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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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PHG

KyussB wrote: »

You know full well I was referring to the average person - and most people are just going to let their earnings accumulate into a pension fund, and never think about it much again until retirement.

Most people are not financial experts - and if they need to be to avoid being screwed - then they should be putting their money somewhere else.

You really don't need to be a financial expert or even any bit financial savvy. If people are not willing to take 15mins to have a google about a pension and the adjustments per age then in all honesty they are an idiot! People have to take some responsibility for their life. Sick of hearing how they can't and it's everyone else's fault and being screwed.

Most companies or PRSA pensions are provided via financial advisor who can explain the issues in simple terms. All you have to do is ask them to follow up with you once a year thereafter and it is a free follow up!! Otherwise put your money somewhere else like a really sh**ty savings account from one of the major banks, good luck beating inflation there, again inflation is a simple basic term that everyone should know, and if you cannot beat that you are screwed!

If you can spend 2 hours a day on social media liking pictures of cats and random nonsense, you can google pensions and make an informed decision. Laziness is no excuse for ignorance!!!

GreeBo

Robert_Beach wrote: »

You've misunderstood. If private provision is all well and good, and leaving it to the markets is great, as ye are all saying, then the following stands to reason:

As a worker, instead of giving the government money to fund the dole, we should get a reduced tax and instead be directed to put that money into investments (gambling) and that money would only be accessible in the event of a person losing their job. A private dole if you will.

How come we can all agree on a safety net for workers in the that case, provided by the state, but when it comes to old people it's Thaterchism at its finest?

But hang on, I thought state pensions are not funded from tax income?

In any case a pensions works because the money is locked away for decades, the model doesnt work if you can access it a year after you started because you lose your job.

GreeBo

KyussB wrote: »

You know full well I was referring to the average person - and most people are just going to let their earnings accumulate into a pension fund, and never think about it much again until retirement.

Most people are not financial experts - and if they need to be to avoid being screwed - then they should be putting their money somewhere else.

The average person does know about pensions actually.
For those that done, you put it into a fund that manages this transition for you.

The default "lifestyle" fund moves your money into cash as you get closer to retirement.

Robert_Beach

PHG wrote: »

You really don't need to be a financial expert or even any bit financial savvy. If people are not willing to take 15mins to have a google about a pension and the adjustments per age then in all honesty they are an idiot! People have to take some responsibility for their life. Sick of hearing how they can't and it's everyone else's fault and being screwed.

Arr yeah, our grandparents were told that Irish banks were safe and secure. Opps.

Financial "experts" are a funny breed. They collectively bring the world to the tipping point every few years, clap themselves on the back for avoiding disaster and walk off with their pockets stuffed.

Now if you'll wait here, I'm off to tell my parents that they better start watching Bloomberg news instead of RTE, subscribe to the financial times and get themselves up to speed on the wider machinations of the US Chinese trade war... if you don't, you'll be out on the streets in your old age and the government will admonish you for making stupid bets...

GreeBo

Time to grow my ignore list I think, no point in have a discussion with people who ignore facts in favour of conjecture.

S.M.B.

Squall Leonhart wrote: »

There's an element of talking to the wall here. It is pointless engaging with some people when they don't want to learn and flat out refuse to appraise a situation objectively.

^ this

KyussB

PHG wrote: »

You really don't need to be a financial expert or even any bit financial savvy. If people are not willing to take 15mins to have a google about a pension and the adjustments per age then in all honesty they are an idiot! People have to take some responsibility for their life. Sick of hearing how they can't and it's everyone else's fault and being screwed.

Most companies or PRSA pensions are provided via financial advisor who can explain the issues in simple terms. All you have to do is ask them to follow up with you once a year thereafter and it is a free follow up!! Otherwise put your money somewhere else like a really sh**ty savings account from one of the major banks, good luck beating inflation there, again inflation is a simple basic term that everyone should know, and if you cannot beat that you are screwed!

If you can spend 2 hours a day on social media liking pictures of cats and random nonsense, you can google pensions and make an informed decision. Laziness is no excuse for ignorance!!!

Except it's well known that a lot of the public is not financially savvy.

We don't run society and the economy based on "the stupid get what they deserve, and deserve what they get" - that would be sociopathic.

The more obvious standard is: If someone is not enough of a financial expert to know the risks and general issues involved - then they should stay away from private pensions.

KyussB

GreeBo wrote: »

The average person does know about pensions actually.
For those that done, you put it into a fund that manages this transition for you.

The default "lifestyle" fund moves your money into cash as you get closer to retirement.

Most people are about to get auto-enrolled into one without anyone ever checking if the people being auto-enrolled have even the slightest clue about pensions.

Most people don't even know what they are investing in. Won't have a clue about the ethical issues involved with who they're investing in.

The average person is not a financial expert, and is not smart enough to even know the full range of risks or issues.

Most people won't even be smart enough, to see simple things like how percentage-fee based funds, screw people over through compound-fee-interest over time...

Any idiot can know what a pension is - that's a very low bar you set...

KyussB

GreeBo wrote: »

Time to grow my ignore list I think, no point in have a discussion with people who ignore facts in favour of conjecture.

It's funny how you're like the third poster to make a petulant show of putting people on your ignore list - and I bet you'll soon be the third person to, shortly after., demonstrate that this was rhetorical bullshit, when you can't help replying again.

Nobody really believes you, and others, are suddenly going to stop frsntically pushing bsck against the very wide variety of criticisms of such pensions, and the auto-enrolment...

Brian201888

KyussB what do you suggest people do to secure their future given how hard it is to find an ethical pension as you put it?

Varta

The simple and fair way for the state to support private pensions is to have contributions paid from net salary and apply a zero tax rate on pension drawdowns. Of course, this would have the effect of halving the the income of pension fund companies, so it's never going to happen.

KyussB

Brian201888 wrote: »

KyussB what do you suggest people do to secure their future given how hard it is to find an ethical pension as you put it?

Be very politically active in ensuring the government provides strong social safety nets - be aware of how the current main parties are captured by financial interests, and lobby against that - in the case of pensions, reform how the public pensions are structured, so that the finance industry and free-market-fetishist government can't pretend that there is 'pensions crisis' in public pensions - as that is an artificial crisis, designed to strip that particular social safety net.

Join unions and lobby for better wages - you secure your retirement first and foremost, by bolstering your wages - people are getting less and less of a share of company profits as time goes by (and of societies overall gains in wealth), that has to be reversed.

In general, we need solutions that don't rely on "money making money" - i.e. money passively growing in wealth, without a person putting in any effort - because that's pretty much the root of all of the economic/social/political problems we're seeing in recent decades, and those type of gains are supposed to be taxed to death - but instead they are being subsidized, which has to end.

In short, people should have enough of a social safety net even if they have no money - and people should earn enough money (the economy can definitely support it...) so that, inflation/depreciation or not, their accumulated earnings will last through their retirement - with the social safety net to fall back on.

S.M.B.

KyussB wrote: »

Most people are about to get auto-enrolled into one without anyone ever checking if the people being auto-enrolled have even the slightest clue about pensions.

Most people don't even know what they are investing in. Won't have a clue about the ethical issues involved with who they're investing in.

The average person is not a financial expert, and is not smart enough to even know the full range of risks or issues.

Most people won't even be smart enough, to see simple things like how percentage-fee based funds, screw people over through compound-fee-interest over time...

Any idiot can know what a pension is - that's a very low bar you set...

Any time I've been auto enrolled I've been given plenty of information explaining how it all works,both from my employer and my pension provider.

I think you make valid points when it comes to how ethical these funds are but I do think the industry is going to move to a place where this is less of an issue going forward. I think it will have to but maybe I'm being naive.

And I don't see how simple things like percentage fee based funds screw people over in the long run. Yes, a savvy investor will want to keep fees as low as possible but it's no reason to avoid this policy.

KyussB

S.M.B. wrote: »

Any time I've been auto enrolled I've been given plenty of information explaining how it all works,both from my employer and my pension provider.

I think you make valid points when it comes to how ethical these funds are but I do think the industry is going to move to a place where this is less of an issue going forward. I think it will have to but maybe I'm being naive.

And I don't see how simple things like percentage fee based funds screw people over in the long run. Yes, a savvy investor will want to keep fees as low as possible but it's no reason to avoid this policy.

Regardless, the public not being financially savvy is still a known issue - and it's not an issue we can expect to resolve.

I think that it's possible to have truly ethical pension funds (despite the ones being marketed as so today, having a lot of unethical companies in the portfolio) - but it's important to remember, that they won't have the same rate of return, and will be more risky - because unethical companies have an inherent competitive advantage, in being able to externalize costs to society and the environment, access cheaper/more-exploitative forms of labour etc. etc..

So there's still a role for (reformed, ethical) private pensions, and I'd still like to see that encouraged, as investment is still a good/positive thing in the economy - and the risks involved do deserve rewards.

The problem with percentage based is, is that it's compound interest working against your favour, over time - imagine how gigantic that accumulated fee would be, over 40-50 years?

GreeBo

Varta wrote: »

The simple and fair way for the state to support private pensions is to have contributions paid from net salary and apply a zero tax rate on pension drawdowns. Of course, this would have the effect of halving the the income of pension fund companies, so it's never going to happen.

and thus halving the value of my pension and the tax that I pay on it?

Cue me with my hand out needing money from the state in my retirement...so what has that achieved?

Dodge

KyussB wrote: »

So there's still a role for (reformed, ethical) private pensions,

There we have it then.

Your argument is about types of pension rather than the idea that people should save for their retirement.

Which is good, because it really can’t be stressed enough that people need to save for their retirement

KyussB

Dodge wrote: »

There we have it then.

Your argument is about types of pension rather than the idea that people should save for their retirement.

Which is good, because it really can’t be stressed enough that people need to save for their retirement

Of course

I definitely support people saving for their retirement, even risking some of it in investments if they're ok with that risk and are responsible about it.

I just have major major concerns with private pensions in their current, predominant, form (and auto-enrolment particularly) - even the supposed 'ethical' ones have a ton of unethical investments - and all of those concerns tie into the bigger concerns/issues I've learned about, from studying/learning-about economic issues over the last decade.

I need to prepare for my own retirement as well after all (I'll be ok whatever way I do it, as my earnings are alright) - but because of what I know, and the issues that lets me easily see, it makes figuring out what to do about stuff like pensions and all, rather complicated - making it seem very hard to manage without compromising my principles, or putting myself at risk with the (largely fairly exploitative) finance industry.

S.M.B.

KyussB wrote: »

The problem with percentage based is, is that it's compound interest working against your favour, over time - imagine how gigantic that accumulated fee would be, over 40-50 years?

The fees can be crazy but I don't see it as any more of an outrage as a bank having a savings account interest rate set a half a percent below market rates. I know my would have a reasonable amount of money sitting in bank accounts for years. Personal Finances should be part of our formal education as its not just pension education that's lacking.

I know plenty of high earners here who are more than happy to have their pension pot sitting with providers with astronomically high percentage fees.

S.M.B.

Varta wrote: »

The simple and fair way for the state to support private pensions is to have contributions paid from net salary and apply a zero tax rate on pension drawdowns. Of course, this would have the effect of halving the the income of pension fund companies, so it's never going to happen.

The UK has an alternative wrapper which while a bit of a mess right now offers something more akin to this.

Pay a max of £4000 a year into a Lifetime ISA, get a 25% bonus from the government regardless of income tax rate and receive tax free gains from either interest on cash or stocks and shares investment. You can withdraw from the account to either buy your first house or after turning 60.

Now there is an awful lot wrong with this offering but it is a product that caters for retirement saving.

Varta

GreeBo wrote: »

and thus halving the value of my pension and the tax that I pay on it?

Cue me with my hand out needing money from the state in my retirement...so what has that achieved?

Well, if you were correct, and you are not, what would be the difference between putting your hand out after retirement and putting it out before retirement (getting half your pension contributions paid by the state)?

Your pension wouldn't halve if you put more (of your own) money into it.

Why do you always refer to getting the state pension as putting your hand out? Surely if you can afford to pay into a private pension then you are paying a sufficient amount into social welfare to get an earned state pension when you retire.

And as to "what has that achieved?" it has ensured that the state gets use the tax that is due from you to run society.

KyussB

S.M.B. wrote: »

The fees can be crazy but I don't see it as any more of an outrage as a bank having a savings account interest rate set a half a percent below market rates. I know my would have a reasonable amount of money sitting in bank accounts for years. Personal Finances should be part of our formal education as its not just pension education that's lacking.

I know plenty of high earners here who are more than happy to have their pension pot sitting with providers with astronomically high percentage fees.

Well, that's a gigantically big red flag there, I'm afraid

those fees are guaranteed earnings for the fee manager (drawn down immediately, not subject to risk of market crashes), which get amplified by investing more riskily, and thus create perverse incentives which encourage risky investments - then when the market does crash, the fund manager doesn't care because they've already got their cut of the money - 'IBGYBG' - "I'll Be Gone, You'll Be Gone".

This is why it helps to have a healthy (and well earned, for the finance industry) dose of cynicism. Even smart people, high earners, get lulled into accepting shit deals like that. The industry thrives on information asymmetry, and on people not being informed enough to spot stuff like this (and in this post I didn't even get into the astronomically high cost of the compounded fees, there, over time - which will decimate the gains of such funds).

[Deleted User]

Varta wrote: »

The simple and fair way for the state to support private pensions is to have contributions paid from net salary and apply a zero tax rate on pension drawdowns. Of course, this would have the effect of halving the the income of pension fund companies, so it's never going to happen.

It raises a big red flag when an entire industry is based around the benefit of tax relief. Does the industry really add much value beyond this?

Robert_Beach wrote: »

Arr yeah, our grandparents were told that Irish banks were safe and secure. Opps.

Just ICYMI - Irish banks are/were safe and secure. No deposit holder lost their deposits in Irish banks.

Investors in Irish banks certainly lost a lot of value of their share-holdings, but that's a different question.

GreeBo

Varta wrote: »

Well, if you were correct, and you are not, what would be the difference between putting your hand out after retirement and putting it out before retirement (getting half your pension contributions paid by the state)?

Tax benefit on the contributions leads to a much larger fund at the end, which I will continue to pay tax on.
If you cant see that this is a larger sum of money then I cant help you any further.

Varta wrote: »

Your pension wouldn't halve if you put more (of your own) money into it.

The equivalent argument to that is, you wouldnt need a state pension if you earned more money.

Varta wrote: »

Why do you always refer to getting the state pension as putting your hand out? Surely if you can afford to pay into a private pension then you are paying a sufficient amount into social welfare to get an earned state pension when you retire.

Why do you always refer to pension tax relief as putting your hand out?

Varta wrote: »

And as to "what has that achieved?" it has ensured that the state gets use the tax that is due from you to run society.

Which it does when they tax the money I take out of my pension.
For FAR longer and for MORE money than they would if I had my own savings and no private pension.

Robert_Beach

AndrewJRenko wrote: »

Just ICYMI - Irish banks are/were safe and secure. No deposit holder lost their deposits in Irish banks.

Investors in Irish banks certainly lost a lot of value of their share-holdings, but that's a different question.

No, it's not. That's what I meant. Standard safe option given to old people was put the investments in Irish banks. If you were around in the post-2008 Ireland, you couldn't miss all the pensioners who lost a substantial chunk, if not everything, in them.

[Deleted User]

Robert_Beach wrote: »

No, it's not. That's what I meant. Standard safe option given to old people was put the investments in Irish banks. If you were around in the post-2008 Ireland, you couldn't miss all the pensioners who lost a substantial chunk, if not everything, in them.

Who gave this advice? Anyone who knows anything about market investments would advise people to have a portfolio of shares, with geographic and sectoral diversification to balance risk and reward.

Who are these advisors who advised putting all your eggs in any one basket - whether Irish banks or dot com or whatever?

Robert_Beach

AndrewJRenko wrote: »

Who gave this advice? Anyone who knows anything about market investments would advise people to have a portfolio of shares, with geographic and sectoral diversification to balance risk and reward.

Who are these advisors who advised putting all your eggs in any one basket - whether Irish banks or dot com or whatever?

You seem to be mistaking me for a pensioner in post-2008 Ireland.

If you're looking for a specific list of advisors who said this, you'll be left wanting.

The fact is that lots and lots of pensioners lost big in them. What age are you? I ask because it was common to see and hear of this back then, but if you're too young then that's excusable.

And once again, I'm loving the blame being put on pensioners for market loses! This thread is nothing if not constant.

Varta

GreeBo wrote: »

Tax benefit on the contributions leads to a much larger fund at the end, which I will continue to pay tax on.
If you cant see that this is a larger sum of money then I cant help you any further.

I'm not looking for your help. You will pay less tax on your pension than you will get back on your contributions.

The equivalent argument to that is, you wouldnt need a state pension if you earned more money.
That is not an argument. You have earned your state penaion by making contributions.

Why do you always refer to pension tax relief as putting your hand out?

Why do you refer to people on state pension as putting their hand out?

Which it does when they tax the money I take out of my pension.
For FAR longer and for MORE money than they would if I had my own savings and no private pension.

Less tax than you got back on your contributions. Plus, all investment returns are taxed but you don't have to pay those investment return taxes

I get that you want a better income in retirement than the state provides , so do I and most other people. But you want other people to pay for your extra income in the form of a 'tax relief'. If you owe me €20 and I say "Greebo, just give me €10 and put the rest into your private pension", then I have just contributed €10 into your private pension. It is no different when the state does it. All tax relief is wrong. It is a scam used by politicians to win elections.

celtic_oz

Varta wrote: »

All tax relief is wrong. It is a scam used by politicians to win elections.

Sounds like someone who doesn't pay the higher rate .. You're welcome to your opinion, but I'm glad there is some way to pay less than the 50 odd percent which in my mind is outrageous.

Varta

celtic_oz wrote: »

Sounds like someone who doesn't pay the higher rate .. You're welcome to your opinion, but I'm glad there is some way to pay less than the 50 odd percent which in my mind is outrageous.

I paid the higher rate for most of my life. I believe in paying taxes to have a civilised, caring society in which to live and raise my family. I know we could get much better value for money for our taxes and that there is a lot of abuse such as in the welfare system, nevertheless, you will see that we do get a surprising return on our taxes when you actually write it all down.

[Deleted User]

Robert_Beach wrote: »

You seem to be mistaking me for a pensioner in post-2008 Ireland.

If you're looking for a specific list of advisors who said this, you'll be left wanting.

The fact is that lots and lots of pensioners lost big in them. What age are you? I ask because it was common to see and hear of this back then, but if you're too young then that's excusable.

And once again, I'm loving the blame being put on pensioners for market loses! This thread is nothing if not constant.

I've heard it said before all right, hence my question about who was saying it - was it from proper, qualified, regulated investment advisers (AA or QFA or whatever) or was it from your friendly accountant down the golf club who really didn't know his ass from his elbow.

Diversification is the basis for managing risk in any portfolio. To be honest, a lot of those who went for these kinds of investments were being greedy, like the bould Sean Quinn. They saw the strong growth in Irish financials, and they went chasing it at the wrong time for the market. It's hard to have too much sympathy.