Do you have a pension?

10-03-2016 03:47PM

Squall Leonhart wrote: »

Actually, can anybody explain something for me...

Say I retire at 65, my pension fund is worth 400,000 eur. How is this paid out?

I understand up to 200,000 euro can be paid out as a tax free sum, then 200-500 is @ 20%, and 500+ is at marginal rate.

Are all pensions fully paid out as a lump sum, or is some of it paid as a lump sum and the remainder paid as a set weekly amount (in which case how is this figure arrived at)?

You have to take 5% of the fund value each year assuming it's over a certain threshhold, 12k per annum? Maybe that's ARFs. Go read up on ARFs and PRSAs anyway, that's what you're looking for.
On top of that you can buy an annuity either so you pay your money up front and that will guarantee you X years of Y income

Tax free is 25% afaik not 50% as you have there

esforum · 10-03-2016 08:28PM

lawred2 wrote: »

most people can't simply just decide such a thing

well you havent actually backed up your statements yet, perhaps you can advise why? The majority (in my opinion) arrange their own pensions, if the majority arrange their own then the majority decide the type and payment plan.

Heres a report, there may be a more recent one but this I found
http://www.oecd.org/els/public-pensions/OECD2013ReviewOfTheIrishPensionSystemPreliminaryVersion22April.pdf

KomradeBishop · 11-03-2016 01:07AM

esforum wrote: »

well you havent actually backed up your statements yet, perhaps you can advise why? The majority (in my opinion) arrange their own pensions, if the majority arrange their own then the majority decide the type and payment plan.

Heres a report, there may be a more recent one but this I found
http://www.oecd.org/els/public-pensions/OECD2013ReviewOfTheIrishPensionSystemPreliminaryVersion22April.pdf

Most people don't seem to have a private pension, if this is correct:

only 41.3% of workers (including in the public sector) aged 20 to 69 were enrolled in a funded pension plan, either occupational or personal.

http://www.finfacts.ie/irishfinancenews/article_1026530.shtml

esforum · 11-03-2016 01:35AM

KomradeBishop wrote: »

Most people don't seem to have a private pension, if this is correct:
only 41.3% of workers (including in the public sector) aged 20 to 69 were enrolled in a funded pension plan, either occupational or personal.
http://www.finfacts.ie/irishfinancenews/article_1026530.shtml

and?

rhoa · 11-03-2016 02:03AM

Does anyone trust that the money will be there when they retire in decades to come?
Banks world wide are dodgy at best, all beset will scandal and massive debt, then we have government raids on pensions, its not looking to good to me.

11-03-2016 10:51AM

KomradeBishop wrote: »

Most people don't seem to have a private pension, if this is correct:
only 41.3% of workers (including in the public sector) aged 20 to 69 were enrolled in a funded pension plan, either occupational or personal.
http://www.finfacts.ie/irishfinancenews/article_1026530.shtml

People in the public sector have a public sector pension though not a private one, they may have an additional private pension. You have no choice in the matter if you work in the public sector pension is compulsory for all public sector workers, even those on contract etc.

I really can't understand how you can not have a pension and encourage those who don't have one not to get one. Not only is it vitally important for your future but its also a very tax efficient way of putting money away if you are paying tax at the higher rate.

My dad retired in his mid 50's due to paying his pension from such a young age and also doing AVCs. I'm much later starting to pay mine and will be looking at paying extra contributions also to try make up some of the years I missed. I do not want to be stuck working way into my 60's like some appear to just accept will happen, 65 is still the absolute latest I'd want to work and preferably not even that long.

11-03-2016 11:20AM

Squall Leonhart wrote: »

Actually, can anybody explain something for me...

Say I retire at 65, my pension fund is worth 400,000 eur. How is this paid out?

I understand up to 200,000 euro can be paid out as a tax free sum, then 200-500 is @ 20%, and 500+ is at marginal rate.

Are all pensions fully paid out as a lump sum, or is some of it paid as a lump sum and the remainder paid as a set weekly amount (in which case how is this figure arrived at)?

If it's set weekly amounts, how is it decided whether I've 10 years or 30 years of life left in me for example, or is it possible to have a good pension, but live "too long" and run out of money in the twilight years because too much was paid out in weekly installments in the first 10 years of retirement??

Depends on what you want to do. If you go the old lump sum and annuity way you can get a tax free lump sum of up to 1.5 x salary, this salary can be an average of previous years and can include non-pensionable earnings, anything over 200k is taxed at 20%.

The remaining amount is then used to buy a pension for you.

So if you get to take €200k tax free the other €200k would be used to purchase your annuity, which would be around €8k a year, so you'd be getting €600+ a month from it.

This is guaranteed for life.

The other option is the go the ARF route, take 25% tax free and invest the rest in an Approved Retirement Fund. For this option you need a guaranteed income of €12,700 and you drawdown a minimum of 4% of the value every year, 5% after age 70.

This can run out if you drawdown too much, investment returns are low, or you live longer than projected.

Squall Leonhart · 11-03-2016 11:27AM

Deleted User wrote: »

This can run out if you drawdown too much, investment returns are low, or you live longer than projected.

And if I die suddenly 1 year into retirement? Presumably there's a next of kin who can benefit from my life of paying into a fund?

(there's a depressing thought, save for 30 years into a fund and then just dying and not benefitting at all from it!)

lawred2 · 11-03-2016 11:31AM

Are there any pensions in Ireland that will allow you to take the remainder after lump sum as taxable cash?

Or is it all pension + annuity?

Badly Drunk Boy · 11-03-2016 11:43AM

Squall Leonhart wrote: »

(there's a depressing thought, save for 30 years into a fund and then just dying and not benefitting at all from it!)

I remember one time, after years of trying, I won the Lotto jackpot but I was knocked down and killed by a LUAS on Middle Abbey Street, outside the Lotto headquarters.

Now that's what I call an unwanted LUAS strike!

11-03-2016 11:43AM

Squall Leonhart wrote: »

And if I die suddenly 1 year into retirement? Presumably there's a next of kin who can benefit from my life of paying into a fund?

(there's a depressing thought, save for 30 years into a fund and then just dying and not benefitting at all from it!)

An annuity will usually have a guarantee period of at least 5 years, you can ask for ten if you'd like. After that it dies with you. You can get one that includes a spouse's benefit.

An ARF will pay the remaining balance over to your estate.

lawred2 wrote: »

Are there any pensions in Ireland that will allow you to take the remainder after lump sum as taxable cash?

Or is it all pension + annuity?

If you have a small fund value there are ways of getting it paid out.

If you take an ARF you get your 25% tax free and then take an immediate drawdown of the balance. This amount would be taxed at the highest rate, the USC, and PRSI if you're under 66.

KomradeBishop · 11-03-2016 01:44PM

esforum wrote: »

and?

Nevermind - was misreading what you were replying to.

KomradeBishop · 11-03-2016 01:53PM

Graysen Helpless Spittoon wrote: »

People in the public sector have a public sector pension though not a private one, they may have an additional private pension. You have no choice in the matter if you work in the public sector pension is compulsory for all public sector workers, even those on contract etc.

I really can't understand how you can not have a pension and encourage those who don't have one not to get one. Not only is it vitally important for your future but its also a very tax efficient way of putting money away if you are paying tax at the higher rate.

My dad retired in his mid 50's due to paying his pension from such a young age and also doing AVCs. I'm much later starting to pay mine and will be looking at paying extra contributions also to try make up some of the years I missed. I do not want to be stuck working way into my 60's like some appear to just accept will happen, 65 is still the absolute latest I'd want to work and preferably not even that long.

I misread what he said, and thought it was about most people having a pension, not most people in a pension choosing the type of pension.

The main thing I'm advising people, is to be extremely cynical about pensions, and not to go near them unless you do your research and know the ins and outs of what you're investing in.

Most people have fúck all knowledge about how they can be screwed over - and the financial industry preys on this. Pensions are a fantastic way to be ripped off if you're stupid, or simply not-knowledgeable; especially if you get conned into paying for e.g. high-fee investments, that enrich the fund managers, while hiding risk that blows up later on, eating into the gains the higher fees were supposed to be paying for...loads of ways to be conned.

Also worth paying note to are the ethical issues with what you're investing in - something I think most people care about, when made aware of ethical issues - and again, most people don't even know what their pension fund does with their money, other than the highlights they get every quarter or such. I think if people actually looked at where their money is going, and the ethical issues with many of the companies they will be investing in, they'd have second thoughts about their particular fund, and may look elsewhere.

11-03-2016 02:22PM

KomradeBishop wrote: »

Also worth paying note to are the ethical issues with what you're investing in - something I think most people care about, when made aware of ethical issues - and again, most people don't even know what their pension fund does with their money, other than the highlights they get every quarter or such. I think if people actually looked at where their money is going, and the ethical issues with many of the companies they will be investing in, they'd have second thoughts about their particular fund, and may look elsewhere.

Most people, who are part of an occupational pension scheme, don't really have any control over where the money is invested.

You're given a range of funds going from high risk to low risk, you pick whatever suits you best and that's it.

The funds are chosen by the trustees of the scheme, if you don't like where the money is going and there are no ethical funds available there's not a lot you can do bar opting out of the scheme and losing the company contributions.

Permabear · 11-03-2016 02:31PM

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Permabear · 11-03-2016 02:35PM

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esforum · 11-03-2016 02:35PM

A lot of pension funds have ethical investment standards now so you can research that, being stupid isnt a reason to not do a sensible thing, its a reason to stop being stupid and again, research

Its one thing that bugs me, people moaning about public sector pensions because they, in their lack of research and independent thought, made a bad pension choice.

KomradeBishop · 11-03-2016 02:41PM

Deleted User wrote: »

Most people, who are part of an occupational pension scheme, don't really have any control over where the money is invested.

You're given a range of funds going from high risk to low risk, you pick whatever suits you best and that's it.

The funds are chosen by the trustees of the scheme, if you don't like where the money is going and there are no ethical funds available there's not a lot you can do bar opting out of the scheme and losing the company contributions.

Opting out of the scheme and putting the money elsewhere is a choice - you don't 'lose' anything, you put the money elsewhere.

KomradeBishop · 11-03-2016 02:45PM

Permabear wrote: »

This post had been deleted.

I don't know really - that's up to other people to research. I may consider putting my own plan together in the future, so I may eventually research this, but it's not really something I'm actively interested in right now.

Before people bring it up again too: Investing in a company is a far more deliberate and avoidable choice than simply buying something from a company as well, so I would consider the ethical standards in both cases to be different - when buying, practical considerations can make even awareness of ethical issues difficult in a lot of cases, but when investing, I don't view ignoring ethical issues as excusable, given how much more deliberate and researched a choice that is.

11-03-2016 02:54PM

KomradeBishop wrote: »

Opting out of the scheme and putting the money elsewhere is a choice - you don't 'lose' anything, you put the money elsewhere.

If you opt out of the scheme you are no longer entitled to the company's contribution on your behalf.

The pension amount deducted from a person's salary and the employer's contribution aren't paid into an individual holding for each member. The money given over to the investment managers, along with an investment instruction, is the total pension contributions for the scheme.

If you want you can set up your own PRSA with you're own money and invest it as you see fit but you will not be getting any contribution from your employer.

KomradeBishop · 11-03-2016 03:12PM

esforum wrote: »

A lot of pension funds have ethical investment standards now so you can research that, being stupid isnt a reason to not do a sensible thing, its a reason to stop being stupid and again, research

Its one thing that bugs me, people moaning about public sector pensions because they, in their lack of research and independent thought, made a bad pension choice.

It's not reasonable to expect your average person to be knowledgeable of such things though - a lot of people (even very smart people), are very dumb when it comes to financial knowledge - and there is a lot of deliberate complexity and opacity within the financial industry, which is the perfect cover for fooling even very smart people.

Add to that, the ethical issues involved - a lot of people don't even know what they are supporting with their money, they just know their pension fund invests it, without knowing where.

The solution isn't to blame the individual for being preyed upon, it's to have proper safeguards in place to prevent that - and to deal with that when it happens (i.e. a fallback public pension; it's an important social safety net).

KomradeBishop · 11-03-2016 03:14PM

Deleted User wrote: »

If you opt out of the scheme you are no longer entitled to the company's contribution on your behalf.

The pension amount deducted from a person's salary and the employer's contribution aren't paid into an individual holding for each member. The money given over to the investment managers, along with an investment instruction, is the total pension contributions for the scheme.

If you want you can set up your own PRSA with you're own money and invest it as you see fit but you will not be getting any contribution from your employer.

Well, negotiate a less shítty contract with your employer then - if they don't give you the money on an opt-out (the portion going to your salary), or offer to contribute it to an alternate fund, that's a bad deal.

11-03-2016 03:18PM

KomradeBishop wrote: »

Well, negotiate a less shítty contract with your employer then - if they don't give you the money on an opt-out, or offer to contribute it to an alternate fund, that's a bad deal.

You'd have to negotiate the setting up of a separate scheme and that wouldn't be happening.

You could try getting the trustees to add an ethical find choice into the existing scheme but they aren't required to provide one.

If you aren't happy with the funds that are there you don't really have any alternative.

If there was money to be made in being ethical the world would be a much better place...

KomradeBishop · 11-03-2016 03:31PM

You'd mainly be 'losing' the employer contribution to the pension from what I can see, I don't think you would risk losing any portion of your salary - a contribution that you can effectively lose anyway if the pension fund is looted or otherwise mismanaged - and considering you may not ever see any of that money, I wouldn't see it as a reason to contribute any of my own money to a pension scheme, without first understanding/analyzing ever facet of the scheme for potential issues.

Not worth the risk - a risk which workers are usually completely blind to. Not worth selling out your ethical/moral standards for either - I'd credit most people with giving a toss about such things.

11-03-2016 03:41PM

KomradeBishop wrote: »

You'd mainly be 'losing' the employer contribution to the pension from what I can see, I don't think you would risk losing any portion of your salary - a contribution that you can effectively lose anyway if the pension fund is looted or otherwise mismanaged - and considering you may not ever see any of that money, I wouldn't see it as a reason to contribute any of my own money to a pension scheme, without first understanding/analyzing ever facet of the scheme for potential issues.

Not worth the risk - a risk which workers are usually completely blind to. Not worth selling out your ethical/moral standards for either - I'd credit most people with giving a toss about such things.

The employee isn't always obliged to contribute to a scheme. Some will have it so that they do, and they should, but most schemes would give the employee the option whether they want to contribute or not.

Without the employer paying in the scheme member would be looking at a much weaker pension on retirement.

Would be great to be in a position where you could pass up the offer of the company's contributions but I would doubt that many employees would be in a position to do that.

You can opt out and invest in your own ethically managed PRSA but, again, without the employer amount you would be looking at a pretty weak holding. Compared to what you could have had, that is.

11-03-2016 03:46PM

KomradeBishop wrote: »

You'd mainly be 'losing' the employer contribution to the pension from what I can see

The employer contribution is significant though you are losing a lot if you lose that.

Also I don't think most people really care about the ethical issue of companies they are investing in. They care about their money and growing their pension fund and I'd be in agreement. I don't really care if someone questions my ethics because I in invest in a company that they have decided is unethical to them.

Do you think people would really care that you think "ignoring ethical issues is not excusable"?

KomradeBishop · 11-03-2016 03:51PM

Deleted User wrote: »

The employee isn't always obliged to contribute to a scheme. Some will have it so that they do, and they should, but most schemes would give the employee the option whether they want to contribute or not.

Without the employer paying in the scheme member would be looking at a much weaker pension on retirement.

Would be great to be in a position where you could pass up the offer of the company's contributions but I would doubt that many employees would be in a position to do that.

You can opt out and invest in your own ethically managed PRSA but, again, without the employer amount you would be looking at a pretty weak holding. Compared to what you could have had, that is.

If the workers wages are so squeezed that they can't do without the employers pension contributions, kind of signals that they are being underpaid as workers and should demand a wage rise (which the company can more than afford for the opt-out workers, given they'd not be providing contributions...).

Otherwise - I don't think mandatory pensions, without an opt-out, are a thing (or at least, not a prevalent thing) - so yes, employees do have a choice.

If you don't even know if you'll see a single cent of your employers contributions - given that you're putting money in an investment, where generally the workers are not even knowledgeable about the risks of the fund - you can't really say that people are 'losing' anything, that they may never see.

It's a gamble. In multiple ways: On being an investment, on most workers not knowing the risks involved (utterly stupid to gamble, if you don't know/research the risks/odds...), that you'll live long enough to see a single cent, that you trust your employer and the fund managers not to loot the fund etc..

11-03-2016 03:53PM

KomradeBishop wrote: »

I don't think mandatory pensions, without an opt-out, are a thing (or at least, not a prevalent thing) - so yes, employees do have a choice..

Public service employees cannot opt out of their pension, the mechanism does not exist to do so.

You are making little out of the significant contribution that employers are putting towards peoples pensions and also the fact its a much more tax efficient way to get the money.

11-03-2016 04:06PM

KomradeBishop wrote: »

If the workers wages are so squeezed that they can't do without the employers pension contributions, kind of signals that they are being underpaid as workers and should demand a wage rise (which the company can more than afford for the opt-out workers, given they'd not be providing contributions...).

Otherwise - I don't think mandatory pensions, without an opt-out, are a thing (or at least, not a prevalent thing) - so yes, employees do have a choice.

If you don't even know if you'll see a single cent of your employers contributions - given that you're putting money in an investment, where generally the workers are not even knowledgeable about the risks of the fund - you can't really say that people are 'losing' anything, that they may never see.

It's a gamble. In multiple ways: On being an investment, on most workers not knowing the risks involved (utterly stupid to gamble, if you don't know/research the risks/odds...), that you'll live long enough to see a single cent, that you trust your employer and the fund managers not to loot the fund etc..

The benefits of being in a pension scheme far outweigh the benefits of not being in one.

If you are a member of a scheme where personal contributions are optional you are literally getting something for nothing.

And if you are worried about losing all of your investment you can always invest it in lower risk bond or cash funds.

An employer is under no obligation to pay an employee who has opted out of their pension scheme any more than an employee who is in one.

cooperguy · 11-03-2016 04:08PM

KomradeBishop wrote: »

If the workers wages are so squeezed that they can't do without the employers pension contributions, kind of signals that they are being underpaid as workers and should demand a wage rise (which the company can more than afford for the opt-out workers, given they'd not be providing contributions...).

Otherwise - I don't think mandatory pensions, without an opt-out, are a thing (or at least, not a prevalent thing) - so yes, employees do have a choice.

If you don't even know if you'll see a single cent of your employers contributions - given that you're putting money in an investment, where generally the workers are not even knowledgeable about the risks of the fund - you can't really say that people are 'losing' anything, that they may never see.

It's a gamble. In multiple ways: On being an investment, on most workers not knowing the risks involved (utterly stupid to gamble, if you don't know/research the risks/odds...), that you'll live long enough to see a single cent, that you trust your employer and the fund managers not to loot the fund etc..

That is really misguided advice for a tonne of reasons. I'll list 3 though.

The employer usually matches your contribution. No matter how much you earn turning down doubling your investment every month is really bad idea. The compound interest on that over the life of the investment is massive.

Secondly, you keep talking about funds being mismanaged and raided. If your employer was matching your contributions you can afford to loose half your fund if things go wrong before ever loosing any money you put in yourself.

If you die your next of kin benefit, the money doesn't go up in smoke

Do you have a pension?

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