How's your pension?

DubDani wrote: »

I am lucky as in that my employer has always been very good in all aspects of social security (Pension, Life insurance, Health Insurance, Travel Insurance etc.). They match up to 12% of my salary, i.e. right now I pay 15% of my salary into the pension every month and they add another 12% to it. They also add the Social Insurance contributions they save by me giving up 15% of my salary to the Pension pot as well. Decent pot right now, but another 20 years to go and who knows how many crashes we will see by then.

Don't worry too much about crashes for the next while at least. Your fund might have got hosed in 2008, for example, but today the value of those equities is significantly higher than it was even at the depth of the recession. Meanwhile, if you were still contributing to your pension during the downturn you were following Warren Buffets advice to "buy to the sound of cannons, and sell to the sound of trumpets." Every contribution during the crash bought stocks at depressed prices that have since bounced back and then some. Cash out when the economy looks really strong and you're closing in on retirement to the safer, boring bets like government bonds. And as I mentioned earlier, prepare to become one of those people who is like "Gulp.... Erm, guys, why don't we not burn the bondholders?!"

I'm in the public sector but a recent entrant so don't have the same cushy pension as those that work around me lol

Would it be worth contributing to a private pot on top of that?

Fccwontletmebe wrote: »

Thanks for that, any recommendations on who you can talk to about it. Definitely not planning on maxing it out though as don’t want my money tied up for 29 years.

Might consider putting the 8% in but I’ll see.

At the rate I’m going i should have 600K by the time I’m 50.

I would then have 1600 a month for the next 30 years which would do me perfectly fine on top of the state pension.

Okay after that last sentence I’m realizing I’m better off definitely putting something into it but do plan on retiring as early as I can, hopefully 50 so I’ll have do the maths and get a financial advisor. Will probably still work 3 months a year on some contract roles.

I really think you should talk to someone. Like, really really think you should talk to someone. You can achieve what you want to achieve in a far more tax efficient manner and your current plan takes no account of inflation. €20k in 29 years will not be €20k in today's money. Assume an average inflation rate of 3% over the period to be safe and your €20k will be worth €8.2k or so in 30 years. 1% inflation will make your €20k be worth €15k in real money. You need to be putting your money somewhere that it is growing faster than inflation, be inflation 1% or inflation 3% or whatever.

You also need to take account of things like deposit guarantees. Only €100k of your money is covered in case an institution goes belly up if you're holding it in a bank. So never hold more than that across all your accounts in any one bank.

Now lets say you want to retire early still. You can totally plan for that. Lets talk in today's money and bear in mind you will need to get advice on what to do with non-pension funds so that inflation doesn't kill them. For example, if you want €1,666 (propitious!) per month from age 50 to age 60, you only actually need €200k in cash. Another €100k from where you are today will set you back €438 per month over the next 19 years. The other €1,500 you're currently saving (let alone escalation, which I imagine you have in mind to get to €600k by 50 from 31) from your after tax income could go into a pension without tax (ie, be doubled if you're paying the higher rate of tax) and get you €684k in contributions over that same period, before the fund started to grow from the investments its in. You contribute nothing more till you're 60 and that fund will still be considerable. Now you're pulling down big lump sums and taking a raise at 60 before waiting for the state pension.

Head over to the Ask About Money recommendations forum to find someone to talk to. Genuinely, your case as you describe it needs some professional planning beyond what I might offer as a punters opinion on boards!

In the case of an AVC, Say for example you're paying 40% on a small portion of your wages.
Would you get tax relief at 40% for the year?
Or just 40% for the part of the year/income you're paying the higher rate.

AndrewJRenko wrote: »

The pension/insurance company are taking a gamble. They'll pay you €8k a year whether you live for two years or forty years after retirement. You pay a price for this lifetime guarantee.

That's just not true at all. Pension companies make money by charging a management fee i.e 1.5% of your fund per annum. The reason the 250k doesn't match say 20x8k now is because 160k in today's money will be worth 300k then etc due to inflation

car_radio19834 wrote: »

Yeah but that's my 250k.

When I'm 72 or so I'll be smelling of piss and biscuits and getting boils from sitting in a chair all day. A state pension would do me then.

You can choose to buy an annuity, which is an insurance product.

Or you can draw down from the fund, which will usually give you a higher return but at the risk of variable income if the markets shift.

What a lot of folks do is draw down from a fund still exposed to the market until they decide certainty is a bigger win (there's a difference between being 65 and being 75, basically) and use what's left to buy an annuity. Less income but, as you say, less doing.

I have that attitude as well but wouldn’t word it the same haha.

It is nice to have money but I could be maxing out my pension for the next 29 years and be dead by then.

I really hate the idea you can’t touch it until your 60

I really hate the idea of the taxman touching 50% of my money when I could be putting it away tax free and seeing a big lump of it later, tax free!

Fccwontletmebe wrote: »

Thanks for that, any recommendations on who you can talk to about it. Definitely not planning on maxing it out though as don’t want my money tied up for 29 years.

Might consider putting the 8% in but I’ll see.

At the rate I’m going i should have 600K by the time I’m 50.

I would then have 1600 a month for the next 30 years which would do me perfectly fine on top of the state pension.

Okay after that last sentence I’m realizing I’m better off definitely putting something into it but do plan on retiring as early as I can, hopefully 50 so I’ll have do the maths and get a financial advisor. Will probably still work 3 months a year on some contract roles.

I second seeing a financial planner. e.g. you could put the 8% in to get your employer to match your contributions and with the balance of your saving look into something like the EII qualified fund, not completely familiar but essentially you can invest into certain companies/funds and get tax relief for your contribution. Not quite as good as the relief on pension but close.

I.e. if you contributed €40k in the year, you get 40% relief on 75% of that (40k * 75% *40% = €12k relief). So your €40k investment actually costs you €28k. It is locked away for 4 years though.

Possibly worth looking into, as I said I am not overly familiar only starting to assess that option myself but wouldn't be just leaving it sitting there in cash. Much better ways of using it.

Sgt Hartman wrote: »

I'm in the public service for the last 14 years and I also have an AVC which isn't worth that much at the moment (about 6k) I'm 40 now and I'm seriously thinking about starting a personal pension just to top up my measly public pension when I finally retire

You can't have a personal pension plus a PS pension.

Well, what I mean is, the personal pension you can have is the AVC, that's it.