Retirement age to rise to 68 by 2028

seamus

http://www.rte.ie/news/2010/0303/pensions.html
Highlights:

The Government is to introduce a new mandatory or 'auto-enrolment' pension scheme in four years' time as part of a major restructuring of pension provision in the State.

Under the New National Pensions Framework, the State pension will remain the basis of the pension system in Ireland, with the Government undertaking to preserve its value at 35% of average earnings.

However, in future, workers aged over 22 earning above a certain income threshold will automatically be enrolled in a new supplementary pension scheme to provide additional retirement income - unless they are already in their employers' scheme, which provides higher contribution levels or is a defined benefit scheme.

Employees would contribute 4%, with the Government and the employer providing matching contributions of 2% each - making a total contribution of 8%.

Workers may opt out of the supplementary scheme, but it remains mandatory for employers.

However, employees will automatically be re-enrolled every two years.

There will be a once-off bonus payment for people remaining in the scheme for more than five years continuously.

The State contribution will be equal to tax relief of 33% - down from the current maximum tax relief of 41%.

This State contribution will replace the existing pension relief system which currently applies to existing occupational and personal pension schemes.

The qualification age for the State Pension will rise from 65 to 66 in 2014, 67 in 2021, and 68 in 2028.

However, workers will be permitted to postpone collecting that pension, to make up contribution shortfalls.

There are also proposals to devise a 'revised and more secure' defined benefit model, which schemes may wish to consider if restructuring in the future.

Future employees joining the public service will enter a new pension scheme from 2010.

The minimum pension age will be 66, with the pension based on a career average rather than final salary.

It is estimated that while there are almost six workers to support each pensioner today, by the middle of the century that ratio will have fallen to less than two workers per pensioner - creating an unsustainable burden on the working population.

In addition, State expenditure on pensions will increase from 5.5% of GDP to 15.5% by 2050.

The Taoiseach said the reforms would be phased in to improve pension provision while protecting competitiveness.

Not only does it seem like they're trying to encourage people to save into a pension, they're trying to encourage people to move to a Government pension - your contribution is doubled by the government and your employer, as well as a five-year bonus.

As I've said elsewhere, I'm iffy about this because I don't trust a subsequent Government to turn around and tell us that this fund is suddenly gone and we're getting nothing more than the standard contributory pension and none of our money back.

There doesn't seem at this early stage to be any ability to transfer your Government pension fund to a private fund later on in life.

Little but of a kick in the teeth for anyone between 55 and 61 who were looking forward to retirement - you've an extra year to go

ei.sdraob

comrades!

you have to work harder and longer to support the banks

i love socialism

Kinetic^

2% on to the employer, yet another reason why companies won't be hiring. Well done Mr. Cowen you dribbler! You're supposed to try and stimulate jobs but instead you're putting more cost on them. :rolleyes:

ei.sdraob

Kinetic^ wrote: »

2% on to the employer, yet another reason why companies won't be hiring. Well done Mr. Cowen you dribbler! You're supposed to try and stimulate jobs but instead you're putting more cost on them. :rolleyes:

yes the employers already have to pay employer prsi/paye thingie

this will go on top so

changes

Thats another 3 years people in negative equity can stretch their mortgages over too and pay even more interest.

oppenheimer1

I can't say I'm liking the changes but they seem inevitible really with an aging population. Pension based on average lifetime salary? one would really want to start racing up the ladder early on in their career. It could affect women disproportionally too, considering they take time out typically towards the peak of their abilities to have families and may miss out on promotion.

The old saying states that our young people never had it so good. When we look back in 20 to 30 years time we will say our old people never had it so good..

Sleepy

Is there going to be a pension fund? Or are we investing our pensions in "Ireland Inc" to be paid back out of the current account when we retire?

Whichever it is, to be honest I don't fancy my chances of seeing a pension either way given how badly this shower are managing the economy...

dan_d

Emmmmm, I'll be continuing with looking after my pension myself, and anything I might happen to get afterwards I'll be considering a bonus. WOn't be relying on it happening though......

Head The Wall

Sleepy wrote: »

Is there going to be a pension fund? Or are we investing our pensions in "Ireland Inc" to be paid back out of the current account when we retire?

Whichever it is, to be honest I don't fancy my chances of seeing a pension either way given how badly this shower are managing the economy...

It could just be a ploy to scare us all into organising our own private pensions. I wouldn't trust them running it either, although the SSIA scheme worked out okay. It depends also on whether you could opt in or out when ever you need.

It might make employers more proactive in organising a pension scheme in their own companys so they can avoid the 2% levy themselves

Trampas

Also saying it will be managed by one of the private companies and no guarantee it will be worth anything at the end.

changes

Who exactly does this new retirement age apply to?

Is it everyone who is under 65 in 2028 when it comes in or is it for any new workers entering the workforce from that date?

Fat_Fingers

Sleepy wrote: »

Is there going to be a pension fund? Or are we investing our pensions in "Ireland Inc" to be paid back out of the current account when we retire?

Whichever it is, to be honest I don't fancy my chances of seeing a pension either way given how badly this shower are managing the economy...

They just drained National Pensions Reserve Fund by bailing out banks. This is needed in order to replenish NPRF for the next round of bailouts.

joe1979

ei.sdraob wrote: »

comrades!

you have to work harder and longer to support the banks

i love socialism

Yes you can see through it like me.Whats the odds this pension fund will be used as a form of collateral in order to receive extra funding to recapitalise our fine upstanding financial institutions.remember where you heard it first.

ei.sdraob

joe1979 wrote: »

Yes you can see through it like me.Whats the odds this pension fund will be used as a form of collateral in order to receive extra funding to recapitalise our fine upstanding financial institutions.remember where you heard it first.

yep

Five days ago, the State took a 16 per cent stake in Bank of Ireland through the National Pension Reserve Fund after the commission banned the bank from making certain interest payments to the State.

http://www.irishtimes.com/newspaper/breaking/2010/0226/breaking7.html

theyre already muddying the pension waters (which are about to rise) with NAMA/banking junk

wait till the break they pension piggybank down the road to pay the banks

joe1979

ei.sdraob wrote: »

yep



http://www.irishtimes.com/newspaper/breaking/2010/0226/breaking7.html

theyre already muddying the pension waters (which are about to rise) with NAMA/banking junk

wait till the break they pension piggybank down the road to pay the banks

Its quite comical.Just listened to Hanafin on Today FM trying to explain it.Basically if you are self employed your even more screwed because you have to make all the contributions yourself.Way to encourage entrepreneurs!!

It is basically a pension levy on the population like the public sector.No doubt there will be an extra tax imposed on people earning over 40-50000 per annum upon withdrawing their pension at the retirement age of 95 in 2050.:D

97i9y3941

laughable approach to this,ok they are trying to save taxpayer money from the pensions,but theres many people who have been on dole for years who now shoundnt bother find a job because you get a lovely state pension if you dont go out and get work.

whos going to watch the private companies?,making sure no one commits fraud on the pension fund.

the rules to the public sector is a joke aswell,there is an embargo at mo in recruitment so its not going anywhere!.

Eliot Rosewater

Yet another big-government policy that erodes personal responsibility.

This new pension scheme is "opt-out": the government don't even ask you if you want it before giving it to you (what great salesmen they would make). From the word go they presume that you will want them to interfere in your personal accounts. But even worse: if you don't contribute you will still be paying for other people. The detail is in the 1% the State will contribute. So if you have a private pension set up, and don't decide to join the Government scheme, you will still be paying for other peoples' pensions through your tax.

And then there's the whole principle of it. The Government has found yet another way to edge itself in in the management of the individual. We are becoming increasingly like toddlers trying to walk, with the government holding our hands and paying billions of euro to surround us with thousands of public servants to help us if we fall. Is there any end to this continual expansion of forced Government influence in our lives?

In short this is a policy that will burden businesses and the self-employed with something they may not even want, and its another excuse for the determined and motivated to say farewell to Ireland and move onto sunnier shores.

97i9y3941

its ok for the gov to preach that we must save for pensions,thats fine coming from people that have state guarantee public sector job,but what about folks when the company shuts shop,they could lose their pension and all you get is oh hard luck..

ei.sdraob

Eliot Rosewater wrote: »

Yet another big-government policy that erodes personal responsibility.

This new pension scheme is "opt-out": the government don't even ask you if you want it before giving it to you (what great salesmen they would make). From the word go they presume that you will want them to interfere in your personal accounts. But even worse: if you don't contribute you will still be paying for other people. The detail is in the 1% the State will contribute. So if you have a private pension set up, and don't decide to join the Government scheme, you will still be paying for other peoples' pensions through your tax.

And then there's the whole principle of it. The Government has found yet another way to edge itself in in the management of the individual. We are becoming increasingly like toddlers trying to walk, with the government holding our hands and paying billions of euro to surround us with thousands of public servants to help us if we fall. Is there any end to this continual expansion of forced Government influence in our lives?

In short this is a policy that will burden businesses and the self-employed with something they may not even want, and its another excuse for the determined and motivated to say farewell to Ireland and move onto sunnier shores.

and its not only you that be paying it

take my case

as director and main employee of company, this also means the company having to pay employer side of this new "tax", thats in top of prsi/paye and other levies of course

meh this government is really sapping any will to work harder from me, why bother work harder when it all be taken away

Fat_Fingers

Fat_Fingers wrote: »

They just drained National Pensions Reserve Fund by bailing out banks. This is needed in order to replenish NPRF for the next round of bailouts.

yeah its just another tax needed to fund the banks

heyjude

We may have needed to do something about the fact that as a governement minister said "unfortunately people are living longer", but a fundamental principle has been breached here. Up till now, you paid your PRSI and it was on the understanding that this qualified you for the contributory state pension at 65/66, indeed for the self employed this was just about the only benefit from paying PRSI, but if this principle can now be breached and the goal posts progressively moved to 68, then how can we be expected to have any faith that this won't be changed again in the future.

I can see it already, 10 or 15 years from now, they'll look at it again and adjust the pension age from 68 to 70 or more. We've stepped onto the slippery slope now, and by the time todays 20 year olds near retirement, they probably be facing their 75th birthday.

No consideration either as to how increasing business costs through extra pension contributions, is going to help improve our competitiveness.

SkepticOne

I agree with those who say it is just another tax. Looking through the documents, there's plenty about the new mechanisms for raising money but nothing about what the contributor is entitled to. There isn't even anything about how the money will be ring-fenced and invested.

When it comes to retiring, you will be paid out of whatever money the government has at hand and deems necessary to buy your support just like at present.

ei.sdraob

all of this also assumes life expectancy keeps going up (it should in theory)

but the health system is in a mess as we all know

and life expectancy can also dramatically collapse as happened in ex USSR due to huge economic and social upheaval

SkepticOne

SkepticOne wrote: »

I agree with those who say it is just another tax. Looking through the documents, there's plenty about the new mechanisms for raising money but nothing about what the contributor is entitled to. There isn't even anything about how the money will be ring-fenced and invested.

When it comes to retiring, you will be paid out of whatever money the government has at hand and deems necessary to buy your support just like at present.

Pension Timebomb Dwarfs Banking Crisis dated 2007

Pensions - a source of funding for the status quo?

National pensions framework announced

From the last link:

If you had current account in a bank that did not issue or provide statements how would you feel? Of course you could try and keep a record of all transactions yourself and see if when the bank provided a balance, once a year, that the figures matched.


The situation covering pension contributions is not unlike the scenario described above. We simply do not know if there is significant fraud because we cannot find out and are relying on the honesty of brokers and pension companies. It is quite extraordinary how this situation prevails. Is it 'nuts' to expect that people will steal money when they are afforded the chance?

People online have this figured out from the start...mainstream media needs to make itself relevant again!

Sydney2007

The self employed are going to get a raw deal out of this, with the tax relief being reduced.

Come 2014, I (a self employed small business with 2 employees) will have to commence this new pension fund for my workers. No problem.

My worker pays €4, the state pays €2, I pay €2, the fund now has €8.

But I want a pension myself. So I pay €4, the state pays €2, but since I have no employer, there's no one to pay another €2 for me, so my fund only has €6. If I want my pension fund to have €8, I have to pay an extra €2 myself, and the state only pays 33% of that.

So from equal contributions from our salaries, my worker can build up a far superior pension fund to me. Or else, I have to pay an awful lot more from my income just to arrive at the same pension fund as him.

And in this day and age, just because I am the employer doesn't mean I'm a lot better off than my worker, after I pay all my overheads, provide the workplace, pay the wages, VAT, PAYE, PRSI, etc. etc. I suspect a lot of small business operators (who arre not limited companies) are happy to be earning as much as their employees at the end of the week.

At the very least, there would need to be the full tax relief on that last €2 of pension contribution for the self employed, so that it can be treated as a full business expense in the same way as the employers contribution for the worker is.

Idbatterim

I run the family business, and so you can imagine what my attitude to the likes of Begg etc are, but I find myself for the first time ever completely agreeing with him! ICTU chief David Begg claimed workers were being forced to hand over a portion of their wages to the private pension industry in order to facilitate "gambling and stock market speculation". When I reach retirements age and am entitled to state pension, on top of savings I may have, and should I own a house, I can sell it and release the equity! This will more than cater for my needs! But I can see why they do it, ofcourse many would be fine without it, but there is a large pecentage in this country who arent fit to wipe their a**! Anyway I assume most of us posting on boards, may be facing one or two more increases in retirement age before we make it that far!

BeardyFunzo

Sydney2007, surely your business has some value? Would that value not equal or surpass the dispartity between your pension and your employee's?

Sydney2007

Not necessarily true, and not the point. My point is that from equal contributions from our income, my employee and I will have vastly different pensions, because I have no one to make an extra free contribution for me. My employee's other assets, which are no concern of mine, may well give him an additional post retirement income, and good luck to him. My business, if still surviving at the time of my retirement, and any other assets I have may also provide me with additional post-retirement income. Equally, however, we may both have to retire on the pension provisions we both made during our working lives, and all I'm saying is that taking like with like, it will not be possible for me to provide myself with a simialr pension to my employee for similar contributions from earnings. I will either have to pay a lot more from my earnings, or enjoy a substantial smaller pension. I have no way of providing a similar pension fund for myself at the same cost to me.

__________

What's all this talk about 2050

Sure I heard the world is going to end in 2012, some mayan prediction

So there ya go

BeeDI

Idbatterim wrote: »

I run the family business, and so you can imagine what my attitude to the likes of Begg etc are, but I find myself for the first time ever completely agreeing with him! ICTU chief David Begg claimed workers were being forced to hand over a portion of their wages to the private pension industry in order to facilitate "gambling and stock market speculation". When I reach retirements age and am entitled to state pension, on top of savings I may have, and should I own a house, I can sell it and release the equity! This will more than cater for my needs! But I can see why they do it, ofcourse many would be fine without it, but there is a large pecentage in this country who arent fit to wipe their a**! Anyway I assume most of us posting on boards, may be facing one or two more increases in retirement age before we make it that far!

Bang on the nail here. I couldn't believe myself, when I started nodding on absolute agreement with the chief beard last night. Iv'e been 32 years now contributing AVC's. Based on what my fund is worth now, I wish I had drank it. And I have absolutely NO confidence that the tricksters, gamblers, chancers, three card trick merchants, who pay themselves obscene salaries and bonuses, have the will or capacity to repair the damage to the value of my fund!
If I had the option I would have NTMA run my fund! Mr Sommers, did a hell of a better job than most fund managers, and certainly knew enough not to put cash in Anglo Irish, or purchase shares in them.

B

dvpower

One of the issues that hasn't been commented much was the proposed reduction in tax relief on pension contributions for higher earners.

At the moment, if I pay €1 into my private pension fund, the government give me tax relief at the higher rate, so (rounded), I pay 50c and the government pay 50c. Pension rules mean that I must buy an annuity and income from this is taxed, so, (again rounded), for each €1 income I get, the government get 50c. So the tax relief is basically just deferred taxation.

They are now changing this so the tax relief is set at 33%, so now, for every €1 contribution, I pay 66c and the government pay 33c. But earnings from the annuity are still taxed at the higher rate; the government still take 50c.

This move discourages people from paying into a personal pension.

Idbatterim

The more i think about it the more dead set I am against not wanting a pension forced on me, for reasons I stated a few posts back! Imagine now that if I did have a pension like hundreds of thousands of private sector workers, that if I did have a mortgage, instead of paying into a pension, i used the money to invest into my property and paying off the mortgage quicker, the collossal amount of money I would save in interest, come retirement age which will now be atleast 68 for myself, I sell my home if needs be, I could sell it and leaseback, and either sell to the investor for a cheaper price or pay slightly higher than average rent, to make it worth both parties time. Put this cash into a high interest account and end of story! What is with all this ridiculous panic about pensions! anyone who isnt a moron / layabout has nothing to worry about! There is talk of the huge pension ticking timebomb, but could someone please tell me if they see any issues with my suggestion?!

recedite

Idbatterim wrote: »

The more i think about it the more dead set I am against not wanting a pension forced on me

Paying into a pension only works if capital value of the fund grows rapidly. It has to overcome;
1. commissions extracted by the managers and salesmen.
2.inflation in the cost of living
3.your losses incurred by paying interest on your existing loans or mortgage

But its value is magnified by any government tax reliefs on the mortgage payments and the pension contributions, and now by actual govt contributions as well.

When the idea of pensions first started the necessary growth was achieved in the long term by investing in shares and property. Growth was fuelled by a constantly expanding population and economy.There are too many variables to do the maths, but I wonder if we are moving into a new paradigm where constant growth is no longer guaranteed or desirable.

ei.sdraob

recedite wrote: »

Paying into a pension only works if capital value of the fund grows rapidly. It has to overcome;
1. commissions extracted by the managers and salesmen.
2.inflation in the cost of living
3.your losses incurred by paying interest on your existing loans or mortgage

But its value is magnified by any government tax reliefs on the mortgage payments and the pension contributions, and now by actual govt contributions as well.

When the idea of pensions first started the necessary growth was achieved in the long term by investing in shares and property. Growth was fuelled by a constantly expanding population and economy.There are too many variables to do the maths, but I wonder if we are moving into a new paradigm where constant growth is no longer guaranteed or desirable.

that's an interesting point

certainly there aint much growth left in the West, best we can hope for is slow steady growth of 1-2 % a year, people simply cant consume more crap and populations in general and not growing much either

but there is alot of room for growth in the developing world

also growth wasn't fuelled just by growing populations , its fuelled ultimately by energy and productivity,
you can take a pessimistic view that we will run out of energy and resources (peak oil point of view)
or
optimistic view that new technologies (eg fusion etc) or more efficient technologies (insulators,superconductors etc) would develop once there's a need


anyways to get back on point, there's alot of money out there in savings and investments flowing from one asset class to another, creating bubbles as it goes

its alot harder nowadays to make wise savings or investments, simply because things change rapidly

steamengine

Fat_Fingers wrote: »

They just drained National Pensions Reserve Fund by bailing out banks. This is needed in order to replenish NPRF for the next round of bailouts.

+1........... That's about it - lets call a spade a spade. The rubbish about an ageing profile just suits at the minute.

If the government wanted to be creative at this point in time, they could introduce an early retirement scheme instead and seriously reduce the dole queues.

But no, that involves logic which certainly isn't their forte.

http://4.bp.blogspot.com/_1WaO1OGuwzI/Sbym-a0IhlI/AAAAAAAAIYw/aezkMfy5x84/s400/bailout-doris-bailout-politics-banking-money-funny-humor-demotivational-poster-1223909487.jpg

LOL initially........... but so true

http://www.tristanyates.com/wp/wp-content/uploads/2009/08/financial-crisis1.jpg