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Do you have a pension?

One More Toy

Was sitting around at work talking about it, I was the only one of my colleagues to have one set up, and contributing the maximum, why is there such disregard in the Irish population towards private pensions? The state one wont provide the greatest of living standards yet people put it off, even into their forties:eek:

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kazamo

KERSPLAT! wrote: »

I'm 28 and very worried.

I've only just started out in a new career and was only made permanent 2 weeks ago. Have emailed HR regarding setting up a pension this morning based on this thread.

If your employer is contributing to your pension, make sure you get the maximum contribution out of them. It might be painful, but their portion is free money into your pension pot.

keano_afc

I work for a life and pension company so its mandatory. I'm glad it is though, gets taken out of my salary every month so I dont miss it.

FURET

KERSPLAT! wrote: »

I'm 28 and very worried.

I've only just started out in a new career and was only made permanent 2 weeks ago. Have emailed HR regarding setting up a pension this morning based on this thread.

Very important also to choose the right pension option. If the employer matches your contribution, contribute the maximum possible.

And choose a pension plan with the lowest Total Expense Ratio (always passive rather than actively managed funds). Any plan costing more than 1% is costing too much. The closer you can get the cost to zero, the better. A cost of just 1% will cost you hundreds of thousands over a thirty-year period.

Really wish Vanguard would set up pension plans in Ireland with Irish employers.

Geuze

Spanish Eyes wrote: »

It is, if your only income is the State Pension, which is what I said.

Here are the details for the GMS means-test for people under 70.

http://www.citizensinformation.ie/en/health/entitlement_to_health_services/medical_card_means_test_under_70s.html

The income limit is 201.50 for a single person living alone.

The State Pension is 230.30 pw.

Therefore, people on a SP aged 66-69, do not automatically qualify for a GMS med card.

Geuze

Hans Bricks wrote: »

Public sector here on a contract so I pay prsi and some other obscure pension contribution. Quite small. About 100 or above a month. I'm not even entirely sure tbh.

What's this "employer matches my contribution " ? I'm in the same ignorant boat as melisandre21.

Public servants hired since April 1995 pay full-rate PRSI like all other workers.

Most public servants pay 6.5% of wages as pension conts.

All PS also pay the PRD pension levy, up to 10.5% of wages.

There is no pension fund in the PS, so there is no direct employer cont.

Geuze

kazamo wrote: »

It is if it's the only income you have for the last 10-20 years of your life.

Would you be able to live of 12k a year and not be watching all expenditure very closely ?

I'm not saying it's a lot, but I am saying it's not "very small".

With kids grown up, and no mortgage, 1000 pm would be ok, not great.

Add in free travel, free TV licence.

Add in med card after age 70.

Thousands of people manage on it.

Aisling(",)

I've just started a civil service job and while I'm here two months there's be no mention of a pension.

I start training next month so my goal is to get a pension sorted by the end of September.

I've 43 years before I retire but I'm terrified that I'll end up destitute!

Geuze

Aisling(",) wrote: »

I've just started a civil service job and while I'm here two months there's be no mention of a pension.

I start training next month so my goal is to get a pension sorted by the end of September.

I've 43 years before I retire but I'm terrified that I'll end up destitute!

You don't need to "get a pension sorted".

If you are a permanent civil servant, you are in the Civil Service pension scheme.

That's it. You do nothing, except read up on it.

Geuze

Aisling(",) wrote: »

I've just started a civil service job and while I'm here two months there's be no mention of a pension.

I start training next month so my goal is to get a pension sorted by the end of September.

I've 43 years before I retire but I'm terrified that I'll end up destitute!

Read this:

http://www.cspensions.gov.ie/

GreeBo

Fuzzy wrote: »

I manage my own investments.
These pension funds will probably be fu*cked by the time we are 75 and at retirement age.

Assuming you are not talking about public service/defined benefit/; why do you think you can manage an investment fund better than those who do it for a living?

I'm late 30's, pension since I was 21, currently at 20%.
Fund was up 113% last year, and I do enjoy free money.

No way I want to be still working when I'm 65.

Cant understand people who don't, do you not like free money?

suicide_circus

Ronnie Worried Workaholic wrote: »

I paid between 8 and 12% of my salary in to one for 35 years and retired at 55. Large lump sum and a very decent monthly payment ever since. Get in early and contribute as much as you can. Just remember it's a long term investment.

Only a tiny fraction of us will be able to retire that young. I have visions of being found aged 75 slumped over the keyboard clutching my chest.

FURET

Geuze wrote: »

I'm not saying it's a lot, but I am saying it's not "very small".

With kids grown up, and no mortgage, 1000 pm would be ok, not great.

Add in free travel, free TV licence.

Add in med card after age 70.

Thousands of people manage on it.

In 2030, you would need 17,380 to have the purchasing power of 12000 euro in today's money.
In 2035, you would need 19,700.
In 2040, you would need 22,300.
In 2045, you would need 25,100.

And all of those numbers assume a mere 2.5% inflation per year.

If inflation averages 3.5% per year, the numbers are as follows:

In 2030, you'd need 20,100
In 2035, you'd need 23,900
In 2040, you'd need 28,400
In 2045, you'd need 33,700

Your pension, wherever it's coming from, needs to be growing at least 7% per year to stave off inflation and allow for a modest withdrawal rate of between 3.5 and 4% per year.

So, if your pension is going to be 12,000 euro in your first year of retirement, your total pension pot needs to be at least 300,000 euro at that time.

Let's say you want around 35,000 pear year in the first year of retirement; at a 4% withdrawal rate, you would need a pension pot of 875,000 euro - and as mentioned, it needs to be growing at least 7% per year throughout retirement, or you run the risk of running out of money.

GreeBo

Geuze wrote: »

I'm not saying it's a lot, but I am saying it's not "very small".

With kids grown up, and no mortgage, 1000 pm would be ok, not great.

Add in free travel, free TV licence.

Add in med card after age 70.

Thousands of people manage on it.

Agreed.
12k is equivalent of earning 25k a year.
With no dependents and presumably no mortgage, you should be grand on that.

[Deleted User]

Public sector (on a contract) so no choice in the matter. Its disgusting paying the pension levy though with is more than the pension contribution and I will never see a cent of it. Only started working (after more or less been studying since 18) last year at 29 so I'm fairly behind in paying into a pension....

Drumpot

I'm a Financial Broker and in my experience people who value pensions do them and people who don't value them don't. It really is that simple. People who have a negative opinion of them (some justified, some not) look for any reason and excuse to not to them.

I think a big part of the problem is that the industry makes them out to sound more complex then they are and many people simply do not trust anything associated with the financial services sector. I work in the industry and I don't fully trust it so I don't blame people!

That said, what I find extremely fascinating (in an annoying way) is how banks are the least trusted institutions in this industry and yet People do Pensions, Life Assurance and use other services with banks who are normally not the most cost efficient or the superior option.

Back on topic, I find the people that do Pensions do not need to have the benefits explained to them. They have already made their minds up to do them. I don't really try to "sell" Pensions because its wasted breath to people who don't want to understand the value. I am not saying Pensions are perfect or ideal for everybody, but some people get hung up on parts of Pensions that are possibly not as relevant as they believe.

If you are on the higher rate of tax and contribute zero to a Pension you need to serious think again. Depending on your income, you can get between 33%-40% relief on a contribution. So you put in €100 into a pension and the net cost is at most €67.

I am finding that many young people are more astute and interested in Pensions. They also like the fact that they wont have access to their pension until their 60s. they wont be able to impulsively draw the funds out and buy a car/holiday.

So why not just save into a Bank/savings plan? You should do that anyway, but it costs you €100 of taxed income to put €100 into a savings plan. It costs you €67 (higher rate) to put it into a Pension.

But what about fund performance and charges ? (I hear the cynics shout). Yes, asides from what you contribute, the fund performance (more then charges) will be a huge factor in how much you will have at retirement. That is why people should get more involved in deciding where to invest their pension monies. Most big companies and brokerages have generic fund options and people just presume it will grow to their expectation.

Get involved in your Pension planning. Ask questions about the fund performance and what are reasonable expectations. Nobody can say for certain how a fund will perform but you can take lower risks for more consistently returning funds. I have existing clients who only take an interest in their pension value when it goes down. They wont talk to me when its going great, that's the time to consolidate, but people instinctively wait until something bad happens to do something instead of being actively involved in their Pensions journey.

In terms of charges, yes they can be high, but in general the biggest charges are an annual management charge (around 1%) and a reduction in the amount of your premium that gets allocate to your Pension. This is worth considering, but for me if the charge is high, once the fund can justify it (there's one fund in particular that consistently performs well and is worth it!), I don't see why people would complain. If a fund consistently returns what it says it will, why would a person haggle over the charge?

If you don't like Pensions or have had a bad experience with them, ask yourself how involved you were in the process. How much do you really know about them? IN some cases people know very little and don't try to get past the parts of pensions that annoy them. If you are educated enough to make an informed (not emotive) decision, then fair enough, they aren't for you. I would still recommend trying to have an alternative strategy for retirement. If you are on the higher rate of tax, you will do well to find a more tax efficient way of doing that . .

Daith

I've a pension with my current company.

A company I worked with for 5 years has moved my pension into a PRSA with Irish Life. AH probably isn't best place but anyone know what's best to do with it if anything?

VinLieger

The people relying on the state one simply don't understand how the system works.

They are under the misguided impression that the money they are paying in now will be what funds their pensions when they retire while in reality the money paying in now is funding the person who retires tomorrow and when the people in their 30's and 40's retire there will be twice as many pensioners and the system simply won't be able to afford to pay them all at the current rate.

Basically private pensions are the only solution and if your too stupid or lazy to set it up then don't go crying when you go to retire in 20 years and the state pension isn't enough to live off

Boots234

Our company provides a Defined Benefit Career Average pension entitlement and also allows for colleagues to participate in a supplementary Defined Contribution plan. At the moment I see about 120euro going towards the pension every month but I really haven't a clue where its going or what are the benefits of this pension. I amn't paying into the defined contribution plan

kazamo

Daith wrote: »

I've a pension with my current company.

A company I worked with for 5 years has moved my pension into a PRSA with Irish Life. AH probably isn't best place but anyone know what's best to do with it if anything?

Pay attention to the charges.
The legislation setting up PRSA's said that providers could charge up to 5% in charges per anum.......and a lot do.
If confident about pension options, maybe the 1% providers are for you.
Same pension, just need to decide if advice from pension provider is worth 4% to you per anum.

Uriel.

Geuze wrote: »

You don't need to "get a pension sorted".

If you are a permanent civil servant, you are in the Civil Service pension scheme.

That's it. You do nothing, except read up on it.

Can Public servants also take out a private pension in addition to the public sector pension? Presumably, the public service don't do a % contribution scheme like some private sector companies do?

draiochtanois

This post has been deleted.

daheff

i think the reasons a lot of people dont have a pension are:

1-dont have the money (disposable income) to do so

Its all well and good to want to have a pension, but with a lot of people just barely getting by these days, a pension is seen as a luxury rather than a necessity. the crash has made a lot of people have to stop contributing to pension and prevented a lot of people starting one.

Other issue is that people are saving to buy homes (just go back to the pre-crash days and people were saving every last cent to try to get on the property ladder). these days people have to have higher deposits so again are saving all they can to get on the ladder.

2-dont understand what they are investing in

Pensions are complicated products. People are reluctant to invest into something they dont understand. I would think I'm financially literate, but would still be confused by the pension products offered to me by brokers (some of which quite clearly also dont understand what they are selling)

3-lot of scandals of misselling by financial institutions over the past few years

theres been quite a few of these scandals over the years (eg endowment mortgages etc)...so people have lost trust in financial providers. Would you put money with somebody you didnt trust??

FURET

daheff wrote: »

i think the reasons a lot of people dont have a pension are:

1-dont have the money (disposable income) to do so

Its all well and good to want to have a pension, but with a lot of people just barely getting by these days, a pension is seen as a luxury rather than a necessity. the crash has made a lot of people have to stop contributing to pension and prevented a lot of people starting one.

Other issue is that people are saving to buy homes (just go back to the pre-crash days and people were saving every last cent to try to get on the property ladder). these days people have to have higher deposits so again are saving all they can to get on the ladder.

2-dont understand what they are investing in

Pensions are complicated products. People are reluctant to invest into something they dont understand. I would think I'm financially literate, but would still be confused by the pension products offered to me by brokers (some of which quite clearly also dont understand what they are selling)

3-lot of scandals of misselling by financial institutions over the past few years

theres been quite a few of these scandals over the years (eg endowment mortgages etc)...so people have lost trust in financial providers. Would you put money with somebody you didnt trust??

I think that's pretty much it. There are many complicated pension products out there. But a complicated pension product is *always* a bad pension. At it's best, a pension plan is simply an investment in a diversified mixture of stocks and bonds at the lowest cost possible. A good pension product should be able to invest you in around 2,000 separate businesses from around the world and buy you hundreds or even thousands of bonds simultaneously. And this should all be possible for a total cost of less than 0.3%, meaning if the stock and bond markets return 10% in 2015, your investments should return 9.7%.

There should be no manager ducking and diving out of stock markets in response to world news or economic trends. The investment should track impartial indexes like the FTSE Developed Europe index, the Barclays bond indices, and the S&P 500.

Irish consumers are screwed with charges from brokers like Irish Life. That's why Irish consumers should hope that the likes of Vanguard and Schwab open up shop in Ireland, so that Irish people can invest in low cost, passive index funds and get their fair share of what global capital markets return, which has historically been around 8.5% per annum over long periods.

draiochtanois

This post has been deleted.

nelly17

My big fear is that by the time reitirement comes we will have hit rock bottom again and the government will have introduced legislation that says if you have a private pension you are not entitled to the state pension, a lifetime of work and taxes down the drain

nelly17

Boots234 wrote: »

Our company provides a Defined Benefit Career Average pension entitlement and also allows for colleagues to participate in a supplementary Defined Contribution plan. At the moment I see about 120euro going towards the pension every month but I really haven't a clue where its going or what are the benefits of this pension. I amn't paying into the defined contribution plan

You should really be getting a yearly statement tracking how much you will get upon retirement

kazamo

VinLieger wrote: »

The people relying on the state one simply don't understand how the system works.

They are under the misguided impression that the money they are paying in now will be what funds their pensions when they retire while in reality the money paying in now is funding the person who retires tomorrow and when the people in their 30's and 40's retire there will be twice as many pensioners and the system simply won't be able to afford to pay them all at the current rate.

Basically private pensions are the only solution and if your too stupid or lazy to set it up then don't go crying when you go to retire in 20 years and the state pension isn't enough to live off

Ah, you don't know what the future holds anymore than the rest of us.

Perhaps by the time you retire the old age contributory pension will have become a means tested payment and then the private pension may help reduce\eliminate the amount you get for the old age pension.
And if you need a nursing home, your pension will come into the reckoning again.

I agree that pensions are a good idea in principle, just don't see them as the holy grail as they are very expensive compared to the annuity you get.

The main thing going for pensions is tax relief.

Streetwalker

nelly17 wrote: »

My big fear is that by the time reitirement comes we will have hit rock bottom again and the government will have introduced legislation that says if you have a private pension you are not entitled to the state pension, a lifetime of work and taxes down the drain

In my opinion this is nailed on to happen and not only if we hit rock bottom. It would have never happened before because of our political parties thinking of their own necks (votes) but now the EU is ruling over us more and more with each passing year it might be dictated to us from Berlin.

Geuze

Uriel. wrote: »

Can Public servants also take out a private pension in addition to the public sector pension?

They can, this is known as an AVC - additional voluntary contribution.

It is an extra pension, on top of the work pension.

It is a private contract between worker and life company, and is subject to Revenue rules.

Geuze

Uriel. wrote: »

Presumably, the public service don't do a % contribution scheme like some private sector companies do?

Note that the State Pension and PS pensions are typically unfunded.

There is no fund into which to put contributions.

PS staff do make contributions, but these are collected like general taxation, and used by the State to cover general public spending.

Okay, there is the PRSI social insurance fund, into which PRSI goes, and out of which CSP are paid.

But this fund does not grow or accumulate, it's not a savings fund.