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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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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.

Monife

ted1 wrote: »

You pay PAYE when drawing it down.

That's implied in my post.

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.

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

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.

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.

notharrypotter

What is

freeze4real wrote: »

SROP

The J Stands for Jay

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.

.......

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

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

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

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

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

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

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...

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.

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.

.......

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

....... 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

partyguinness wrote: »

Governments come and go.

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

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.

jimmy456

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

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

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

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.

[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.

The J Stands for Jay

[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

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

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

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

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.