Do you have a pension?

FURET · 15-03-2016 11:23AM

I must ask, considering the above, why are you a permabear?

KomradeBishop · 15-03-2016 11:38AM

Eh, in no world is a 10% rate of return realistic for pension funds in the long run - none of the main ones here manage that, from what I can see - the average rate for Ireland over the last 10 years, seems to be ~6% across 11 funds, which (in the unrealistically optimal example of starting at age 20) would be around €550,000, i.e. 5 times not 20...

That's only if you start investing at the age of 20 as well - extremely unrealistic - the average starting age of pension investments in Ireland is 37, leading to a return of €174,000 - not even 2 times the original investment...clearly people have gotten by, without having to rely on a huge pension.

You also have to factor in not just the compounding interest, but the compounding cost of fees etc. as well.

I'd much rather see a solid state pension, and a bigger share of corporate profits going to workers, over a reliance on private pension funds.

Permabear · 15-03-2016 11:43AM

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Permabear · 15-03-2016 11:54AM

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KomradeBishop · 15-03-2016 11:56AM

It was pointed out to you 2-3 times already, that the issue with the Tobacco companies was less to do with selling cigarettes, and more to do with a good portion of them corrupting scientific research and the public discourse, leading to the avoidable deaths of millions...

That's a whole world of ethical differences - it's like the energy companies today, corrupting scientific research and putting out denialism about climate change, and how that will lead to widespread externalized harm to others.

As I predicted only a few posts ago as well - people are trying to go 'reductio ad absurdum' by putting forward trivial examples of ethical violations - to try and portray concerns about ethical violations, as trivial/petty.

ancapailldorcha · 15-03-2016 11:58AM

I have to say that this thread is scaring the living crap out of me. I pay into a pension at work and save a portion of my net income in an ISA but I don't have the slightest idea about investing or whether my current routine will be adequate.

storker · 15-03-2016 11:58AM

I'll be 50 this year, and although I've paid into pensions for a few years at a time, I've been pretty job-mobile and nothing's followed me and I think they'd be worth buttons anyway. I'm contracting at the moment and finally earning enough that putting something into a pension is possible after paying for the usual plus health insurance, income protection, kids college savings, etc.

I imagine that by the time I'm looking at retirement, the age will have been pushed out to 70 anyway, which gives me +/-20 years to fund something as much as I can. I don't have a problem with working until then - as long as there is work, haha. Is a pension still the best option for me? I would imagine that the 40% tax relief means yes, although I'm concerned about stories like those of the people who had pensions in "safe" stocks like the banks who ended up with worthless pension funds. I don't know enough about finance and the markets to manage my own funds.

KomradeBishop · 15-03-2016 12:04PM

No actually, the issue is you trying to present pension funds as mandatory - the thing you identify as a 'cultural issue', shows that people don't have to rely on pension returns that become multiples of the original investment - as on average, people don't invest in them long enough for that, and have gotten by just fine - which pretty much kills your claim.

Heh - this claim always come up to attack public pensions, and the kicker is: This exact same logic applies to private pensions.

The 'pension timebomb' nonsense that people bring up, applies to private pensions - they are going to blow up (if that logic holds true...) - but the public pensions have the ability to be supported by government funding, i.e. by very different finances, and are going to be far more solid long-term, than private funds.

Permabear · 15-03-2016 12:12PM

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Permabear · 15-03-2016 12:24PM

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storker · 15-03-2016 12:30PM

Is this a good book for finance knuckleheads like yours truly, or does it presuppose some level of knowledge? I'm seriously thinking about picking up a copy.

ancapailldorcha · 15-03-2016 12:33PM

Cheers P! I've heard people talk about portfolios and it goes right over my head. I honestly haven't the foggiest what options there are. That book looks quite good though. There are people at work who trade stocks and shares but, liked I said, Whoosh!!

jimgoose · 15-03-2016 12:35PM

Buttons or not, it's your money and pensions sodding-well should be following you and dumped into the new pension setup. I've done that a couple of times.

hmmm · 15-03-2016 12:37PM

The problem I have with that book is that it is really for the investor in individual stocks, and not the pension investor who will usually be invested in funds of stocks.

A read of some forums like these, even though they are US based, should give you a good grounding in investing principles:
https://www.bogleheads.org/
https://www.reddit.com/r/personalfinance

FURET · 15-03-2016 12:39PM

The Intelligent Investor is a great book but I'd advise against it for total newbs. It's heavy going. For our purposes, you can't go wrong with Andrew Hallam's Millionaire Teacher. Corny title aside, this is the best book on the market for newbs.

valoren · 15-03-2016 12:43PM

I'm financially illiterate myself.

Got a dividend of 75 cent US from JNJ last week.
I paid 15% witholding tax to the IRS. (Had to sign a W8-Ben form so it is 15% instead of 30%)

I paid 20% Irish Encashment Tax.

I will have to declare the Gross $ dividend to revenue on Form 12 at the end of the year.

They will deduct tax at 40% (I think) and I imagine I'll get a credit for the 20% encashment tax.

All so complicated. There seems to be a perverse human instinct to make simple yet important concepts frustratingly complicated.

ancapailldorcha · 15-03-2016 12:45PM

Now imagine how those of us who don't work in finance feel!

Permabear · 15-03-2016 12:47PM

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Permabear · 15-03-2016 12:52PM

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ancapailldorcha · 15-03-2016 12:55PM

A quick search on Amazon certainly supports this. However, I think I'd rather take book recommendations from the likes of yourself and other posters on this site who work in finance as opposed to whatever crops up on Amazon search results.

15-03-2016 01:10PM

For more on the wonderful history of pensions why not check out "Banking on Death: Or Investing in Life" by Robin Blackburn.

Permabear · 15-03-2016 01:20PM

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storker · 15-03-2016 01:24PM

Slow down, slow down...I'm taking notes.

RedXIV · 15-03-2016 01:25PM

My bed time reading just got a lot more technical

KomradeBishop · 15-03-2016 01:26PM

Every. Single. Argument. here, applies equally to private pensions. Every one.

By the same measure of everything you've said here, if taken as true, then private pensions are even more fúcked than public pensions...

Your history of anti-government scaremongering, makes your arguments against public pension funds a "well, you would say that anyway..." type situation, where none of it can really be taken as true.

Fact is as well, unless you consider government finances as being permanently stagnant into the future, those arguments don't hold any water - such very-long-term predictions/speculations, are quite fanciful.

ancapailldorcha · 15-03-2016 01:39PM

I actually already own Thinking Fast and Slow. Been meaning to read it for ages.

I've no intention of trying to "beat the market". I just want to avoid being homeless.

AlexisM · 15-03-2016 01:43PM

You'll need to explain your thinking a bit better here because it makes no sense to me.

My private pension is funded in advance by me from my savings. It's my money, under my control. As long as I invest it wisely, it will be there when I retire and I won't have to share it with anyone (other than whatever tax I have to pay).

My public pension (contributory OAP) will be dependent on the country's finances at the time with demographics (in particular the number of workers per retired person) being an important factor. Pension funding may need to be spread a bit thinner.

How do you see the same arguments applying to both?

ancapailldorcha · 15-03-2016 02:39PM

I'm living in the UK and for me there are 2 incentives to take out a private pension. The first is the tax relief, for every £100 I put in I pay £80. The second is employer contributions which will soon be mandatory so my £80 becomes £40 with no loss to the actual contribution I make.

KomradeBishop · 15-03-2016 02:48PM

Private sector pensions are undergoing increasing shortfalls, which are partially linked to the same demographic problems being presented against public pensions (set to worsen as more economic crisis hits) - and even the private pensions which aren't inherently subject to this demographic issue, are likely to be affected by it, as they will probably be raided to make up the shortfall of other funds (similar to how the insurance industry, has been made to effectively bail out other failed/fraudulent insurers).

The crisis also gave companies an excuse to gut pension plans overall. The switch from the volatile Defined Benefit pensions (placing the burden of funding on the employer, and thus on corporate profits), to the Defined Contribution pensions (placing the burden of funding primarily on the employee, taking far less of a share of corporate profits than DB schemes) - the latter provide far less of a payment out to employees, and is far less likely to provide adequate retirement savings.

So, it's a shítty time to be getting into pension investments - wages are getting squeezed, and actual employer payments on pensions are getting squeezed as well - i.e. companies are paying you less (funding is getting spread thinner...), and are shifting more of their share of the burden of pensions, onto employees - and the legacy of past volatile pension arrangements, has yet to be resolved. Private pensions are a mixed bag for most of the public, and are no substitute for a proper public pension safety net.

Government financing, on the other hand, does not work like a pension fund. Government is actually far better placed, to take back the share of money that companies are shifting away from pensions and towards corporate profits, in order to invest that in a proper state pension.

Government finances are not static either, and the number of workers per retired person means far less than you think, as the tax base is spread much further than just workers.

fg1406 · 15-03-2016 02:55PM

Yes as it's compulsory where I work. Also the pensions time bomb coming down the line whereby the State Contributory OAP will be come unsustainable, a pension is a very valuable asset to have.

Do you have a pension?

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