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Why are people obsessed with getting a pension

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  • Moderators, Business & Finance Moderators Posts: 9,921 Mod ✭✭✭✭Jim2007


    Err....theres absolutely no self entitlement here . .. .


    What he's stating is 100% true. If anything he's pointing out other peoples self entitlement, not his or his mothers.

    In both cases they are expecting in 30+ years time someone will carry the can for them. Enough said.


  • Registered Users Posts: 20,553 ✭✭✭✭Dempsey


    I'm 36 and recently upped my Pension Contributions from 5% to 20%

    So its actually just 12% from me and the other 8% is tax money that would have been just wasted by the government.

    Pensions dont mess up, its the investment funds that people typically shove them into to get tax free growth is where the problem can be

    Pensions are 20% or 40% tax relief, what saving or investment strategy with your disposable income will beat it?

    Looking forward to the 200k tax free lump sum, might even take some of it at 20% tax aswell and go to Vegas for a night :pac:


  • Registered Users Posts: 2,933 ✭✭✭BailMeOut


    I am self employed and pay an estimated tax to revenue every month. At end of the year when doing my return I always owe money so just make an extra PRSA contribution that wipes out any tax owed. For example at end of the year my choice could be to pay revenue an extra €3,000 in taxes or simply save around €5,000 (accountant works out the exact amount) in my PRSA. It's a no brainer what to choose.


  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    Dempsey wrote: »
    I'm 36 and recently upped my Pension Contributions from 5% to 20%

    So its actually just 12% from me and the other 8% is tax money that would have been just wasted by the government.

    Pensions dont mess up, its the investment funds that people typically shove them into to get tax free growth is where the problem can be

    Pensions are 20% or 40% tax relief, what saving or investment strategy with your disposable income will beat it?

    Looking forward to the 200k tax free lump sum, might even take some of it at 20% tax aswell and go to Vegas for a night :pac:

    Sure people are always going on about how you should have a pension because there's no guarantee of a state pension, how can you guarantee they won't tax lump sums to **** when the time comes?


  • Registered Users Posts: 2,382 ✭✭✭1874


    Pussyhands wrote: »
    Sure people are always going on about how you should have a pension because there's no guarantee of a state pension, how can you guarantee they won't tax lump sums to **** when the time comes?


    Or that it will be worthless, or that you'll live to see it?


    Hence my question earlier on, which I dont think got answered, someone thought they can pass it on to their children, I dont think so, not unless you'd taken a lump sum already, Id be interested to know that, but it does seem to be the best way to save, rather than having it all in low interest savings.


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  • Registered Users Posts: 2,933 ✭✭✭BailMeOut


    Pussyhands wrote: »
    how can you guarantee they won't tax lump sums to **** when the time comes?

    because lawmakers also have pensions.


  • Registered Users Posts: 2,933 ✭✭✭BailMeOut


    1874 wrote: »
    someone thought they can pass it on to their children, I dont think so, not unless you'd taken a lump sum already, Id be interested to know that, but it does seem to be the best way to save, rather than having it all in low interest savings.

    Yes, pensions can be passed on to beneficiaries. If I die before I can access mine my wife gets it and if she passes away it goes to my kids. If you contribute to a pension the money in it is yours full stop.


  • Registered Users Posts: 37,295 ✭✭✭✭the_syco


    Who needs that much money at that age. Am I missing something here? You can't take it with you when you die.
    Walk around Dublin, and you'll see old people begging for a pittance. I'm sure they though similar.


  • Registered Users Posts: 778 ✭✭✭no.8


    Steer55 wrote:
    The Irish were badly burned by bamk shares during the crash, Brendan Investments etc. Give me bricks and mortar any day.

    Yawn


  • Registered Users Posts: 11,205 ✭✭✭✭hmmm


    Pussyhands wrote: »
    how can you guarantee they won't tax lump sums to **** when the time comes?
    Because it's ideas like that and the fear of ideas like that which keeps people voting centrist parties like FG & FF back into power - and they wouldn't want to annoy hundreds of thousands of voters. There's no guarantees of course, but you would assume TDs would know what the implications would be if they proposed this.


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  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    hmmm wrote: »
    Because it's ideas like that and the fear of ideas like that which keeps people voting centrist parties like FG & FF back into power - and they wouldn't want to annoy hundreds of thousands of voters. There's no guarantees of course, but you would assume TDs would know what the implications would be if they proposed this.

    But you'd still be getting the state pension anyways....if that 12k a year was taken from me I wouldn't like it...even if I had a private pension..


  • Registered Users Posts: 27,986 ✭✭✭✭AndrewJRenko


    BailMeOut wrote: »
    Yes, pensions can be passed on to beneficiaries. If I die before I can access mine my wife gets it and if she passes away it goes to my kids. If you contribute to a pension the money in it is yours full stop.


    But that changes if you buy an annuity at any stage, right? Once you convert to an annuity, if you die, it's gone. But similarly, if you live for another 30 or 40 years, the payments continue - they take the risk once you buy an annuity.
    Steer55 wrote: »
    But that is Switzerland totally different country!

    The Irish were badly burned by bamk shares during the crash, Brendan Investments etc. Give me bricks and mortar any day.


    The 'cute hoor' Irish who thought they were too smart to follow the basic rules of investment - a diversified investment strategy so all your eggs aren't in one basked - were badly burned during the crash. As were those with bricks and mortar investments.


  • Registered Users Posts: 990 ✭✭✭cefh17


    I pay into a pension (and max my revenue allowance of 15% personal contribution for under 30's) partly because the tax system in this country is prohibited awkward to buy into low cost ETFs. CGT aside, the whole deemed disposal rule is a mess in my opinion and makes me quite jealous of other countries


  • Registered Users Posts: 1,953 ✭✭✭bilbot79


    Tacklebox wrote: »
    I live in the moment, seen enough pensions go down the drain.
    People who gamble on a high risk product, end up with one eight of what they invested in.
    Trends change, but the pension sales person will pull the wool over your eyes with soundbites and fancy phrases...

    I bought a big house with inheritance in 2002, off the plans, luckily its in a nice estate, detached 5 bedrooms and well insulated.

    Ill sell it before I retire, buy something much smaller and have the rainy day money and leave the house to my son.

    I know its a bit of a gamble but I think its a lot less of a risk than buying into a pension.

    Because pensions always go down and property always goes up right?


  • Registered Users Posts: 5,628 ✭✭✭The J Stands for Jay


    BailMeOut wrote: »
    because lawmakers also have pensions.

    Ding ding ding, we have the correct answer. If you look at the changes to pension rules since around 1999, you can see the influence of politicians and civil servants in not overly affecting their pensions.


  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    McGaggs wrote: »
    Ding ding ding, we have the correct answer. If you look at the changes to pension rules since around 1999, you can see the influence of politicians and civil servants in not overly affecting their pensions.

    Lawmakers also get the state pension too though?


  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    People talking about the 200k lump sum.

    If I have 200k in my pension can I take it all out tax free? Or can it only be 25% of my total pension fund? I think I read that somewhere..


  • Registered Users Posts: 987 ✭✭✭LimeFruitGum


    OP, I wasn’t taught about investments either, but that didn’t mean it was too late to learn. I certainly knew it was important to save, but saving interest rates have sucked for years. So I had to look at other ways to make my salary stretch & work for me. I don’t want to be fully reliant on the state.

    I have recommended John Lowe’s The Money Doctor book here before and to friends. I found it very helpful and it is written for the Irish layman/woman in mind. It is bound to be in your local library.

    Say you put in €300 per month. You can claim tax relief for your 2019 contributions in Q1-2020. You would be getting a 40% relief of around €1440 in 2020 assuming you paid €300 x 12 months.
    I would bung that 1440 back in to the pension in 2020 as an Additional Voluntary Contribution. And you can claim 40% tax relief on that 1440 AVC plus your €300x12 payments in 2021. Your pension tax relief in 2020 would now be €2000 +/-, even though your monthly payments remained the same. (Rinse and Repeat ;-))

    Can you talk to your HR/Pension rep at work? If your employer matches your contributions, you would be insane to ignore this. I would jump on it.


  • Registered Users Posts: 19,306 ✭✭✭✭Drumpot


    Pussyhands wrote: »
    People talking about the 200k lump sum.

    If I have 200k in my pension can I take it all out tax free? Or can it only be 25% of my total pension fund? I think I read that somewhere..

    If it’s an occupational pension plan you can get up to 1.5 times your final salary as a tax free lump sum. Alternatively you would need to build up a pension fund of 800k to get the 200k tax free lump sum.

    Also after retirement many people are on lower tax rates which mean that they got more tax relief going in and pay less tax on the non tax free income they get from their pension. And their after tax free cash income pot also grows tax free.


  • Registered Users Posts: 19,549 ✭✭✭✭Ace2007


    But that changes if you buy an annuity at any stage, right? Once you convert to an annuity, if you die, it's gone.

    Depends on what type of annuity you buy, if you get one with a 20 year guarantee, then it is guaranteed for 20 years even if you die after 2, likewise it will continue to be paid to you, if you survive for 40 years. Now obviously an annuity guaranteed for 20 years is more expensive than one for 10 years. But like everything people want more to less, so won't look for long guarantee annuities.


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  • Registered Users Posts: 20,553 ✭✭✭✭Dempsey


    Pussyhands wrote: »
    Sure people are always going on about how you should have a pension because there's no guarantee of a state pension, how can you guarantee they won't tax lump sums to **** when the time comes?

    Turkey's dont vote for xmas

    Taxing the ****e out of lump sums would achieve what exactly??

    Nobody would save at all for retirement and the state would have an even worse problem to solve.

    What more likely to happen is that state pensions will cease to exist and more tax incentives to save for your own defined contribution.

    The government are currently looking at an additional SSIA type tax relief scheme for pensions, i imagine that will be the trade off for removing state pensions all together in 10-20 years time.
    1874 wrote: »
    Or that it will be worthless, or that you'll live to see it?


    Hence my question earlier on, which I dont think got answered, someone thought they can pass it on to their children, I dont think so, not unless you'd taken a lump sum already, Id be interested to know that, but it does seem to be the best way to save, rather than having it all in low interest savings.

    It could be worthless or you could be worthless when you are old. What are you going to do then with your money in a savings account that hasnt even tracked inflation?

    You just have to crunch the numbers yourself and see what you will earn over your working life, see the amount that just drops into the black hole that is PAYE and you'll change your tune.

    Investing your disposable income/savings yourself does not come near to the benefits you can attract through a pension

    Your family can be entitled to the 'surrender value' of your pension. Its defined by the scheme you enter into.


  • Registered Users Posts: 2,601 ✭✭✭Nermal


    Drumpot wrote: »
    If it’s an occupational pension plan you can get up to 1.5 times your final salary as a tax free lump sum. Alternatively you would need to build up a pension fund of 800k to get the 200k tax free lump sum.

    If the scheme is occupational, is it the greater of 1.5 times final salary or 25% of fund value? Or capped at 1.5 times final salary?


  • Registered Users Posts: 4,005 ✭✭✭TaurenDruid


    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.

    If it's public sector then there'll be an "Additional Voluntary Contribution" scheme to buy you extra service.


  • Registered Users Posts: 19,306 ✭✭✭✭Drumpot


    Nermal wrote: »
    If the scheme is occupational, is it the greater of 1.5 times final salary or 25% of fund value? Or capped at 1.5 times final salary?

    You can usually choose either.

    The main drawback with 1.5 x salary can be that all non AVC contributions left in your Pension will have to be used to purchase an annuity.


  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    Drumpot wrote: »
    If it’s an occupational pension plan you can get up to 1.5 times your final salary as a tax free lump sum. Alternatively you would need to build up a pension fund of 800k to get the 200k tax free lump sum.

    How do I know what plan I have? I have one through my employer. So let's say I earn 50k...I can only get a 75k lump sum tax free?


  • Registered Users Posts: 5,628 ✭✭✭The J Stands for Jay


    Pussyhands wrote: »
    How do I know what plan I have? I have one through my employer. So let's say I earn 50k...I can only get a 75k lump sum tax free?

    Only if you stop working for them on or after you retirement age, and have been there for 20+ years.


  • Closed Accounts Posts: 9,057 ✭✭✭.......


    Whats a good sum to have in your pension pot come retirement?


  • Registered Users Posts: 19,306 ✭✭✭✭Drumpot


    Pussyhands wrote: »
    How do I know what plan I have? I have one through my employer. So let's say I earn 50k...I can only get a 75k lump sum tax free?

    It’s normally either 25% of the value of your pension or up to 1.5 times your final salary. This final salary calculation is based on service and salary. You need at least 20 years service to get the full 1.5 option and you have to be drawing down benefits at your chosen retirement age.


  • Registered Users Posts: 5,628 ✭✭✭The J Stands for Jay


    ....... wrote: »
    Whats a good sum to have in your pension pot come retirement?

    €2.15 million would be the optimum sum, assuming you have sufficient earnings to have it within limits.


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  • Registered Users Posts: 8,239 ✭✭✭Pussyhands


    Drumpot wrote: »
    It’s normally either 25% of the value of your pension or up to 1.5 times your final salary. This final salary calculation is based on service and salary. You need at least 20 years service to get the full 1.5 option and you have to be drawing down benefits at your chosen retirement age.

    So who is eligible for the 200k lump sum?


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