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Why are people obsessed with getting a pension

Midlife crisis man

What's the point having one.

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

I struggled throughout the recession eventually going back to college. I'm in my mid 30s now recently started working in the public sector. I'm only on 25k per year. I'm not entitled to the public sector pension because I'm on a fixed term "trainee" contract in my field.

Also if I happen to stay in the public sector for the rest of my career I won't be long enough to get the cushty 40 year pension anyway.

So, in the next 30 years the retirement age will probably be closer to 70. Why save the bollox off myself just so I have a bit of cash when I'm an auld fella with (best case scenario) 10 years of life left. Who needs that much money at that age. Am I missing something here? You can't take it with you when you die.

I'm sure I'll have a good bit of regular savings by then but what's with the obsession of pumping as much money as you can into a pension (that'll end up getting raided by the government in subsequent recessions anyway)

I'm going to enjoy my money while I have health and vigour and the government can look after me when I'm an auld boy.

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Bigbagofcans

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?

[Deleted User]

Bigbagofcans wrote: »

..........., will this pot have increased a bit more than what I've put in?

Over 3 decades if managed properly you could well have a fund that's at least double what you and your employer put in.

That would be based on 5% net growth per annum (after management fees etc) and ignoring inflation.

Pussyhands

Augeo wrote: »

Over 3 decades if managed properly you could well have a fund that's at least double what you and your employer put in.

That would be based on 5% net growth per annum (after management fees etc) and ignoring inflation.

And when can you access it?

Pensions person was in work and I asked this and was told I couldn't access it until retirement age. (or maybe she said until I was retired)

bilbot79

Pussyhands wrote: »

And when can you access it?

Pensions person was in work and I asked this and was told I couldn't access it until retirement age. (or maybe she said until I was retired)

This is the point of the thing. It's a pension pot for retirement because otherwise when you're not working anymore you'll be broke.

You can also retire early if you have the agreement of the employer in an occupational pension scheme.

[Deleted User]

Pussyhands wrote: »

And when can you access it?

Pensions person was in work and I asked this and was told I couldn't access it until retirement age. (or maybe she said until I was retired)

It depends on the conditions of the scheme. It may well be possible to 'retire' for one fund anytime after age 50, even if you are still working.

[Deleted User]

Ace2007 wrote: »

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

This pretty much sums it up.

RIALTO1

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

BarryD2

Midlife crisis man wrote: »

I'm going to enjoy my money while I have health and vigour and the government can look after me when I'm an auld boy.

There is actually a case for this logic. Not a great moral case. But if you need nursing home care when you age, as things stand a good deal of the assets you acquire, will be used as a contribution towards the considerable costs of providing this care. What's the point of acquiring property assets and savings as they will be siphoned off etc etc. So you could logically take the view 'the government can look after me when I'm an auld boy.' Except for government, read the rest of society / tax payers etc.

[Deleted User]

BarryD2 wrote: »

............So you could logically take the view 'the government can look after me when I'm an auld boy.' Except for government, read the rest of society / tax payers etc.

Yeah ............ but given the amount of folk that might need looking after (state pension, RA/HAP/whatever, health care & nursing care etc etc etc) ......... the odds aren't really in your favour IMO.

Ace2007

Augeo wrote: »

Yeah ............ but given the amount of folk that might need looking after (state pension, RA/HAP/whatever, health care & nursing care etc etc etc) ......... the odds aren't really in your favour IMO.

In addition, what if you live to be 100, and are in great shape and think about travelling the world, or going to Vegas for hookers and coke, and then realise that you don't have a penny to your name because you didn't bother saving for it - and instead maybe have the state pension, because let's face it given all the facts about population age in this country, there will be only 2 workers for every pensioner by 2050, so it's actually a big maybe.

And let's look a real life situation today, you could be relying on the public health system for your health needs - be waiting years for appointments or just to see a consultant, or you could pay for health insurance, and get appointments and consultants with little or no delay.

[Deleted User]

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

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

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

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

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.

[Deleted User]

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% 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

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

Squall Leonhart

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.

[Deleted User]

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

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

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

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

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.

[Deleted User]

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

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

BailMeOut

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

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

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

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!