - at most it should be in guaranteed savings accounts but it should be mostly cash, certainly not still invested in the stock market or property.



I can't comment on your neighbour because there isn't enough detail but maybe he didn't have enough saved in his pension or maybe he was still invested in riskier investments.

Bubbaclaus

Aron Jealous Loop wrote: »

Umm, I mean, Irish life - they operate through AIB at the moment.

They're not the banking division but, technically, you still go into the bank to speak with the pensions dude.

What you're posting makes no sense.
First off, I'm a pensions blank slate.
Secondly, your mate above described the process of pension'ing as investments which can lose value during economic down time, thus ones receipt of cash is reduced.

So, my neighbour that had to go back to work after the 2008 crisis being on a pension full time cause he couldn't make ends meet - what was that, was he spoofing me or what?

You seem to be very confused between pension funds going up and down and the pension payments a person actually receives.

FernandoTorres

I think the confusion comes from the fact that the word "pensions" in Ireland covers multiple different products that cover both the phase while you're accumulating (while working) as well as the retirement phase.



In Australia they call the accummulation stage "superannuation" and the income that you receive when you're retired is your "pension". Makes things a bit easier I think!


Anyway, to the point of your neighbour seeing a reduction in his retirement income. The only way that could happen while he was in receipt of it would be if he was in a company defined benefit scheme that wound up in deficit. It's pretty rare that existing pensioners would see a decrease but it can happen where the company gets into extreme financial difficulty. Another reason why defined benefit plans are not as great as they're made out to be.

Henry Ford III

FernandoTorres wrote: »

Anyway, to the point of your neighbour seeing a reduction in his retirement income. The only way that could happen while he was in receipt of it would be if he was in a company defined benefit scheme that wound up in deficit. It's pretty rare that existing pensioners would see a decrease but it can happen where the company gets into extreme financial difficulty. Another reason why defined benefit plans are not as great as they're made out to be.

Not the only way.

Many people use ARF investment funds to provide post retirement income and these can go up and down in value.

Furthermore deemed distribution rules mean a fairly aggressive investment strategy will be needed to maintain capital values which could be passed on to a spouse or the next generation.

FernandoTorres

Henry Ford III wrote: »

Not the only way.

Many people use ARF investment funds to provide post retirement income and these can go up and down in value.

Furthermore deemed distribution rules mean a fairly aggressive investment strategy will be needed to maintain capital values which could be passed on to a spouse or the next generation.

The ARF account value can go up and down but the amount of pension payment would not be cut in half without the person requesting it which seems to be the case as described.

JeffKenna

The big issue to retirement funds hasn't been the overall value of the fund decreasing but the annuity rates falling. I for one would prefer to have a retirment fund with an overall value of 100,000 with a guaranteed 15% annuity rate as opposed to an overall value of 200,000 with a 5% annuity.

Oral Surgeon

Aron Jealous Loop wrote: »

/QUOTE]

Dodge

Aron Jealous Loop wrote: »

So, my neighbour that had to go back to work after the 2008 crisis being on a pension full time cause he couldn't make ends meet - what was that, was he spoofing me or what?

The shortest answer is, he probably was.

He *might* have had other investments go poorly that he called ‘his pension’ (informally) that were no longer performing well enough for his needs

Start saving for your own retirement needs OP.

The J Stands for Jay

Aron Jealous Loop wrote: »

Umm, I mean, Irish life - they operate through AIB at the moment.

They're not the banking division but, technically, you still go into the bank to speak with the pensions dude.

What you're posting makes no sense.
First off, I'm a pensions blank slate.
Secondly, your mate above described the process of pension'ing as investments which can lose value during economic down time, thus ones receipt of cash is reduced.

So, my neighbour that had to go back to work after the 2008 crisis being on a pension full time cause he couldn't make ends meet - what was that, was he spoofing me or what?

You don't need to go to the bank to speak to an Irish Life pension dude.

When you pay into a pension, it's invested with the intention of increasing in value so that when you want to retire you have a big ball of cash to keep you going. You then need to do something with it to give you an income. You get some of it as a lump sum to do with as you wish. The rest had to be used to give you a retirement income. Up until about 20 years ago, you had to buy an annuity. This is what people would usually think of when they hear the word pension. You hand over your find to a pension company, and they give you a monthly pension for the rest of your life. If this is what your neighbor has, they couldn't have had a reduction.

The other option, as pointed out below, is the approved retirement fund. It's still invested, an you can take money out of it when you want. If markets went down, the amount in your find would go down too.

There's also the rare option of a with profits annuity that could reduce the payment, but I think the most it can reduce by is 10%.

To summarise, your neighbor isn't giving you the full story, or is referring to other investments or savings as a pension.

bo0li5eumx12kp

McGaggs wrote: »

You don't need to go to the bank to speak to an Irish Life pension dude.

When you pay into a pension, it's invested with the intention of increasing in value so that when you want to retire you have a big ball of cash to keep you going. You then need to do something with it to give you an income. You get some of it as a lump sum to do with as you wish. The rest had to be used to give you a retirement income. Up until about 20 years ago, you had to buy an annuity. This is what people would usually think of when they hear the word pension. You hand over your find to a pension company, and they give you a monthly pension for the rest of your life. If this is what your neighbor has, they couldn't have had a reduction.

The other option, as pointed out below, is the approved retirement fund. It's still invested, an you can take money out of it when you want. If markets went down, the amount in your find would go down too.

There's also the rare option of a with profits annuity that could reduce the payment, but I think the most it can reduce by is 10%.

To summarise, your neighbor isn't giving you the full story, or is referring to other investments or savings as a pension.

PS - when say "a find" - that means..... in this context, what exactly?

How you phrase it it sounds like, the lump sum you initially invest in a pension?
Or the monthly sum payable into your pension fund (annuity)?

And yes, annuity - yeah, that's what I'm thinking of when I think "pension".

The J Stands for Jay

Aron Jealous Loop wrote: »

PS - when say "a find" - that means..... in this context, what exactly?

How you phrase it it sounds like, the lump sum you initially invest in a pension?
Or the monthly sum payable into your pension fund (annuity)?

And yes, annuity - yeah, that's what I'm thinking of when I think "pension".

Find was a typo for fund.

You pay money into the pension fund, lump sums and monthly payments in whatever combination you want. It's invested and, all going well, is worth more than you paid into it when you need it. That's what is used at retirment to give you a tax free lump sum and buy your annuity or retirment fund.

bo0li5eumx12kp

McGaggs wrote: »

Find was a typo for fund.

You pay money into the pension fund, lump sums and monthly payments in whatever combination you want. It's invested and, all going well, is worth more than you paid into it when you need it. That's what is used at retirment to give you a tax free lump sum and buy your annuity or retirment fund.

Now we're on the same page.

It took three pages of mindless drivel to get here but, clarity is had at last.

That incarnation of a pension, that is what applies to the majority of people I'm assuming?

Some other posters seemed to be alluding to alternate investments they may refer to as a "pension" - but they're just investments with less reliability, basically outside of the above pension paradigm I'm assuming? (as in they may invest in properties with a view to selling them after retirement).

When the dude last page said he lost 13% on his pension due to this pandemic, he was referring to the typical pension you've outlined?
Or something else?

Cause what you're saying is basically, you pay in, and when retirement comes your payback is rock solid - financial crash or no, that won't be affected.

Oral Surgeon

Aron Jealous Loop wrote: »

Now we're on the same page.

It took three pages of mindless drivel to get here but, clarity is had at last.

That incarnation of a pension, that is what applies to the majority of people I'm assuming?

Some other posters seemed to be alluding to alternate investments they may refer to as a "pension" - but they're just investments with less reliability, basically outside of the above pension paradigm I'm assuming? (as in they may invest in properties with a view to selling them after retirement).

When the dude last page said he lost 13% on his pension due to this pandemic, he was referring to the typical pension you've outlined?
Or something else?

Cause what you're saying is basically, you pay in, and when retirement comes your payback is rock solid - financial crash or no, that won't be affected.

Dodge

Aron Jealous Loop wrote: »

It took three pages of mindless drivel to get here but, clarity is had at last.

Only one person posting drivel from what I read...

Jim2007

Aron Jealous Loop wrote: »

It took three pages of mindless drivel to get here but, clarity is had at last.

You started posting drivel, you alone have continued to post drivel

Aron Jealous Loop wrote: »

Cause what you're saying is basically, you pay in, and when retirement comes your payback is rock solid - financial crash or no, that won't be affected.

And no you still don't get it.

Henry Ford III

Hold on for a sec.

I think there is confusion between pension funds (which are active investments) and the payments coming out of pension schemes (annuities) which are purchased with the maturity proceeds of the same pension funds.

Throw in some additional potential confusion when d.b. schemes are included, and throw ARF's in on top of that and it's easy see where someone without a reasonable knowledge of the workings of pensions could be easily and wholly confused.

Most pension funds are d.c. and the risk of funds performing poorly, or shorter term volatility, sits with the individual.

At maturity there are only 3 ways of taking benefits:-

1/. Tax free cash. 25% of the kitty or potentially higher if salary and service calculations allow.
2/. Annuity. This is what most people recognise as a "pension". It's a fixed payment for life from an insurance company in return for a single premium. It'll never go down. It is guaranteed. Various options are available which cost more. With ultra low interest rates annuities are expensive.
3/. ARF's. A complex area but in simple terms they are a post retirement investment designed to produce income. Risk applies so the
"income" payments can vary up and down, as can the capital value. They have certain advantages, but aren't for everyone.

As always get independent professional advice and be prepared to pay for it too.

There are too may willing amateurs here and elsewhere who are only too happy to offer free but useless advise, and to take that and base your financial health on it can be potentially horrendous.

Would you ask a mechanic for advice on chest pain?

bo0li5eumx12kp

Henry Ford III wrote: »

Hold on for a sec.

I think there is confusion between pension funds (which are active investments) and the payments coming out of pension schemes (annuities) which are purchased with the maturity proceeds of the same pension funds.

Throw in some additional potential confusion when d.b. schemes are included, and throw ARF's in on top of that and it's easy see where someone without a reasonable knowledge of the workings of pensions could be easily and wholly confused.

Most pension funds are d.c. and the risk of funds performing poorly, or shorter term volatility, sits with the individual.

At maturity there are only 3 ways of taking benefits:-

1/. Tax free cash. 25% of the kitty or potentially higher if salary and service calculations allow.
2/. Annuity. This is what most people recognise as a "pension". It's a fixed payment for life from an insurance company in return for a single premium. It'll never go down. It is guaranteed. Various options are available which cost more. With ultra low interest rates annuities are expensive.
3/. ARF's. A complex area but in simple terms they are a post retirement investment designed to produce income. Risk applies so the
"income" payments can vary up and down, as can the capital value. They have certain advantages, but aren't for everyone.

As always get independent professional advice and be prepared to pay for it too.

There are too may willing amateurs here and elsewhere who are only too happy to offer free but useless advise, and to take that and base your financial health on it can be potentially horrendous.

Would you ask a mechanic for advice on chest pain?