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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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thebourke

Bass Reeves wrote: »

Annuity rates are not quite that bad. Irish life are quoting sample annunity rates of 3.85% for a joint life with 50% to spouse and 3% escalation for someone at 65. So on 300k would give an annual pension of 11550 euro/ year. On 3% escalation in 10 years the pension will be 15k and after 20 years it will be 20k. However in general people's demand for money after retiring is higher in the early part of the retirement rather than later in there eighties

As well most annuities pay a minimum number of years from 5-10years.

https://www.irishlifecorporatebusiness.ie/annuities

Can you explain how 300k works out at 11550 per year..it doesnt seem like much money for 300k

GreeBo

Tow wrote: »

Looking back 20 years, buying property(s) would have been a much better investment.

Whats the return on property over the last 20 years compared to the (compound) return on the stock market, even excluding the tax benefits of investing via your pension?

Jim2007

S.M.B. wrote: »

Do you mean that it's not possible to get inflation + 4% returns in 'very low risk profiles' once you reach retirement age?

That is what we are starting to see.... low risk returns are usually associated with prime debt..... but there is too much cash around these days....

For example, we have no PAYE system here in Switzerland and people pay their taxes a few times a year. But at present the banks charge public institutions -1% on deposits and in turn local government are encouraging people to pay late or just before the deadline, as it costs them less!

Shedite27

thebourke wrote: »

Can you explain how 300k works out at 11550 per year..it doesnt seem like much money for 300k

€300k * 3.85% annuity rate = €11,500 per annum.

You're right tho, it's rubbish, which is why most people should go ARF/AMRF route. Given people are expected to retire at 67 or whatever, and life expectancy is 81 in Ireland, the average person has 15 years to cover, so €11.5k *15 = €172k. The Annuity rate assumes you'll be drawing it down for 26 years (ignoring growth), which is optimistic.

Bass Reeves

Shedite27 wrote: »

€300k * 3.85% annuity rate = €11,500 per annum.

You're right tho, it's rubbish, which is why most people should go ARF/AMRF route. Given people are expected to retire at 67 or whatever, and life expectancy is 81 in Ireland, the average person has 15 years to cover, so €11.5k *15 = €172k. The Annuity rate assumes you'll be drawing it down for 26 years (ignoring growth), which is optimistic.

Again incorrect it 3.85% with 3% escalation and a 50% surviving spouse pension and the figures is for someone retiring at 65. With escalation after 10 years this pension will be 15K/year and after 20 it will be 20K/year. You do not have to wait until 67 to draw a pension. To make a valid comparrison on a single life for a 65 year old the rate is 6% no escalation or 18K a year.

People often give annunities a bad name by not understanding them. First off pension companies can no longer give different rates to men and women. While an average man at 65 will live to 81 (2012 figures so even with COVID it is higher now) an average woman's 2012 figures was 84. However the real risk for pension companies is that an most people with private pension funds will have the higher socio economic grouping and studies have shown that these will live longer again than average figures. As well those with health issues at 65 tend to look at enhanced annunities which again have higher rates. As well pension companies have to keep these a lot of these funds in low risk bonds. Taking the figures above for a male fund holder who spouse is 2-3 years younger than him. If he lives to 85 and his spouse survives him by 5 years he will they will draw about 370K. Now while it may seem not a great return on average it gives security of outcome where a pensioner and or there spouse lives into there 90's

[Deleted User]

AndrewJRenko wrote: »

There were no cases of company schemes wound up that involved pensioners losing their investments, to the best of my knowledge. Are you aware of any such cases?

Your pension manager isn't going to phone you at 10pm on Saturday night about a blocked toilet. It's not a fair comparison. Renting out property is like running a small business, and all the ups and downs that go with that.

Pensioners are protected under Irish law, at the cost of the non pensioners in the scheme. Waterford Glass is a classic case, the employees got screwed, even those only a few months from retirement.

I have not heard from my pension advisor in 20 years. He is still in the business, but as an Independent advisor. I must call him about the 9 to 12% yearly compound interest (return) they forecast. The least he can do is answer, as he would still be getting a slice of my contributions each year.

Jim2007

Tow wrote: »

Pensioners are protected under Irish law, at the cost of the non pensioners in the scheme. Waterford Glass is a classic case, the employees got screwed, even those only a few months from retirement.

I guess you must have missed it....

THE FORMER WORKERS of Waterford Crystal will receive significant pensions and a tax-free lump sum after a settlement was approved by government.

Tow wrote: »

I have not heard from my pension advisor in 20 years. He is still in the business, but as an Independent advisor. I must call him about the 9 to 12% yearly compound interest (return) they forecast. The least he can do is answer, as he would still be getting a slice of my contributions each year.

Why would a form employee of whatever company you do business with go contacting you about your business relationship with them? If the person has gone and set up their own business, how would they still be getting a slice of the fee income of their former employer? And why should anyone bother contacting you about anything you did not feel was worth following up on for 20 years?

Brian201888

Jim2007 wrote: »

Unfortunately the theory upon which was based has not delivered and the assumed replacement rates are looking more and more like fairy tales as interest rates continue to remain low. I expect many people will die in poverty if it continues along current lines.

What would you forsee as a realistic withdrawal rate in the future if Ireland stayed on its current trajectory?

I'll admit to being blind to what exactly I'm invested in, I max my contribution working in an large multinational and have blindly just allowed it to be auto invested by the pension administrator on the default risk rating with the assumption that this is best way forward, some scary sounding things mentioned in this thread, will certainly be paying more attention to it going forward.

[Deleted User]

Jim2007 wrote: »

I guess you must have missed it....

I know, but only after a lot of fighting.

Jim2007 wrote: »

Why would a form employee of whatever company you do business with go contacting you about your business relationship with them? If the person has gone and set up their own business, how would they still be getting a slice of the fee income of their former employer? And why should anyone bother contacting you about anything you did not feel was worth following up on for 20 years?

That is how the industry works. He is still my advisor on the pension company paperwork. When he left them, joined a independent company and subsequently went out on his own, I got a letter from the pension company telling me and I could contact them if I wanted to change to another person. The reality is I just deal directly with the pension company of I want to change contributions etc. It is not as if they are going to change the cut they take off off each contribution.

thebourke

Tow wrote: »

I know, but only after a lot of fighting.

That is how the industry works. He is still my advisor on the pension company paperwork. When he left them, joined a independent company and subsequently went out on his own, I got a letter from the pension company telling me and I could contact them if I wanted to change to another person. The reality is I just deal directly with the pension company of I want to change contributions etc. It is not as if they are going to change the cut they take off off each contribution.

how do they calculate the tax on the arf?
say for example you paying tax tax at the higher rate as a paye
my figues again
pension fund 400k
100k tax free at retirement

that leaves 300k for annuity/arf
what tax rate do the charge you every year on the arf?

Geuze

You pay normal income tax on the income drawn down from the ARF.

Say you draw 4% from the fund worth 100k.

The life company send you 4,000 income, and it is taxed like they are an employer.

You get a P60.

They are another income added to any other incomes in your Revenue account.

You can allocate tax credits and SRCOP to it, like you can to any employer.

turbostan

Hello
If anyone has the time to help or advise here it's be greatly appreciated.
Working full time (sales, 30k)
Wife working part time.
No pensions.
Both 41.
Where to begin!!
And how much should it cost?
Sorry so vague, thanks in advance!

donkey balls

At youre age you can contribute up to 20% of your basic salary most companies normally have soke sort of pension scheme.

Padre_Pio

turbostan wrote: »

Hello
If anyone has the time to help or advise here it's be greatly appreciated.
Working full time (sales, 30k)
Wife working part time.
No pensions.
Both 41.
Where to begin!!
And how much should it cost?
Sorry so vague, thanks in advance!

Honestly, talk to someone. If your company offers a pension scheme they'll have pension advisors.
They can guide you.

The rule of thumb is you should be putting half your age as a % into your pension, so 20% minimum for you and your wife. Sounds like a lot of money, but it's pre-PAYE.

donkey balls wrote: »

At youre age you can contribute up to 20% of your basic salary most companies normally have soke sort of pension scheme.

25% tax free after 40.

turbostan

Padre_Pio wrote: »

Honestly, talk to someone. If your company offers a pension scheme they'll have pension advisors.
They can guide you.

The rule of thumb is you should be putting half your age as a % into your pension, so 20% minimum for you and your wife. Sounds like a lot of money, but it's pre-PAYE.

25% tax free after 40.

Thanks lads, nothing available from within the company, they'll probably deduct at source if requested but there's no pension scheme

donkey balls

Padre_Pio wrote: »

Honestly, talk to someone. If your company offers a pension scheme they'll have pension advisors.
They can guide you.

The rule of thumb is you should be putting half your age as a % into your pension, so 20% minimum for you and your wife. Sounds like a lot of money, but it's pre-PAYE.

25% tax free after 40.

Yep 25% ye would think i would know because I'm paying that amount in.

donkey balls

turbostan wrote: »

Thanks lads, nothing available from within the company, they'll probably deduct at source if requested but there's no pension scheme

I started my pension early 20s back in the 90s was getting lashed out of it in taxes at the time,But I was living at home at the time.so had no big out going bills like a mortgage etc.
If you can afford to save for a pension do it.

Padre_Pio

turbostan wrote: »

Thanks lads, nothing available from within the company, they'll probably deduct at source if requested but there's no pension scheme

You can get free advice at any pension provider. Call a few and see what they say. Everyone here will tell you what their own apporach is, but what's right for one person may not be right for you.

Bass Reeves

Padre_Pio wrote: »

Honestly, talk to someone. If your company offers a pension scheme they'll have pension advisors.
They can guide you.

The rule of thumb is you should be putting half your age as a % into your pension, so 20% minimum for you and your wife. Sounds like a lot of money, but it's pre-PAYE.

25% tax free after 40.

Not really feasible for someone on an income of 30K. As well there contributions will be at lower tax rate. However Turbostan its a case of getting on with it. Have you children as these will be a huge draw on your finances as they go to college. Out of an income of 30K your would be taking home about 489/week. To make a contribution of 10% of your wages 3k/year will reduce you net income to about 443/week.

General rule of thumb is for your retirement you should aim for 50% of income. In your case the OAP at present would cater for that amount of your net income. However it will only give you and your wife a fairly basic retirement. To achieve 50% of your present gross income as a pension(15K/year inc OAP) it will take about 6.5% of your present income costing you 33 euro/week. I have put in a link to the pension authority pension calculator

https://www.pensionsauthority.ie/en/lifecycle/useful-resources/pension-calculator/

If you contribute 10% of your salary into a fund it will give you a pension of about 3.2K/year at 68 years of age. I am not sure if on your income you can afford to any higher than that. It is likly in the next 5 years that all employers will be forced to provide apension scheme and either they or the state will contribute as well

Henry Ford III

Padre_Pio wrote: »

You can get free advice at any pension provider. Call a few and see what they say. Everyone here will tell you what their own apporach is, but what's right for one person may not be right for you.

Nothing is free.

JJayoo

colm_c wrote: »

Huh?

What have kids got to do with saving for retirement?

Estimated cost of raising two kids is 500k, don't have kids and save some cash, spend it on fine wines and large cheeses

https://www.irishtimes.com/news/consumer/you-want-two-children-that-ll-be-500-000-please-1.2754454

blindside88

Henry Ford III wrote: »

Nothing is free.

The advice from most pension providers is free, unless you choose to go to a fee based advisor. You are under no obligation to go with them after receiving their advice.

If you do take a pension with them they will receive fees but that’s a different matter all together. The advice and consultation is free.

Jim2007

blindside88 wrote: »

The advice and consultation is free.

But it is not advice, it is information about the options they offer... you wouldn’t expect a car salesman to sell you a car on someone’s lot would you?

Jim2007

JJayoo wrote: »

Estimated cost of raising two kids is 500k, don't have kids and save some cash, spend it on fine wines and large cheeses

https://www.irishtimes.com/news/consumer/you-want-two-children-that-ll-be-500-000-please-1.2754454

I guess you don’t know the value of kids....

AnRothar

Jim2007 wrote: »

I guess you don’t know the value of kids....

Well someone has to pick your nursing home

Padre_Pio

Jim2007 wrote: »

But it is not advice, it is information about the options they offer... you wouldn’t expect a car salesman to sell you a car on someone’s lot would you?

No, but if knew zero about cars I'd at least get an idea of what type of car suits my lifestyle and needs. Sure the Ford dealer will push for a Ford, but if he says I need a fiesta, I can look at similar cars from other manufacturers.

Some people know zero about pensions, and can be daunted.

Jim2007

Padre_Pio wrote: »

No, but if knew zero about cars I'd at least get an idea of what type of car suits my lifestyle and needs. Sure the Ford dealer will push for a Ford, but if he says I need a fiesta, I can look at similar cars from other manufacturers.

Some people know zero about pensions, and can be daunted.

And if he said a fiesta because he was told to push that model, you’d spend your time looking at the wrong types of car for the wrong reason.

And I have seen the exact same thing done with financial products - people trying to choose between products all of which were totally inappropriate for them.

Shedite27

Jim2007 wrote: »

And if he said a fiesta because he was told to push that model, you’d spend your time looking at the wrong types of car for the wrong reason.

And I have seen the exact same thing done with financial products - people trying to choose between products all of which were totally inappropriate for them.

Thre are a few bad eggs in the business, but most broker will set you the right way.

OP, if you're that worried, visit a few FREE brokers, and see what advice they give you. Most will tell you the right type of products, funds etc. The difference for the bad eggs is that they'll push you to the company with the highest commission for them. From what I see most push the compan who have the best records for service, performance etc. Most brokers see customers as potential customer for life. Your entry level Pension isn't gonna make a big splash in their annual profits, but if they treat you right, you might be back in a few years for mortgage protection, a savings account, an ARF etc. It's not in their interest to **** you over in year 1

Jim2007

Shedite27 wrote: »

Thre are a few bad eggs in the business, but most broker will set you the right way.

OP, if you're that worried, visit a few FREE brokers, and see what advice they give you. Most will tell you the right type of products, funds etc. The difference for the bad eggs is that they'll push you to the company with the highest commission for them. From what I see most push the compan who have the best records for service, performance etc. Most brokers see customers as potential customer for life. Your entry level Pension isn't gonna make a big splash in their annual profits, but if they treat you right, you might be back in a few years for mortgage protection, a savings account, an ARF etc. It's not in their interest to **** you over in year 1

The biggest pay outs come from retros not commissions....

Henry Ford III

blindside88 wrote: »

The advice from most pension providers is free, unless you choose to go to a fee based advisor. You are under no obligation to go with them after receiving their advice.

If you do take a pension with them they will receive fees but that’s a different matter all together. The advice and consultation is free.

Any Broker who puts a lot of time into analysis, research and presentation in the hope of getting hired won't be around for long.

I'd meet someone for an hour max. without charging but would make it absolutely clear that from then on they'd be on the clock one way or another.