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Why are people obsessed with getting a pension

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  • Registered Users, Registered Users 2 Posts: 29,779 ✭✭✭✭AndrewJRenko


    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?


  • Registered Users, Registered Users 2 Posts: 3,445 ✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 1,667 ✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 5,834 ✭✭✭The J Stands for Jay


    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.


  • Registered Users, Registered Users 2 Posts: 5,834 ✭✭✭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.


  • Posts: 0 [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%?


  • Registered Users, Registered Users 2 Posts: 1,667 ✭✭✭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%.


  • Moderators, Science, Health & Environment Moderators, Social & Fun Moderators, Society & Culture Moderators Posts: 60,105 Mod ✭✭✭✭Tar.Aldarion


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


  • Closed Accounts Posts: 1,794 ✭✭✭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.


  • Posts: 0 [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.


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  • Closed Accounts Posts: 4,732 ✭✭✭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.


  • Moderators, Business & Finance Moderators Posts: 10,500 Mod ✭✭✭✭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?


  • Registered Users, Registered Users 2 Posts: 5,834 ✭✭✭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]


  • Registered Users, Registered Users 2 Posts: 3,014 ✭✭✭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.


  • Posts: 17,728 ✭✭✭✭ [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.


  • Registered Users, Registered Users 2 Posts: 9,717 ✭✭✭YFlyer


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


  • Registered Users, Registered Users 2 Posts: 3,014 ✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 19,869 ✭✭✭✭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.


  • Registered Users, Registered Users 2 Posts: 23,771 ✭✭✭✭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


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  • Registered Users, Registered Users 2 Posts: 3,014 ✭✭✭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!


  • Registered Users, Registered Users 2 Posts: 23,771 ✭✭✭✭ted1


    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.


  • Registered Users, Registered Users 2 Posts: 3,014 ✭✭✭Monife


    ted1 wrote: »
    You pay PAYE when drawing it down.

    That's implied in my post.


  • Registered Users, Registered Users 2 Posts: 3,014 ✭✭✭BailMeOut


    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.

    476276.jpg

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


  • Registered Users, Registered Users 2 Posts: 19,869 ✭✭✭✭Ace2007


    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.


  • Registered Users, Registered Users 2 Posts: 2,540 ✭✭✭freeze4real


    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.


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  • Closed Accounts Posts: 1,112 ✭✭✭notharrypotter


    What is
    SROP
    ?


  • Registered Users, Registered Users 2 Posts: 5,834 ✭✭✭The J Stands for Jay


    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.


  • Closed Accounts Posts: 9,057 ✭✭✭.......


    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)?


  • Registered Users, Registered Users 2 Posts: 11,205 ✭✭✭✭hmmm


    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.


  • Closed Accounts Posts: 1,794 ✭✭✭Squall Leonhart


    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.


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  • Registered Users, Registered Users 2 Posts: 3,014 ✭✭✭BailMeOut


    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.


  • Registered Users Posts: 990 ✭✭✭cefh17


    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


  • Registered Users, Registered Users 2 Posts: 2,070 ✭✭✭bilbot79


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


  • Moderators, Business & Finance Moderators Posts: 10,500 Mod ✭✭✭✭Jim2007


    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...


  • Moderators, Business & Finance Moderators Posts: 17,807 Mod ✭✭✭✭Henry Ford III


    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.


  • Registered Users, Registered Users 2 Posts: 8,203 ✭✭✭partyguinness


    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.


  • Closed Accounts Posts: 9,057 ✭✭✭.......


    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.


  • Registered Users, Registered Users 2 Posts: 8,203 ✭✭✭partyguinness


    ....... 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.


  • Registered Users, Registered Users 2 Posts: 3,014 ✭✭✭BailMeOut


    Governments come and go.

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


  • Registered Users, Registered Users 2 Posts: 8,203 ✭✭✭partyguinness


    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.


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  • Registered Users, Registered Users 2 Posts: 90 ✭✭jimmy456


    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


  • Registered Users, Registered Users 2 Posts: 1,819 ✭✭✭howamidifferent


    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%.


  • Registered Users, Registered Users 2 Posts: 1,385 ✭✭✭franglan


    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.


  • Registered Users, Registered Users 2 Posts: 1,819 ✭✭✭howamidifferent


    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.


  • Posts: 17,378 ✭✭✭✭ [Deleted User]


    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.


  • Registered Users, Registered Users 2 Posts: 5,834 ✭✭✭The J Stands for Jay


    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.


  • Registered Users, Registered Users 2 Posts: 5,834 ✭✭✭The J Stands for Jay



    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!


  • Registered Users, Registered Users 2 Posts: 3,014 ✭✭✭BailMeOut


    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.


  • Registered Users, Registered Users 2 Posts: 3,014 ✭✭✭BailMeOut


    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?


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  • Registered Users Posts: 861 ✭✭✭tomwaits48


    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.


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