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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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Squozen

snoopboggybog wrote: »

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.

I have one parent left at 74 and agree, it doesn't sound great but you do have to factor an inheritance into your planning.

If you invest instead of using the bank you should end up with significantly more than €380k - closer to €700k (which would be around €470k in today's money). Have you taken inflation into account for your calculations? At 2% per annum inflation, €380k in 2040 is worth the equivalent of €255k.

[Deleted User]

AndrewJRenko wrote: »

Provided that you have left that employment.

For folk planning on retiring that's likely no problem.

TK Lemon

Hi everyone,

My OH, Mr Lemon is 28 going on 29 . He has been in a defined contribution pension scheme in his current place of work since 2018 when he was 27.

If I'm not mistaken, tax refunds and tax credits are claimable for up to four years.

Is it possible to make a retrospective AVC contribution to his current provider for former employment in 2016 and 2017 and claim the tax relief immediately?

Squozen

TK Lemon wrote: »

Is it possible to make a retrospective AVC contribution to his current provider for former employment in 2016 and 2017 and claim the tax relief immediately?

I think you'd be best off asking Revenue directly. You can submit an enquiry online.

maestroamado

Mantis Toboggan wrote: »

20% of people die in Ireland before they reach 65 so I'd slightly agree with the OP, chances are you'll never see that money. Life is short, enjoy it, we'll all be dead in 80 years anyway and a few years dead and you're long forgotten.

I just came across this thread now.

In was at a conference a few years ago and this is what happened.
One of my former collegues asked the Human Resorces Director who was doing a presentations on AVCs advanced contributions.
He asked.
Because i joined the company later on i would like to have same lifestyle when i retire.
Reply name, the reality is most people retire at 65 and of those people 20% will not be around at 70.
of these people 25% will not be around at 75.... shall i continue... No...

Personally i think a lot of pension schemes are pretty dodgy.
I think it will be compulsory to have a private pension in the next 5/10 years. The trick is not to put too much in as if you save tax going in and invest too much you pay tax taking out.
I would be inclined to have a pension of a min of €100 and up to €150pw.
That would be an income of nearly €400 in today's terms and with no debt live very comfortable and have a holiday.

Padre_Pio

maestroamado wrote: »

I just came across this thread now.
Reply name, the reality is most people retire at 65 and of those people 20% will not be around at 70.
of these people 25% will not be around at 75.... shall i continue... No...

I'm in my mid 30s. I don't know what the retirement age will be in 30 years, but equally I don't know what the expected life will be in 30 years.

People dying at the average life expectancy of 82 were born when Mr. Hitler was annexing Austria. When they were my age the life expectancy was 68.

It's silly to plan future events based on current state of affairs. We could all be living to 100 in 30 or 40 years time.

snoopboggybog

So canyone recommend what i should do?

Squozen

maestroamado wrote: »

Personally i think a lot of pension schemes are pretty dodgy.

Cool story, bro.

I think it will be compulsory to have a private pension in the next 5/10 years. The trick is not to put too much in as if you save tax going in and invest too much you pay tax taking out.

Untrue. Do some research before coming onto a forum and spouting nonsense.

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

If you put in too much you don't get tax relief on the excess.

You will get taxed at 40% for any amount over €2,000,000 in your pension, and I'd love to have that 'problem'.

I would be inclined to have a pension of a min of €100 and up to €150pw.
That would be an income of nearly €400 in today's terms and with no debt live very comfortable and have a holiday.

€400 a month is comfortable? Are you having a laugh?

Squozen

snoopboggybog wrote: »

So canyone recommend what i should do?

Several of us have recommended what you should do. Speak to a financial advisor if you want further confirmation.

snoopboggybog

Squozen wrote: »

Several of us have recommended what you should do. Speak to a financial advisor if you want further confirmation.

No they havn't

Yellow_Fern

Squozen wrote: »

Cool story, bro.

Untrue. Do some research before coming onto a forum and spouting nonsense.

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

If you put in too much you don't get tax relief on the excess.

You will get taxed at 40% for any amount over €2,000,000 in your pension, and I'd love to have that 'problem'.

I don't think you understand. It is a case of diminishing returns and opportunity cost. If you are going beyond the tax relief percentage you will have diminished advantage and perhaps better advantage investing the money elsewhere like a devident free share or a EII Scheme

S.M.B.

Squozen wrote: »

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/

That page is about annual tax charges on underlying assets and then the following page is this one and starts as follows.

"All pensions (annuities) are taxable as income under the PAYE system and are also subject to the Universal Social Charge, but not PRSI."

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

Maybe I'm reading your post incorrectly though but not sure how else you can interpret " And it is not 'mostly taxed at the other end as income'. "

Squozen

snoopboggybog wrote: »

No they havn't

I have, and I'll say it again. Invest.

blindside88

S.M.B. wrote: »

That page is about annual tax charges on underlying assets and then the following page is this one and starts as follows.

"All pensions (annuities) are taxable as income under the PAYE system and are also subject to the Universal Social Charge, but not PRSI."

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

Maybe I'm reading your post incorrectly though but not sure how else you can interpret " And it is not 'mostly taxed at the other end as income'. "

You can earn up to €18k per annum and pay virtually no tax. A further approx €18k will be taxed at 20%.

State pension is approx €12k per annum meaning you could take up to an additional €6k and not pay tax or up to €24k from your pension in a very tax efficient manner. If you are currently paying tax at the higher rate you’d be mad not to pay into a pension.

Tax relief on contributions
Tax free growth
Tax free lump sum of up to €200k on retirement

I started a pension at 25 and am currently on track to have €1.1 million in my pension pot at retirement. I will have contributed very little of that. I’m taking advantage of employer contributions and tax relief.

Squozen

S.M.B. wrote: »

That page is about annual tax charges on underlying assets and then the following page is this one and starts as follows.

"All pensions (annuities) are taxable as income under the PAYE system and are also subject to the Universal Social Charge, but not PRSI."

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

Maybe I'm reading your post incorrectly though but not sure how else you can interpret " And it is not 'mostly taxed at the other end as income'. "

I said that because I was responding to this line: 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.

So let me calculate that out.

Say you start at the age of 30, you earn enough to get taxed at the 40% rate, and you put €200 a month into your pension until the age of 68. That's costing you €120 a month (because you would have lost €80 to tax if you hadn't put the money into a pension).

If you'd just put that money in the bank, over that 38 years you've already been taxed €36,480 and you've made no return. Agreed so far?

Ok, so let's say that pension earned you a really crappy return, like 6% pa after fees. You end up with €351,901.

Now you can take 25% out as a tax-free lump sum. That's €87,975 (already more than you put in!) tax-free, and you still have €263,926 to put into an ARF or annuity.

That's not a 15-40% return on an investment of €54,720 (38x12x€120), I think you'd agree. That was all I was saying.

Squozen

blindside88 wrote: »

I started a pension at 25 and am currently on track to have €1.1 million in my pension pot at retirement. I will have contributed about very little of that. I’m taking advantage of employer contributions and tax relief.

I made a horrible income (sub-€20k) until I was 34, but because I was lucky enough to be in Australia where personal pensions are mandatory I'm still in a position to retire at 60 on savings and will have €1.125m to draw on at 65 (assuming a net return of 9%). Pensions are great. Get one.

Yellow_Fern

S.M.B. wrote: »

That page is about annual tax charges on underlying assets and then the following page is this one and starts as follows.

"All pensions (annuities) are taxable as income under the PAYE system and are also subject to the Universal Social Charge, but not PRSI."

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

Maybe I'm reading your post incorrectly though but not sure how else you can interpret " And it is not 'mostly taxed at the other end as income'. "

PRSI and lump sums being excluded doesn't change it being mostly akin to income.
Yes pensions are a good idea and everyone in Ireland should be getting a private pension but the scheme we have is age discriminatory against young people and overall somewhat penal. Like often in this country, hard work isn't rewarded.

S.M.B.

Squozen wrote: »

That was all I was saying.

Fair enough I just don't want someone reading a statement like "Only interest/dividends on the invested sum after retirement count as taxable income, not the sum itself." and thinking the rest isn't taxable as income when a portion of it will be. As the previous post makes clear, most would be in a position where there earnings would be much lower at pension age so the amount of actual tax due would be dramatically reduced.

Also, "If you'd just put that money in the bank, over that 38 years you've already been taxed €36,480 and you've made no return. Agreed so far?". I don't agree, that money can also be making 6% each year but with tax due depending on where it's invested.

I'm in no way disagreeing with the fundamental point that it's a smart move although it's very difficult to calculate the exact gains you get from using the pension wrapper as opposed to saving/investing without as things will change over the years.

I'm assuming things won't change that dramatically myself so I'm paying ~20% of my salary plus any bonus into my pension on top of my employers contributions.

maestroamado

Squozen wrote: »

Cool story, bro.

Untrue. Do some research before coming onto a forum and spouting nonsense.

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

If you put in too much you don't get tax relief on the excess.

You will get taxed at 40% for any amount over €2,000,000 in your pension, and I'd love to have that 'problem'.

€400 a month is comfortable? Are you having a laugh?

You did not read the post as i was responding to the original post who did not want to waste money on pension.
What i said was €400 Week €1700+ Month in todays terms of life without debt.
I did not need to do research as i know what i am talking about. I retired at 50 but i was lucky i was with "Blue Chip" company.

https://www.thejournal.ie/pensions-regina-doherty-2-4872911-Oct2019/

I did do research since i read your message as i knew i read of this recently as the way forward for Government.

Why you tell the OP of the tax on €2,000,000 is beyond me....

Jim2007

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?

Actually it is 57 here (Switzerland) And since it is Swiss government policy to discourage property investing, we pay not CGT on gains from investing.
[/QUOTE]

[Deleted User]

Augeo wrote: »

For folk planning on retiring that's likely no problem.

Retiring isn't a 'once-in-a-lifetime' event for most people. I'm technically 'retired', and I'm also working full-time. I 'retired' for the purposes of one AVC scheme in my early 50s to withdraw that cash, while still continuing to work normally.

The option to get your hands on money in private pensions from previous employments once you hit 50 doesn't get a whole lot of attention, but is important for financial planning purposes.

It's crazy really - just another tax break for middle and upper classes.

Jim2007

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.

Do the math... figure out how much you will need to have saved by the time you are 50. It will not be accurate of course, so keep it simple.

Assume you need 65% of your current salary to live on and that you can buy an annuity at say 3%, that gives:

(current gross salary * .65) / .03

If the years from retirement to pension age, you'll need to generate all the income from investments and them it should drop when the pension kicks in, so you should be able to eat up some capital in the years before retirement.

Jim2007

maestroamado wrote: »

Personally i think a lot of pension schemes are pretty dodgy.

What is your factual evidence for this believe?

maestroamado wrote: »

The trick is not to put too much in as if you save tax going in and invest too much you pay tax taking out.

Why should you not have to pay tax on it? You get a income tax break when you pay into it and you get the benefit of it growing over the investment period tax free, so you exactly should you not have to pay taxes?

This argument makes no sense - your going to take advantage of the most efficient tax method of saving for your retirement, because you will have to pay taxes on it in the end and in the mean time your pay income tax on it every year....

maestroamado wrote: »

I would be inclined to have a pension of a min of €100 and up to €150pw.
That would be an income of nearly €400 in today's terms and with no debt live very comfortable and have a holiday.

And what are you going to do with your time after you've had your annual holiday... sit around and watch the grass grow? Most people I now are in good health and active, including myself, don't sit around waiting to die... they take a couple of holidays a year, dine out a few times a week, spend on their hobbies and interests.... you will not do much on 20 or 25 Euro a day.

bilbot79

Squozen wrote: »

I made a horrible income (sub-€20k) until I was 34, but because I was lucky enough to be in Australia where personal pensions are mandatory I'm still in a position to retire at 60 on savings and will have €1.125m to draw on at 65 (assuming a net return of 9%). Pensions are great. Get one.

Can I ask your current age, size of current pot and level of contributions to get you to 1.1?

I figure 1-1.3 mil is a great figure to retire with. I'd love to have that at 60 but I think I'll more likely have 700k

S.M.B.

Is 9% net a reasonable assumption? I've being basing my projections on 6% net.

The extra 3% increases my potential l pot by nearly 50%.

maestroamado

Jim2007 wrote: »

What is your factual evidence for this believe?

Why should you not have to pay tax on it? You get a income tax break when you pay into it and you get the benefit of it growing over the investment period tax free, so you exactly should you not have to pay taxes?

This argument makes no sense - your going to take advantage of the most efficient tax method of saving for your retirement, because you will have to pay taxes on it in the end and in the mean time your pay income tax on it every year....

And what are you going to do with your time after you've had your annual holiday... sit around and watch the grass grow? Most people I now are in good health and active, including myself, don't sit around waiting to die... they take a couple of holidays a year, dine out a few times a week, spend on their hobbies and interests.... you will not do much on 20 or 25 Euro a day.

The original poster said did not want invest on private pension and thats his choice.
I was pointing that to have a life today you need have no debt, house paid.
I said an individual need minimum €150 + €250 state = €400 pw = €1700+ to have any kind of life. I do not think the OP was thinking of cruises like everyone else here.

I expect things will change when this compulsory pension they are talking about and the larger portion will come from private pension.
I am not aware if there are any pensions in private funds that are guaranteed by Government.
If its to work something need be done in this area, i know a few people who got caught in last financial crisis.

There is no freebee here if we get the tax concession at the front end we pay tax when we draw out, that's the way it is. We can get 25% of the cash tax free.
Thats my understanding of how it works...

Squozen

Yellow_Fern wrote: »

Yes pensions are a good idea and everyone in Ireland should be getting a private pension but the scheme we have is age discriminatory against young people and overall somewhat penal. Like often in this country, hard work isn't rewarded.

You're going to have to explain this like I'm five.

Squozen

bilbot79 wrote: »

Can I ask your current age, size of current pot and level of contributions to get you to 1.1?

I figure 1-1.3 mil is a great figure to retire with. I'd love to have that at 60 but I think I'll more likely have 700k

46, €153k (dropped fairly significantly due to covid-19!), putting in €687/month between myself and my employer (would love to put in more, but I can't until I can find a house to buy) and working on an average gain of 9% per annum.

Squozen

S.M.B. wrote: »

Is 9% net a reasonable assumption? I've being basing my projections on 6% net.

The extra 3% increases my potential l pot by nearly 50%.

If you go for a fund that is very high on equities and low on fees, 9% is historically lower than the S&P 500 has made over time. My Australian fund gained 11.29% in 2018 and 12.47% in 2019, but it allows me to put my money directly into the stock market rather than charging active management fees. Those kinds of funds have been hard for me to find in Ireland.

Squozen

maestroamado wrote: »

If its to work something need be done in this area, i know a few people who got caught in last financial crisis.

People shouldn't have much of their money in equities in the last 5-8 years of their working life. Most managed pensions move your investment automatically into cash and bonds to avoid these issues.

But if you have enough put away, being 100% in equities isn't a real issue during a stock market crash. Just keep taking out 4% of the total every year and it will still last forever.