Why are people obsessed with getting a pension

AndrewJRenko · 19-03-2019 2:30pm

BarryD2 wrote: »

So you could logically take the view 'the government can look after me when I'm an auld boy.

And what if they don't?

NSAman · 19-03-2019 5:04pm

I know I have taken flack from people on here about not taking the traditional route in relation to pensions....is that so bad?

I do not want to be reliant upon the State for an income in older age. I certainly do not want to be reliant upon the State to look after me in old age, I have never asked them for anything in this life and never will. I have always been independent and even when unemployed, never claimed anything that people normally claim. Some may think this is stupid. Personally, I have no issue in paying my taxes but I also have stood and will continue to stand on my own two feet.

There is going to be a major issue in relation to State pensions in the future. Not just in Ireland but also internationally, with ageing populations and the younger generations being held to account for the promises made in retirement for the older generations. Many people simply do not have the means to pay into a pension. State benefits will deteriorate as we all get older, there is simply not the ability for the tax payer to afford to maintain them. From a personal perspective, no matter if you take the traditional pension route or create an income stream by yourself to look after yourself in old age, we all need some form of savings/investment/income strategy to look after ourselves in older age.

People are,in general, more healthy (not where I am located most need to loose around 100lbs) and will be working longer to maintain a lifestyle level. Some of us will also work in retirement, not simply because we have to but because we enjoy what we do.

Klonker · 19-03-2019 10:45pm

I'm 30, was paying about 5% into pension with employer paying about 5% too, up to about 6 months ago. I then increased it to 10%, with employer still paying 5%. After reading this thread the other day I have increased my contributions to 20% (employer still around 5%).

I'd love to be able to retire when im 60 but very hard know if that will be achievable this far out. Who knows if there will even be a state pension in 30-40 year time. If I find 20% difficult at any stage I can always decrease to increase my cash flow.

The J Stands for Jay · 20-03-2019 7:46am

Bigbagofcans wrote: »

Despite having a pension, I still don't understand them. So I pay 5% and my employer matches it.

If I take early retirement or change jobs when I'm say 55 (in 20+ years' time), when am I entitled to this pot of money? Since I'm only paying minimum low risk, will this pot have increased a bit more than what I've put in?

If you're going for low risk, it will be unlikely to be worth much more than you paid in.

The J Stands for Jay · 20-03-2019 7:48am

RIALTO1 wrote: »

In terms of a married couple, one say over 40 and one under 40, is there a recommended approach in terms of AVCs. So would they be better off maxing the older persons AVC, due to higher limit, or the younger persons as more scope for compound growth. Assumptions are they can not afford to max both, and neither would negatively impact any employer contributions.

TIA

Each person should fund their own AVCs.

20-03-2019 10:53am

Klonker wrote: »

I'm 30, was paying about 5% into pension with employer paying about 5% too, up to about 6 months ago. I then increased it to 10%, with employer still paying 5%. After reading this thread the other day I have increased my contributions to 20% (employer still around 5%).

I'd love to be able to retire when im 60 but very hard know if that will be achievable this far out. Who knows if there will even be a state pension in 30-40 year time. If I find 20% difficult at any stage I can always decrease to increase my cash flow.

Is that 20% from you plus 5% from employer (25%) or 15% + 5%?

Klonker · 20-03-2019 12:27pm

20% from me and 5% from employer. Limits only include my contributions as far as I'm aware anyway. 30-39 bracket is up to 20%.

Tar.Aldarion · 20-03-2019 12:39pm

That's correct for an occupational pension. With a PRSA the total would be limited to 20%.

Squall Leonhart · 20-03-2019 1:31pm

Klonker wrote: »

20% from me and 5% from employer. Limits only include my contributions as far as I'm aware anyway. 30-39 bracket is up to 20%.

Up to 20% combined contributions between employer and employee for PRSA as far as I know.

20-03-2019 3:47pm

Klonker wrote: »

20% from me and 5% from employer. Limits only include my contributions as far as I'm aware anyway. 30-39 bracket is up to 20%.

Thanks for confirming. I had thought only 15+5 was allowed, will up my contributions to 20 so.

BarryD2 · 22-03-2019 7:58pm

Received annual statement - see our PRSA fell in value by abt 7% in last six months of 2018. Yes pensions rise & fall in value but it's swings like this that make the ordinary citizen look askance.

Jim2007 · 22-03-2019 8:47pm

BarryD2 wrote: »

Received annual statement - see our PRSA fell in value by abt 7% in last six months of 2018. Yes pensions rise & fall in value but it's swings like this that make the ordinary citizen look askance.

What type of PRSA are you talking about? What was the investment strategy and what was the cause of the decline?

The J Stands for Jay · 22-03-2019 8:49pm

BarryD2 wrote: »

Received annual statement - see our PRSA fell in value by abt 7% in last six months of 2018. Yes pensions rise & fall in value but it's swings like this that make the ordinary citizen look askance.

I've gone up in value over the last 6 months. 100% equities FTW.

[I'm not recommending everyone does this]

Monife · 22-03-2019 10:43pm

Think a few people must have been hit badly with PRSAs if you look at the latest asset figures on the Pensions Authority website. They usually increase each year but Q4 2018 was down €25m from the previous year.

23-03-2019 10:09am

BarryD2 wrote: »

Received annual statement - see our PRSA fell in value by abt 7% in last six months of 2018. Yes pensions rise & fall in value but it's swings like this that make the ordinary citizen look askance.

It's likely still worth mire then the total contributions & if you are well diversified and don't intend to access it for decades a 7% drop in the period you mention is effectively immaterial data.

YFlyer · 23-03-2019 10:15am

I'm 47 I don't have a pension scheme. Will work till I drop.

BailMeOut · 23-03-2019 1:31pm

BarryD2 wrote: »

Received annual statement - see our PRSA fell in value by abt 7% in last six months of 2018. Yes pensions rise & fall in value but it's swings like this that make the ordinary citizen look askance.

worldwide markets took a dump late last year but have mostly recovered since then. It goes up and it goes down but history has shown it always grows on average over long periods of time. As you get more investment savvy you can take advantage of the down events by buying stock cheap.

Ace2007 · 23-03-2019 11:11pm

BarryD2 wrote: »

Received annual statement - see our PRSA fell in value by abt 7% in last six months of 2018. Yes pensions rise & fall in value but it's swings like this that make the ordinary citizen look askance.

BailMeOut wrote: »

worldwide markets took a dump late last year but have mostly recovered since then. It goes up and it goes down but history has shown it always grows on average over long periods of time. As you get more investment savvy you can take advantage of the down events by buying stock cheap.

Exactly this, you might see a 7% fall over 6 months, but you would probably see a 7%+ rise in the first 2/3 months of the year. Pensions are long term game, and hence you the ordinary layman, should really just invest in a default life-styling option and never worry about returns.

ted1 · 23-03-2019 11:14pm

bilbot79 wrote: »

You do realise pension saving is tax free but regular saving is not?

You pay USC twice on it. And you may still be taxed on drawing it down.

So to say it’s tax free is incorrect

Monife · 23-03-2019 11:48pm

ted1 wrote: »

You pay USC twice on it. And you may still be taxed on drawing it down.

So to say it’s tax free is incorrect

But you don't pay PAYE on it, which is the biggest tax. In retirement, you get 25% of your fund or 1.5 times your final salary tax free, then yes the remainder is subject to tax but you have an approx 18 grand threshold as a single pensioner before you pay tax and double tax credits!

ted1 · 25-03-2019 9:27am

Monife wrote: »

But you don't pay PAYE on it, which is the biggest tax. In retirement, you get 25% of your fund or 1.5 times your final salary tax free, then yes the remainder is subject to tax but you have an approx 18 grand threshold as a single pensioner before you pay tax and double tax credits!

You pay PAYE when drawing it down.

Monife · 25-03-2019 9:31am

ted1 wrote: »

You pay PAYE when drawing it down.

That's implied in my post.

BailMeOut · 25-03-2019 10:18am

Interesting real life pension growth example here. Back in 2004 I changed jobs and had very small pension with that company that was worth 5,743 at that time. I have made zero contributions to that pension since then so interesting to see how it grew over 15 years. Average yield was just less than 11% per year and this 5,700 is now worth 20,626.

If you are young and do not have a pension get working on it now as the most important thing is time.

(PS: This is not my main pension!!)

Ace2007 · 25-03-2019 11:31am

I think one good thing the above shows, that even with the crash, the funds have grown substantially in that time, and above and beyond what you would get in a savings account.

freeze4real · 27-04-2019 7:33pm

When I joined my employee pension, I started off contributing 375 and employed matched 200. I also transferred 2000k from previous employer.

My pension firm sent a SORP based on my contribution, that future investment/value might be worth over 1.2mill.

Today, I checked my performance. My pension value has gone up 755euro out of over 20k.

And SROP from 1.2m to under 645k.

notharrypotter · 29-04-2019 11:16am

What is

freeze4real wrote: »

SROP

?

The J Stands for Jay · 29-04-2019 11:19am

notharrypotter wrote: »

What is
?

Statement of reasonable projection. They take the value of the fund today, add on the future contributions, add on growth and subtract charges to get a projected fund. They then apply an indicative annuity rate to give a pension figure.

....... · 29-04-2019 11:31am

freeze4real wrote: »

When I joined my employee pension, I started off contributing 375 and employed matched 200. I also transferred 2000k from previous employer.

I presume you actually mean 2k above? (and not 2 million which is what you have written)?

hmmm · 29-04-2019 9:56pm

BailMeOut wrote: »

Interesting real life pension growth example here.

Great example of the power of compounding and time. It's useful to see the hit you took in 2009 (as did most people), and how you made your money back. We had people in here who took all their money into cash in 2009 and essentially locked in their loss - and then told everyone they could find that pensions/investments are a fools game - perhaps they are if you don't play a long game.

Squall Leonhart · 30-04-2019 5:51am

hmmm wrote: »

Great example of the power of compounding and time. It's useful to see the hit you took in 2009 (as did most people), and how you made your money back. We had people in here who took all their money into cash in 2009 and essentially locked in their loss - and then told everyone they could find that pensions/investments are a fools game - perhaps they are if you don't play a long game.

I'm always highly sceptical if I hear people who are still on employment now spouting things like "my pension was wiped out by the recession", it may well have halved or worse in value... But if you'd done absolutely nothing the chances are it's worth more now than it ever was before. People seem to ignore that part of of it.

Fair enough to those unfortunate enough to be retiring 2008-2012, they may not have had the luxury of time for their pension to bounce back.

BailMeOut · 30-04-2019 9:53am

Squall Leonhart wrote: »

I'm always highly sceptical if I hear people who are still on employment now spouting things like "my pension was wiped out by the recession", it may well have halved or worse in value... But if you'd done absolutely nothing the chances are it's worth more now than it ever was before. People seem to ignore that part of of it.

Fair enough to those unfortunate enough to be retiring 2008-2012, they may not have had the luxury of time for their pension to bounce back.

however someone who retired 2008-2012 would have still have 40+ years prior growth before he crash.

cefh17 · 30-04-2019 10:00am

BailMeOut wrote: »

however someone who retired 2008-2012 would have still have 40+ years prior growth before he crash.

And should have diversified away from mostly equities well before getting that close to retirement

bilbot79 · 01-05-2019 11:38pm

I still find it unusual that the global economy recovered as well as it did. Can't trust it yet

Jim2007 · 01-05-2019 11:50pm

bilbot79 wrote: »

I still find it unusual that the global economy recovered as well as it did. Can't trust it yet

What is unusual about it? 1866, 1896, 1901, 1907, 1929... it is the way it is and we’ll have an crash sometime in the next few years...

Henry Ford III · 02-05-2019 11:56am

Monife wrote: »

But you don't pay PAYE on it, which is the biggest tax. In retirement, you get 25% of your fund or 1.5 times your final salary tax free, then yes the remainder is subject to tax but you have an approx 18 grand threshold as a single pensioner before you pay tax and double tax credits!

Subject to scheme service. Many people won't qualify.

partyguinness · 02-05-2019 12:04pm

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.

....... · 02-05-2019 1:07pm

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.

The current government treatment of landlords makes this a terrible idea.

The way things are going you wont have control of your own asset and will never be allowed to sell it if it means evicting a tenant.

partyguinness · 02-05-2019 1:15pm

....... wrote: »

The current government treatment of landlords makes this a terrible idea.

The way things are going you wont have control of your own asset and will never be allowed to sell it if it means evicting a tenant.

Governments come and go.

BailMeOut · 02-05-2019 1:26pm

partyguinness wrote: »

Governments come and go.

What taxes do you pay when selling a buy to rent home when retired?

partyguinness · 02-05-2019 1:32pm

BailMeOut wrote: »

What taxes do you pay when selling a buy to rent home when retired?

I am open to correction but CGT springs to mind and VAT on any selling costs. You will have to account for income tax on rental income up to point of sale although you have to do that anyway selling or not.

I moved from Ireland 10 years ago so forgive me if there are new taxes that I am not familiar with.

jimmy456 · 02-05-2019 2:01pm

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.

you could also invest in B2L in your pension. I think you are confusing a defined contribution pension with an investment.

The dc pension is only a structure that you put money into. Its what you do with the funds afterwards is what causes the issue for most people as they don't understand investing. They then shy away from pensions for evermore and call them scams etc

howamidifferent · 02-05-2019 2:16pm

My pension pot is 100% equities and has jumped from 186K Jan 2018 to 223K Apr 2019. Yes it took a dive during the recession but has gained more than amply since. I contribute 6% and my employer 8%.

franglan · 02-05-2019 2:19pm

howamidifferent wrote: »

My pension pot is 100% equities and has jumped from 186K Jan 2018 to 223K Apr 2019. Yes it took a dive during the recession but has gained more than amply since. I contribute 6% and my employer 8%.

You've also added to it over those 15 months.

howamidifferent · 02-05-2019 2:27pm

franglan wrote: »

You've also added to it over those 15 months.

Obviously I did notice that my 6% was going in, but that doesn't negate the compounding growth its experiencing over the years.

02-05-2019 2:35pm

I can't even get the benefits of paying into a pension since I'm not in Ireland. No tax benefit.

31 now and wondering what the hell to do. What's the story with just saving for 30-40 years instead? My health means I won't last long anyways. 65 would be pretty damn good. 80 a never. Maybe something will come along and fix that but who knows.

The J Stands for Jay · 02-05-2019 2:44pm

[Deleted User] wrote: »

I can't even get the benefits of paying into a pension since I'm not in Ireland. No tax benefit.

31 now and wondering what the hell to do. What's the story with just saving for 30-40 years instead? My health means I won't last long anyways. 65 would be pretty damn good. 80 a never. Maybe something will come along and fix that but who knows.

Are there no local pensions? Could it be something to look into? I might have the wrong country, but there may be something to look into here: http://www.pensiondevelopment.org/248/vietnam.htm

In Irish pensions, there can be early access 8n the case of ill health. Could be the same where you are. Anyway, the only difference between a pension and investing yourself is the tax treatment and the accessibility of the funds.

The J Stands for Jay · 02-05-2019 2:45pm

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.

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.

Why wait until 70 to retire? Aim for 50. YOLO!

BailMeOut · 02-05-2019 3:08pm

Deleted User wrote: »

I can't even get the benefits of paying into a pension since I'm not in Ireland. No tax benefit.

31 now and wondering what the hell to do. What's the story with just saving for 30-40 years instead? My health means I won't last long anyways. 65 would be pretty damn good. 80 a never. Maybe something will come along and fix that but who knows.

Can you not setup a pension in the country you live in now? I have pensions from four countries as have moved around a bit since starting to work.

BailMeOut · 02-05-2019 3:11pm

partyguinness wrote: »

I am open to correction but CGT springs to mind and VAT on any selling costs. You will have to account for income tax on rental income up to point of sale although you have to do that anyway selling or not.

I moved from Ireland 10 years ago so forgive me if there are new taxes that I am not familiar with.

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

tomwaits48 · 02-05-2019 3:25pm

My pension a/c at the moment totals €67k - I've put in less than half of that myself as my employer pays into it too - free money. it's great. If I don't spend it my kids will.

Why are people obsessed with getting a pension

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