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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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[Deleted User]

Thisonedone wrote: »

8 years of stock market gains now wiped out in a week. .........

S&p500 was this low back in Dec 2018.

Thisonedone wrote: »

.......Those with pensions have no control over their own money and can only look on and weep. If only they had of put the money into stocks directly instead of a pension they could of sold out weeks ago when it was clear what was going on. Wonder is this the final nail in the coffin for the pension industry?

Daftest load of sh1t I've read in a while.

Henry Ford III

Yellow_Fern wrote: »

I always encourage pensions, but pensions are not tax free. Pensions are not taxed as they grow and you have the tax free lump size option but aside from that they are taxed when you use them just like anyother income.

Don't forget about tax relief on premiums.

Steer55

Henry Ford III wrote: »

Don't forget about tax relief on premiums.

Heard talk on radio earlier about emergency budget within couple weeks, expect major major changes to tax system, money has to be raised to pay for the unprecedented effects of what's unfolding in our country. Hundreds and thousands of people are about to become unemployed.

Squozen

Thisonedone wrote: »

8 years of stock market gains now wiped out in a week. Those with pensions have no control over their own money and can only look on and weep. If only they had of put the money into stocks directly instead of a pension they could of sold out weeks ago when it was clear what was going on. Wonder is this the final nail in the coffin for the pension industry?

This dip will be a distant memory in five years, and nobody who needs the money to retire on within five years should be all-in on equities if they are relying on their pension as their main/only source of income.

I kept putting as much as I could into my pension during the GFC and it's worked out very well for me.

christy G

Hi I'm 28 and dont no much about pensions, I'm looking to start saving now . Should I open up my own penison scheme and put money in each month ?

Or I could put In 14k now straight away would it build up over 30 years if I just left it in it ?

I have an apartment rented out which I get 1200 a month from that is going to pay off my mortgage when my partner and I decide to build or buy new .

Thanks for your advice in advance.

GreeBo

christy G wrote: »

Hi I'm 28 and dont no much about pensions, I'm looking to start saving now . Should I open up my own penison scheme and put money in each month ?

Or I could put In 14k now straight away would it build up over 30 years if I just left it in it ?

I have an apartment rented out which I get 1200 a month from that is going to pay off my mortgage when my partner and I decide to build or buy new .

Thanks for your advice in advance.

If you are still paying a mortgage on that apartment then use the 14k on that instead

Bass Reeves

christy G wrote: »

Hi I'm 28 and dont no much about pensions, I'm looking to start saving now . Should I open up my own penison scheme and put money in each month ?

Or I could put In 14k now straight away would it build up over 30 years if I just left it in it ?

I have an apartment rented out which I get 1200 a month from that is going to pay off my mortgage when my partner and I decide to build or buy new .

Thanks for your advice in advance.

It unlikly you would have 14K in higher tax band income. However you could look at your 2019 tax year income and see how much you paid at the top tax rate. You can pay that amount into a pension and recover the tax from 2019 tax year before October. You can repeat this as often as necessary to put money into you pension tax efficient.

For example if you paid tax on 10K in 2019 at the 40% rate and put that amount into your pension you would receive 4K back in tax. So you would still have 8K left in savings. Next year if you repeated the exact same amount you put 8K + 2K(I say borrowings but it may just be using an over draught) into your fund you receive 4K back leaving a 2K in savings. You have now put 20K into the pension fund and you have 2K in savings. Make your money work for you.

Finally I generally never worry about mortgage payments it is the cheapest money you ever borrow, it car loans, holiday borrowings , paying insurance and car tax in installments etc that ruins wealth creation. Finally if you can build or buy without selling the apartment down the line consider it.

christy G

Bass Reeves wrote: »

It unlikly you would have 14K in higher tax band income. However you could look at your 2019 tax year income and see how much you paid at the top tax rate. You can pay that amount into a pension and recover the tax from 2019 tax year before October. You can repeat this as often as necessary to put money into you pension tax efficient.

For example if you paid tax on 10K in 2019 at the 40% rate and put that amount into your pension you would receive 4K back in tax. So you would still have 8K left in savings. Next year if you repeated the exact same amount you put 8K + 2K(I say borrowings but it may just be using an over draught) into your fund you receive 4K back leaving a 2K in savings. You have now put 20K into the pension fund and you have 2K in savings. Make your money work for you.

Finally I generally never worry about mortgage payments it is the cheapest money you ever borrow, it car loans, holiday borrowings , paying insurance and car tax in installments etc that ruins wealth creation. Finally if you can build or buy without selling the apartment down the line consider it.

Thanks for your advice, yeah that the plan I dont want to sell it would prefer to rent.

Should I own my own penison scheme and pay into that each month not sure where to start just start looking a few companys up ? Also how safe Is your money in your own penison scheme?

dotsman

GreeBo wrote: »

If you are still paying a mortgage on that apartment then use the 14k on that instead

Why on earth would you recommend that?

Overpaying a mortgage would be far down the list of priorities for 99% of people and without knowing more, is extremely likely to be terrible financial advice.

Christy, what is your current employment situation and income? If you are employed, your employer will have a pension scheme, so that should be your first port of call with regards looking in to pension options.

And while you should definitely be putting money in to a pension, it is important to keep at least some money in emergency savings (the past month being a very good example of why). For pensions, when in steady/regular employment, the main thing is the regular contributions (a percent of your salary) and build it up over the years. While it may be of benefit to kickstart a pension with a small portion of the 14K, I would recommend keeping a good chuck of that in easy-access emergency savings. Especially when you have an investment property (imagine, for example, if your tenants stopped paying rent next month; it could take months, even a year to evict them - how would you cover the mortgage repayments while waiting to evict them and find new tenants? etc)

snoopboggybog

I'm currently putting in what my employer matches 6%.

I definitely won't be increasing it as have to wait 30 years for it.

I'm saving money regardless outside of the pension but don't understand people trying to max it out with as much as they can at a young age.

Live your life for now, not for retirement.

Yellow_Fern

dotsman wrote: »

Why on earth would you recommend that?

Overpaying a mortgage would be far down the list of priorities for 99% of people and without knowing more, is extremely likely to be terrible financial advice.

Christy, what is your current employment situation and income? If you are employed, your employer will have a pension scheme, so that should be your first port of call with regards looking in to pension options.

And while you should definitely be putting money in to a pension, it is important to keep at least some money in emergency savings (the past month being a very good example of why). For pensions, when in steady/regular employment, the main thing is the regular contributions (a percent of your salary) and build it up over the years. While it may be of benefit to kickstart a pension with a small portion of the 14K, I would recommend keeping a good chuck of that in easy-access emergency savings. Especially when you have an investment property (imagine, for example, if your tenants stopped paying rent next month; it could take months, even a year to evict them - how would you cover the mortgage repayments while waiting to evict them and find new tenants? etc)

Assuming you have a roughly six month emergency fund many and maybe most advisors would say pay off your mortgage. Its very conservative advice but very safe advice too.

GreeBo

dotsman wrote: »

Why on earth would you recommend that?

Overpaying a mortgage would be far down the list of priorities for 99% of people and without knowing more, is extremely likely to be terrible financial advice.

Christy, what is your current employment situation and income? If you are employed, your employer will have a pension scheme, so that should be your first port of call with regards looking in to pension options.

And while you should definitely be putting money in to a pension, it is important to keep at least some money in emergency savings (the past month being a very good example of why). For pensions, when in steady/regular employment, the main thing is the regular contributions (a percent of your salary) and build it up over the years. While it may be of benefit to kickstart a pension with a small portion of the 14K, I would recommend keeping a good chuck of that in easy-access emergency savings. Especially when you have an investment property (imagine, for example, if your tenants stopped paying rent next month; it could take months, even a year to evict them - how would you cover the mortgage repayments while waiting to evict them and find new tenants? etc)

Because the poster said they have 14k that they want to put into a pension. If you are paying a mortgage I'd seriously consider paying off mortgage instead of a pension. Depending on their age and salary they won't get 14k in an avc anyway

I'm also assuming that the 14k is disposable income and not their only funds, otherwise neither mortgage or pension is appropriate and it should be in cash.

WhatsGoingOn2

christy G wrote: »

Hi I'm 28 and dont no much about pensions, I'm looking to start saving now . Should I open up my own penison scheme and put money in each month ?

Or I could put In 14k now straight away would it build up over 30 years if I just left it in it ?

I have an apartment rented out which I get 1200 a month from that is going to pay off my mortgage when my partner and I decide to build or buy new .

Thanks for your advice in advance.

Offset your tax bill at the end of the year by paying into your pension using as much of the 14k as necessary, repeat next year with whatever is left.

Bass Reeves

WhatsGoingOn2 wrote: »

Offset your tax bill at the end of the year by paying into your pension using as much of the 14k as necessary, repeat next year with whatever is left.

You can offset 2019 tax and get it back straight away. But you should only do it at the higher tax rate

donkey balls

snoopboggybog wrote: »

I'm currently putting in what my employer matches 6%.

I definitely won't be increasing it as have to wait 30 years for it.

I'm saving money regardless outside of the pension but don't understand people trying to max it out with as much as they can at a young age.

Live your life for now, not for retirement.

I started paying AVC in to my pension when I was in my early 20s, OK I was still living in mammy and daddy house at the time.
I could afford to pay the extra 10% AVC at the time and I looked at it from another angle that its better in my savings than dead money to revenue.
I left the company I was working for in 03 but left the pension in the scheme, I never had a pension since then untill 2016 and I'm ploughing the money into additional AVC as I can afford to now.
But during the last economic downturn a pension was the last thing on my mind,As I was made redundant and ended up doing zero hour agency work for nearly 4 years.
If people can afford to put extra into a pension fund imo they should better to have it later on in live than never see it again.

donkey balls

snoopboggybog wrote: »

I'm currently putting in what my employer matches 6%.

I definitely won't be increasing it as have to wait 30 years for it.

I'm saving money regardless outside of the pension but don't understand people trying to max it out with as much as they can at a young age.

Live your life for now, not for retirement.

snoopboggybog

donkey balls wrote: »

I started paying AVC in to my pension when I was in my early 20s, OK I was still living in mammy and daddy house at the time.
I could afford to pay the extra 10% AVC at the time and I looked at it from another angle that its better in my savings than dead money to revenue.
I left the company I was working for in 03 but left the pension in the scheme, I never had a pension since then untill 2016 and I'm ploughing the money into additional AVC as I can afford to now.
But during the last economic downturn a pension was the last thing on my mind,As I was made redundant and ended up doing zero hour agency work for nearly 4 years.
If people can afford to put extra into a pension fund imo they should better to have it later on in live than never see it again.

30 years is a long wait, I'd rather an extra 400 in my pocket now than increasing it to like 15%.

Each to their own really but maxing out your pension early is pointless.

Live life for now. I'll still have a nice lump sum to live whereever i want

Jim2007

snoopboggybog wrote: »

30 years is a long wait, I'd rather an extra 400 in my pocket now than increasing it to like 15%.

Each to their own really but maxing out your pension early is pointless.

Well it is not 15%, it was a little over 769% in my case and if you thing being able to get out in your early fifties to do things that interest you, rather than having to trudge into work each day is pointless... well I guess it's up to you what you want to do with your time...

snoopboggybog wrote: »

Live life for now. I'll still have a nice lump sum to live whereever i want

Except you're 'nice lump sum' will be a lot less than it would be if you'd saved it through a pension vehicle. And more than likely by then pension reform will have happened by then and there will be a bigger reliance on private pensions and saving, just as there is in other EU/EEA/CH countries who have already gone a head with the 3 Pillar System.

And of course none of us is guaranteed a full working life in which to build up savings... which might mean a very frugal existence.

Squozen

Jim2007 wrote: »

Well it is not 15%, it was a little over 769% in my case and if you thing being able to get out in your early fifties to do things that interest you, rather than having to trudge into work each day is pointless... well I guess it's up to you what you want to do with your time...

Yep, the money you put into a pension immediately gives you a 20-40% return because you get a tax credit on it.

Between my personal contribution and my company adding some on top, I'm putting €687 a month into my pension and it's only costing me €275 after tax. That's a 150% return on day one.

If you actually sit down and do the sums I don't understand how people can be arguing against this. But I don't mind if you want to work until you're 68 and end up on a €13k state pension, no skin off my nose.

snoopboggybog

Jim2007 wrote: »

Well it is not 15%, it was a little over 769% in my case and if you thing being able to get out in your early fifties to do things that interest you, rather than having to trudge into work each day is pointless... well I guess it's up to you what you want to do with your time...

Except you're 'nice lump sum' will be a lot less than it would be if you'd saved it through a pension vehicle. And more than likely by then pension reform will have happened by then and there will be a bigger reliance on private pensions and saving, just as there is in other EU/EEA/CH countries who have already gone a head with the 3 Pillar System.

And of course none of us is guaranteed a full working life in which to build up savings... which might mean a very frugal existence.

You can't draw on your pension I thought till 60? So I'm gessing here is living off your normal savings from 50 to 60 and then get your pension?

It actually makes sense to me that way. I'm currently saving 1200 a month on top of my 6% contribution which my employer matches.

I'm new to all this so any advice is greatly appreciate even though I'm 30.

The J Stands for Jay

snoopboggybog wrote: »

Each to their own really but maxing out your pension early is pointless.

Maxing out your pension early is the best way. You could pay in for maybe 5 years, and still do much better than someone who maxed the last 10 years of their employment.

Jim2007

Squozen wrote: »

But I don't mind if you want to work until you're 68 and end up on a €13k state pension, no skin off my nose.

Well unfortunately that is not so, there is a social aspect to it as well...

The state pension system is a pay as you go model, which with an ageing population is not sustainable, so if people don't start to provide for their own retirement then then 'haves' will have to pay for the 'have nots' in term of pension taxation, less services etc....

That is why the 'second pillar' - company pension is become mandatory in most Europe countries now, much like auto enrolment in Ireland.

Yellow_Fern

Squozen wrote: »

Yep, the money you put into a pension immediately gives you a 20-40% return because you get a tax credit on it.

Between my personal contribution and my company adding some on top, I'm putting €687 a month into my pension and it's only costing me €275 after tax. That's a 150% return on day one.

If you actually sit down and do the sums I don't understand how people can be arguing against this. But I don't mind if you want to work until you're 68 and end up on a €13k state pension, no skin off my nose.

I guess you mean 15-40% return right. No doubt that the pension is well worth doing for all ages and you should start as soon as possible. However it is not quite a 15-40% return because it is mostly taxed at the other end as income and then is the issue of fees.

snoopboggybog

Any advice on my 6% and my employer matching and want to retire at 50. I'm currently saving 1200 a month which i have going into a bank of ireland savings account.

Squozen

Yellow_Fern wrote: »

I guess you mean 15-40% return right. No doubt that the pension is well worth doing for all ages and you should start as soon as possible. However it is not quite a 15-40% return because it is mostly taxed at the other end as income and then is the issue of fees.

No, it's much higher than 15-40% after 40 years of investment. Putting in €687 and getting an 8% net return over 40 years gives me just shy of €17,000. Even counting inflation that's insane.

And it is not 'mostly taxed at the other end as income'. Only interest/dividends on the invested sum after retirement count as taxable income, not the sum itself.

https://www.pensionsauthority.ie/en/lifecycle/tax/tax_on_pension_assets/

[Deleted User]

snoopboggybog wrote: »

Any advice on my 6% and my employer matching and want to retire at 50. I'm currently saving 1200 a month which i have going into a bank of ireland savings account.

If your employer is offering to match your contribution, that is an immediate 100% return on your investment, before you even look at the tax saving. If you're leaving any opportunity for employer matching on the table, you're a fool, financially speaking.

Squozen

snoopboggybog wrote: »

Any advice on my 6% and my employer matching and want to retire at 50. I'm currently saving 1200 a month which i have going into a bank of ireland savings account.

Look at a good index fund ETF. Putting the money into the bank is actually losing you money over time once inflation is factored in.

I am planning to retire at 60 (currently 46) and start drawing on my pensions at 65, so I only need to have enough in normal investments to last me five years. As you're 30, you need to invest enough over 20 years to last 10. Do you have a mortgage?

The J Stands for Jay

snoopboggybog wrote: »

You can't draw on your pension I thought till 60? So I'm gessing here is living off your normal savings from 50 to 60 and then get your pension?

It actually makes sense to me that way. I'm currently saving 1200 a month on top of my 6% contribution which my employer matches.

I'm new to all this so any advice is greatly appreciate even though I'm 30.

Occupational pension schemes allow you to draw down at 50.

[Deleted User]

McGaggs wrote: »

Occupational pension schemes allow you to draw down at 50.

Provided that you have left that employment.

snoopboggybog

Squozen wrote: »

Look at a good index fund ETF. Putting the money into the bank is actually losing you money over time once inflation is factored in.

I am planning to retire at 60 (currently 46) and start drawing on my pensions at 65, so I only need to have enough in normal investments to last me five years. As you're 30, you need to invest enough over 20 years to last 10. Do you have a mortgage?

No But I'm in the US at the minute and paying into the pension over here at the minute, same as when i was back in Ireland.

When i was in Ireland I was living with friends paying 250 euro for a room. I don't need a mortgage. I am single and plan on staying that way. (It might sound morbid but I have one parent left at 70 and will inherit the house).

What I'm thinking of doing is:

Retire at 50: Should have 380K saved
At 60: Hit the pension.