Why are people obsessed with getting a pension

Jim2007 · 11-05-2020 1:35pm

Kilboor wrote: »

Look stop twisting words. I don't want nor expect any government help. The bottom line is I'm bearish (and hopefully I'm wrong) on what sort of economy and society we will have in 35-40 years.

We can argue all day about that philosophy and I understand completely why you and others take your tax free pension savings, that's fine, but the question was people's obsessions on pensions and I've stated my case for not being focused on pensions and they are my bearish outlooks. Don't assume I am looking for government assistance or that I am missing the "basic stuff". Right now I am more concerned with improving my current life as well as those who are older in my family who had and still have nothing.

So you see the situation with older people in your family, you are not concerned about providing for your old age, but don't expect government help.... so what's the plan die young?

Bass Reeves · 11-05-2020 1:47pm

McGaggs wrote: »

Just be careful on this point. You have to have stopped working in the employment that funded the contributions to the pension you're cashing in.

You could quit the rat race, cash in the pension, and take on a new job, with less hours and less pay somewhere closer to home for example.

In a strict sense you are correct. However in general if are happy to work away in a job it is unlikely you will need the cash. It is likely as well that from now on pensions will be accumulated in 2-3 jobs. General health is better into your 60's and 70's. Therefore it is likely more and more people will semi retire. I did last year. I received a redundancy and at present I work part time along with other income to use up tax credits. My spouse is still working. I do not intend to access pension at present and my 3 best years earning are 2016-2018. I can still add to the pot to increase it tax efficiently.

Part of my pension is a DB scheme which I can access at 60 which I will do and draw down a substantial lump sum at that stage. People will make choices like this going semi retired and working part time to part fund pension

howamidifferent · 11-05-2020 2:06pm

Jim2007 wrote: »

Certainly not. The answer is to follow the best advice available and implement a version of the three pillar system being taken around the rest of the EU.

Ok Jim2007, I learned something new here. I wasn't aware of the three pillar system until I googled and read up on it. Yes, that makes sense.

However my original comment was to say that no one should be able to do nothing and expect the rest of the taxpayers bail them out in retirement.
Everyone should have to make some provision for their own retirement ( assuming physically and intellectually able of course). The three pillar system seems to support this line of thinking.

Geuze · 11-05-2020 10:51pm

Jim2007 wrote: »

Certainly not. The answer is to follow the best advice available and implement a version of the three pillar system being taken around the rest of the EU.

Which we have already?

First pillar = State pensions

Second pillar = occupational pensions (are you suggesting making these compulsory?)

Third pillar = personal pensions, e.g. AVCs, PRSAs

Yellow_Fern · 12-05-2020 10:15am

Jim2007 wrote: »

Certainly not. The answer is to follow the best advice available and implement a version of the three pillar system being taken around the rest of the EU.

There a myriad of systems and there is no common pension system, unless people refer to common recognition of state pension contributions which is totally different and this recognition system as it is, is a total mess.

Jim2007 · 12-05-2020 11:47am

Yellow_Fern wrote: »

There a myriad of systems and there is no common pension system, unless people refer to common recognition of state pension contributions which is totally different and this recognition system as it is, is a total mess.

The common approach under consideration is a the three pillar concept.
1. Pillar one: State pension, expected in total to only cover a few months of living expenses
2. Pillar two: Pension from employment expected to be the primary source of income in retirement
3. Pillar three: Private savings

S.M.B. · 12-05-2020 12:18pm

Out of curiosity, what does 'expected in total to only cover a few months of living expenses' mean? I've seen it mentioned a few times. It's a safety net/stop gap between retirement and when you can access your primary workplace pension?

Edit: I'm actually going to go read up on the swiss system as I'm not aware of the actual details.

Geuze · 12-05-2020 12:45pm

Here, the SPC is 33-34% of average earnings.

Average earnings 2018 = 38,871

SPC 2020 = 248.30 pw I think = 13k pa

GreeBo · 12-05-2020 1:21pm

S.M.B. wrote: »

Out of curiosity, what does 'expected in total to only cover a few months of living expenses' mean? I've seen it mentioned a few times. It's a safety net/stop gap between retirement and when you can access your primary workplace pension?

Edit: I'm actually going to go read up on the swiss system as I'm not aware of the actual details.

I would have expected private savings to fill that gap, so would be interested in what you find.

Jim2007 · 12-05-2020 3:09pm

S.M.B. wrote: »

Out of curiosity, what does 'expected in total to only cover a few months of living expenses' mean? I've seen it mentioned a few times. It's a safety net/stop gap between retirement and when you can access your primary workplace pension?

No it just means that the total paid out over the year, would cover a couple of months total living expenses.

So in Switzerland, depending on where you live the state pension might cover 3 to 5 months of your annual living costs and you'd need to cover the other 7 to 9 months from your second pillar (employment pension) or third pillar (savings).

S.M.B. wrote: »

Edit: I'm actually going to go read up on the swiss system as I'm not aware of the actual details.

The Swiss system is not the total solution, just as it is not in Germany or the other countries, but right now it is probably the one that is most further along.

Probably the most important less to learn, is that we left it too late... no politician wants to bring home the bad news. The generation that retired say 20 years ago or so were badly hit - there was not enough being paid in to increase the state pension and they did not have the savings to live off. So for many the only solution was to go live somewhere cheaper - South of Spain, Italy and so on.

When I came here 30 years ago and heard about people's parents and in-laws retiring to Spain or Italy, I though man, these people are rich! It was actually the opposite - they could not afford to live in their own country!

Jim2007 · 12-05-2020 3:21pm

GreeBo wrote: »

I would have expected private savings to fill that gap, so would be interested in what you find.

The pension planning is fairly simple:
- Assume you'll need 65% of your average income over the last three years
- About 40% is from pillar 2, your employment pension
- About 15% - 20% is from the state pension
- And the remainder is from the third pillar, personal savings

The financing goes along these lines:
- Social security contributions from employee and employer
- Pension contributions min 7% with one to one matching from the employer
- Tax relief on up to 8k in a blocked account until retirement age.

In most cases the employment pension contributions are much higher than 7% and on a sliding scale as you get older. In most professional jobs the rate is more like 20+% once you are older that 50, with employee matching amounts. Which on one hand is good, but suddenly dropping 20% of your disposable income on the 50th birthday is harsh.

S.M.B. · 12-05-2020 3:41pm

Jim2007, fair enough, that just sounds like a different perspective of looking at what the moneys purpose is. Covering a few months of expenses of someone with a relatively comfortable lifestyle would be the equivalent of providing 12 months of support for the absolute essentials to meet basic needs of others.

GreeBo · 12-05-2020 3:50pm

Jim2007 wrote: »

The pension planning is fairly simple:
- Assume you'll need 65% of your average income over the last three years
- About 40% is from pillar 2, your employment pension
- About 15% - 20% is from the state pension
- And the remainder is from the third pillar, personal savings

The financing goes along these lines:
- Social security contributions from employee and employer
- Pension contributions min 7% with one to one matching from the employer
- Tax relief on up to 8k in a blocked account until retirement age.

In most cases the employment pension contributions are much higher than 7% and on a sliding scale as you get older. In most professional jobs the rate is more like 20+% once you are older that 50, with employee matching amounts. Which on one hand is good, but suddenly dropping 20% of your disposable income on the 50th birthday is harsh.

Why would it rely on personal savings over your private pension?
/edit
when I say "over" I mean instead of putting that money into your pension.

Unless you mean a small amount of quick access money that everyone has?

garbanzo · 12-05-2020 6:53pm

bilbot79 wrote: »

I guess some people see it as just saving to look after a decrepit auld fella that's good for nothing but for me it's literally about retiring early and having a few years where I'm relatively healthy and not dragged down by the grindstone. That's why I'm enthusiastic to max it out, if it was to save enough to pay for a nursing home I wouldn't have the motivation.

I'm conscious also mind you that if you are investing for that time in your pension pot you need to invest in your own health at the same time. I've a few bad habits to break as the ultimate goal is that come retirement I'm fighting fit with loads of cash

Billbot79’s point here is very well made. I’ve also been investing in myself in a few ways to try and ensure I don’t start falling apart until as late as possible in life. It is an aspect of pensions and retirement which people often overlook. You health is your wealth, simple as...

Also, as attractive as it might sound you can’t live in the sun drinking wine every day. I know a guy who has a place in Spain and says there are a fair few people who move down there and do that, and after a year they are in pretty bad shape.

12-05-2020 7:00pm

Plenty guzzling wine etc on social welfare in pretty bad shape also

GreeBo · 12-05-2020 7:04pm

garbanzo wrote: »

Also, as attractive as it might sound you can’t live in the sun drinking wine every day.

You certainly can, it just cant be the only thing you do.

bilbot79 · 12-05-2020 11:06pm

GreeBo wrote: »

You certainly can, it just cant be the only thing you do.

People move out to the sun thinking it's everything they've dreamed of but once it becomes normal they are bored and start drinking everyday. I wouldn't like that, drinking every day kind of drags on you. If you live in the sun you need a proper lifestyle too

S.M.B. · 12-05-2020 11:25pm

I would have thought the same applies no matter your location in retirement?

bilbot79 · 12-05-2020 11:31pm

S.M.B. wrote: »

I would have thought the same applies no matter your location in retirement?

You're probably right. Would seem a shame to self Medicate out of boredom. Much better to go travelling or something

donkey balls · 13-05-2020 9:22am

bilbot79 wrote: »

People move out to the sun thinking it's everything they've dreamed of but once it becomes normal they are bored and start drinking everyday. I wouldn't like that, drinking every day kind of drags on you. If you live in the sun you need a proper lifestyle too

Very true we have friends living in Lanzorote and they told us of people moving there but still carrying on as if they are away for a week or two, Eventually they either give up the partying every day and settle down or move back home.
Know a lad that's retired he spends summer here and Spain during the winter period.

The J Stands for Jay · 13-05-2020 11:04am

bilbot79 wrote: »

You're probably right. Would seem a shame to self Medicate out of boredom. Much better to go travelling or something

I think we all need to have a plan in mind. What to do for the rest of your life now that you've finished working. You can live out your dreams! ****e, I didn't spend any time dreaming because I was too busy working...

nsi423 · 14-05-2020 12:42am

Great thread folks, I've been catching up from the beginning - apart from that middle bit where it went completely off the rails! I skipped over that! :pac:

Jim2007 you've been giving the benefit of your own experience here, thanks.

Jim2007 wrote: »

The pension planning is fairly simple:
- Assume you'll need 65% of your average income over the last three years

One thing I picked up on from my extensive reading (well, YouTube-ing) about this F.I.R.E. caper is the way those folks think about their living expenses, not their income. They estimate future expenses based on current expenses, not current income.

Not much of a distinction for those of us who are just getting by, but it is a different way of thinking. Keeping expenses in check now means a greater ability to save for the future, a future that will also be that bit easier to afford, assuming the same lifestyle.

Pensions really are the ultimate marshmallow test!

S.M.B. · 14-05-2020 8:56am

I think it's quite common for people's expenses to naturally creep upward as their income does over time so the 65% of income is a common and simplistic goal to set.

A lot of these concepts that can help people plan for retirement are extremely basic though (half your age pension contribution rule, 50/30/20 rule etc) and will never match the efforts of someone who is willing to properly identify their expenses in later life and save/invest accordingly. Kudos to anyone who puts the effort in to creating detailed spreadsheets at a young age.

14-05-2020 9:31am

nsi423 wrote: »

............folks think about their living expenses, not their income. They estimate future expenses based on current expenses, not current income.

........

Knowing what you spend your money on is easy to establish but most folk have little idea what they spend on food, utility bills, petrol/diesel etc over the course of the year.

For folk with a mortgage, knowing what their other expenses are is key to having a really good idea what they'd need in retirement ....... what folk need is often surprisingly low.

GreeBo · 14-05-2020 10:50am

S.M.B. wrote: »

I think it's quite common for people's expenses to naturally creep upward as their income does over time so the 65% of income is a common and simplistic goal to set.

100% true, I also expect the makeup of my expenses to significantly change when I retire as I will be doing very different things with my time.

Augeo wrote: »

Knowing what you spend your money on is easy to establish but most folk have little idea what they spend on food, utility bills, petrol/diesel etc over the course of the year.

For folk with a mortgage, knowing what their other expenses are is key to having a really good idea what they'd need in retirement ....... what folk need is often surprisingly low.

Assuming you dont pay for most things with cash, most banks can give you this detail on your account.

15-05-2020 12:05pm

GreeBo wrote: »

.............
Assuming you dont pay for most things with cash, most banks can give you this detail on your account.

True, however...........
I have 2 current accounts and 2 private credit cards. I use the credit cards for most of my spends and clear them 100% each month.

So my AIB account does recognise and categorise my AIB credit card spends per retailer category but it's far from great to be honest......

14 MAY 20 CIRCLE K GRANGE CASTLE
Auto
Petrol/Fuel
CREDIT CARD - 5112 €3.85

14 MAY 20 GALA STRAFFAN
Shopping
Groceries
CREDIT CARD - 5112 €2.00

I didn't buy €2 of diesel in Straffan but if I did buy €80 it would be under Shopping Groceries.

BOI credit card spends appear as ........ 07 MAY 20 D/D BOI CR CARD
Finance & Banking

Not wonderful IMO.

If folk rely on their banks to provide detail on their spends then as I said.........

Augeo wrote: »

Knowing what you spend your money on is easy to establish but most folk have little idea what they spend on food, utility bills, petrol/diesel etc over the course of the year......

howamidifferent · 15-05-2020 1:37pm

I've been using YNAB4 since March 2015 and know where every single cent was spent and on what...

cefh17 · 15-05-2020 1:53pm

howamidifferent wrote: »

I've been using YNAB4 since March 2015 and know where every single cent was spent and on what...

July 2017 here, it's eye opening. I'm saving more per month than back then and still feel like I've more disposable money once you see how much you spend on ****e you don't need/want

15-05-2020 2:46pm

I use excel, with Onedrive on the mobile it's fairly effortless.

GreeBo · 15-05-2020 3:00pm

Augeo wrote: »

True, however...........
I have 2 current accounts and 2 private credit cards. I use the credit cards for most of my spends and clear them 100% each month.

So my AIB account does recognise and categorise my AIB credit card spends per retailer category but it's far from great to be honest......

Not wonderful IMO.

If folk rely on their banks to provide detail on their spends then as I said.........

Not wonderful, but I'd argue its more than enough for someone without a clue to get on top of things.
At the very least you would wonder why your shopping bill was too high and/or your petrol bill too low.

Zero barrier to entry also.

Blacktie. · 15-05-2020 3:41pm

cefh17 wrote: »

July 2017 here, it's eye opening. I'm saving more per month than back then and still feel like I've more disposable money once you see how much you spend on ****e you don't need/want

Why do it for so long though? I understand doing it for a few months to get an idea of where the money is going but surely once you've done that it's just repeating itself over and over. Like I done it and went pretty granular with it But after a few months of doing it I can't see much benefit.

Also is it possible to make an AVC to your pension with last years left over tax relief not used and if so how would I go about doing this?

GreeBo · 15-05-2020 4:41pm

Blacktie. wrote: »

Also is it possible to make an AVC to your pension with last years left over tax relief not used and if so how would I go about doing this?

Contact your pension provider (or your employer)

Blacktie. · 15-05-2020 4:47pm

GreeBo wrote: »

Contact your pension provider (or your employer)

I did they sent me a document that basically says to contact revenue. Thought I'd find a quick answer here of what's involved.

GreeBo · 15-05-2020 4:52pm

Blacktie. wrote: »

I did they sent me a document that basically says to contact revenue. Thought I'd find a quick answer here of what's involved.

Assuming you don't manage your own, I don't know why revenue would need to be involved tbh

cefh17 · 15-05-2020 5:19pm

Blacktie. wrote: »

Why do it for so long though? I understand doing it for a few months to get an idea of where the money is going but surely once you've done that it's just repeating itself over and over. Like I done it and went pretty granular with it But after a few months of doing it I can't see much benefit.

Also is it possible to make an AVC to your pension with last years left over tax relief not used and if so how would I go about doing this?

I can see where you're coming from, it's more a habit at this stage, you're right that I don't really get the same benefit as the first few months gave. Nice to plan ahead and make sure I've enough put away for insurance by the time it's due

NIMAN · 06-06-2020 11:55am

Long term they can be a good way of investing your money for the future, ignoring tax breaks etc.

Just checked my pension and it's value is 2.7x greater than what has been put into it.

snoopboggybog · 06-06-2020 4:09pm

howamidifferent wrote: »

The answer to the pension time bomb is for the government to come out tomorrow and state that from the first of January 45 years from now the pension will no longer be available to anyone not already on it. So start saving for your retirement now. Of course you have to look after those who are incapable of work but everyone else gets 45 years notice. If you don't provide your on your own.

Nonsense, the State pension is not going away anytime soon in Ireland. There not even cutting long term people on the Dole and still handing out allowances and council houses like there's no tomorrow.

As I previously mentioned people maxing out their pension from an early age will not spend the money in their retirement either. They will die with it in the bank.

Its good to plan for your retirement but think people are completely overestimating how much money they actually need in retirement. Are you going to take a cruise every week or drive a new 7 series every year or something?

There was a post here of a 26 year old a while back maxing out their pension while renting a room in Dublin. That's just absolutely crazy.

Jim2007 · 06-06-2020 6:50pm

snoopboggybog wrote: »

Nonsense, the State pension is not going away anytime soon in Ireland.

You won't need it anytime soon and if you continue to keep your head stuck in the sand and ignore all the discussions and research papers that have been discussed in the last few years, you will be in for a surprise when you do need it.

snoopboggybog · 06-06-2020 6:54pm

Jim2007 wrote: »

You won't need it anytime soon and if you continue to keep your head stuck in the sand and ignore all the discussions and research papers that have been discussed in the last few years, you will be in for a surprise when you do need it.

They are not going to let old people die of starvation. Worst that will happen is that they will bring in an additional payment out of your wages for the state pension in the future. People born after a certain will have this tax taking out of their wages. That is worst case scenario.

I do have a pension, paying 6% and employer matching 6% which will do me on retirement. What I don't understand is people putting every cent possible into their pension now and not touching it till retirement. It doesn't make any sense to me waiting 35 years for it.

If you don't enjoy the money now, you will die with it in your bank account.

S.M.B. · 06-06-2020 8:55pm

Or that it's means tested so anyone with a house and a decent amount of savings could be exempt from getting it.

I would imagine anyone putting every cent possible into a pension has a justifiable reason rather than doing it out of ignorance or stupidity. People have very different long term financial goals and there are various ways to get there.

snoopboggybog · 06-06-2020 10:55pm

S.M.B. wrote: »

Or that it's means tested so anyone with a house and a decent amount of savings could be exempt from getting it.

I would imagine anyone putting every cent possible into a pension has a justifiable reason rather than doing it out of ignorance or stupidity. People have very different long term financial goals and there are various ways to get there.

Your own home will never be affected, i can guarantee that.

Means tested maybe to some extent but not like your going to get zeroe.

It's not ignorance but probably stupidity. Live frugal now, you'll live that way for the rest of your life. You'll die with the money in the bank.

Yellow_Fern · 06-06-2020 11:03pm

snoopboggybog wrote: »

Your own home will never be affected, i can guarantee that.

Means tested maybe to some extent but not like your going to get zeroe.

It's not ignorance but probably stupidity. Live frugal now, you'll live that way for the rest of your life. You'll die with the money in the bank.

I think most people are prone to life style creep, ie you might rough a hostel when you are 25 when you visiting Lisbon but not when you are 65.

Klonker · 06-06-2020 11:11pm

snoopboggybog wrote: »

As I previously mentioned people maxing out their pension from an early age will not spend the money in their retirement either. They will die with it in the bank.

Its good to plan for your retirement but think people are completely overestimating how much money they actually need in retirement. Are you going to take a cruise every week or drive a new 7 series every year or something?

There was a post here of a 26 year old a while back maxing out their pension while renting a room in Dublin. That's just absolutely crazy.

I don't know about other people but I'm in my 30s and I'm maxing my contributions. The main reasons are:

I don't want to worry about not having enough money in retirement. I'm a worrier, that's my personality. I'd rather be safe than sorry and have too much than too little.

Like most people I plan to have children in life. I hope they don't need much from me financially in their adult life but I want to be able to help them if they do need it and probably even if they don't. I'd love to be able help with a deposit or wedding or to bring the whole family on a nice foreign sun holiday on me like its not big thing.

If myself and partner die with a load of our cash not spent, well I'll be happy that it will go to my family and help give them a more comfortable. I'm not stuck for money but my parents help me anyway from time to time and I really appreciate it and I know it makes them happy too. I'd love to be able to do similar with my children.

Padre_Pio · 06-06-2020 11:25pm

Klonker wrote: »

I don't know about other people but I'm in my 30s and I'm maxing my contributions.

Im maxing it till I have kids, then I'll cut back knowing I already have a good lump sum gaining interest.

Imagine having no pension and trying to pay into a fund whole putting kids thru college..

snoopboggybog · 06-06-2020 11:38pm

I honestly think both of ye are mad to be honest. I have a pension paying 6% with my employer matching 6%

Is there not something you'd like to spend the money on now? Why do you think you need a ton of money in retirement which is 30 years or more down the line.

I just find it mad is all your maxing out your pension at an early age.

I presume both of you have a mortgage?

S.M.B. · 06-06-2020 11:52pm

snoopboggybog wrote: »

Your own home will never be affected, i can guarantee that.

Means tested maybe to some extent but not like your going to get zeroe.

It's not ignorance but probably stupidity. Live frugal now, you'll live that way for the rest of your life. You'll die with the money in the bank.

Not sure how someone could be so certain it wouldn't be assessed along the lines of Fair Deal and if is means tested property should be taken into account.

Without knowing an individuals circumstances I don't think you can say stuff like it's ridiculous or people are going to die with money in the bank.

snoopboggybog · 06-06-2020 11:58pm

S.M.B. wrote: »

Not sure how someone could be so certain it wouldn't be assessed along the lines of Fair Deal and if is means tested property should be taken into account.

Without knowing an individuals circumstances I don't think you can say stuff like it's ridiculous or people are going to die with money in the bank.

I can safely say it as its my opinion.

The state pension will be there and thinking your protecting yourself is making excuses for having money tied up for the next 30 years.

anewme · 07-06-2020 12:04am

S.M.B. wrote: »

Not sure how someone could be so certain it wouldn't be assessed along the lines of Fair Deal and if is means tested property should be taken into account.

Without knowing an individuals circumstances I don't think you can say stuff like it's ridiculous or people are going to die with money in the bank.

Interesting point on fair deal. I've seen 2 people go through fair deal recently.

One person had nothing. He sailed through process.

The other person had a home and a few Bob saved. As his son said to me...hes in the worst position... not rich but not poor.

It definitely made me think about why we bother...especially those who will end up with a mediocre pension. I want to have enough so I've a nice lifestyle, but to spend it all so it's not left behind me. Reckon 2,500 per month total (between private pension plus state) plus a few hundred grand in the bank is enough.

Padre_Pio · 07-06-2020 12:33am

snoopboggybog wrote: »

I honestly think both of ye are mad to be honest. I have a pension paying 6% with my employer matching 6%

Is there not something you'd like to spend the money on now? Why do you think you need a ton of money in retirement which is 30 years or more down the line.

I just find it mad is all your maxing out your pension at an early age.

I presume both of you have a mortgage?

I have more money than I can spend. Pension is a good tax avoidance scheme, better than having in the bank.

07-06-2020 11:30am

snoopboggybog wrote: »

I honestly think both of ye are mad to be honest. I have a pension paying 6% with my employer matching 6%

Is there not something you'd like to spend the money on now? Why do you think you need a ton of money in retirement which is 30 years or more down the line.

I just find it mad is all your maxing out your pension at an early age.

I presume both of you have a mortgage?

I think it depends on your income. If you are on a high income then it certainly makes sense to max contributions but the lower your salary the less it makes sense to max out (it always makes sense to have a pension). It’s a valid point too in relation to other costs.

I was in a public service job for a number of years so had a mandatory contribution and a large employer contribution. I changed to private sector to a company with no pension plan, they don’t as yet make contributions etc and as I’m saving up as much as I can towards a deposit/house build I haven’t started any pension at all yet. I think a few years of no pension is worth it to go into my house build with as much cash as possible. My salary is pretty decent but not enough to save as I want to, have the lifestyle I want and pay any pension that would be worth while. I’m probably on about half the salary my role would attain also and I could move elsewhere but I’m taking a gamble that staying put will in the long run result in far higher salary than would be possible elsewhere and that would enable me to load my pension later plus save a lot.

I also have a family farm which I will eventually take on to run part time and while it doesn’t bring in much money it will still be an additional source of income in future when I retire so not reliant totally on a pension and I’ll have an income from the farm for life (as I’ll never retire from that).

Why are people obsessed with getting a pension

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