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The end of Pensions (as we know them)?
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24-11-2010 4:57pm#1Announced today as part of the 4 year plan, some serious changes to pensions including capping and tax relief on contributions etc Does this torpedo the appeal of Irish private pensions?0
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I'm afraid so. Double taxation where you pay 30+% putting money into a pension and then possibly facing 50%+ when you take the money out. Farcical really, their own pensions white paper recommended against standard rating pensions.
In 20 years time when we have a generation of poverty stricken pensioners we'll look back on this day and wonder.0 -
So you would rather the super rich were able to hide as much money as they wanted at the top rate of relief, like all the developers and bankers we hear about with 50 million pensions and stuff like that.capping and tax relief on contributions
its not like they are charging you to put money into your pension, the tax relief is just coming down. You still get a fair whack of tax relief.
We [as a nation] cant afford all the benefits and tax relief's we had/have, WE ARE BROKE - people really need to realise that.0 -
tHE vAGGABOND wrote: »So you would rather the super rich were able to hide as much money as they wanted at the top rate of relief, like all the developers and bankers we hear about with 50 million pensions and stuff like that.
its not like they are charging you to put money into your pension, the tax relief is just coming down. You still get a fair whack of tax relief.
We [as a nation] cant afford all the benefits and tax relief's we had/have, WE ARE BROKE - people really need to realise that.
But if someone is receiving a pension of €1M per year, they'll be paying €400k+ tax per year on it.
Anyone who put big money into pensions got a tax deferral, but eventually they should be paying back approx what they saved (depending on how their pension fund performed).
Now maybe we can't afford to give people that deferral anymore, but as the first two posters said, that's going to lead to a big decrease in the amount people put into their pension schemes.0 -
So if,say, by 2014 you put 20k (example) into a private pension, you get 20% tax relief but when you reach retirement will pay at least 20% tax on your pension..therefore would it be better to lock the original 20k into a high interest account rather than hope the pension can outperform that same interest account?. ie there will be NO tax advantage to having a private pension, therefore why continue locking it away in this fashion.
any ideas??, i'm not working in pensions obviously,was just wondering if i'm getting the right/wrong gist on this, thanks0 -
The easy answer to that is to cap the amount that people can put into pensions - which we already do.tHE vAGGABOND wrote: »So you would rather the super rich were able to hide as much money as they wanted at the top rate of relief, like all the developers and bankers we hear about with 50 million pensions and stuff like that.
The problem is that we have (had) a system where you don't pay tax on income you save in a pension but do pay tax when you take it out. Now we have a system where people pay tax on the way in and also are taxed a second time on the same income on the way out. It's crazy stuff, standard rating will kill private pensions.its not like they are charging you to put money into your pension, the tax relief is just coming down. You still get a fair whack of tax relief.0 -
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tHE vAGGABOND wrote: »So you would rather the super rich were able to hide as much money as they wanted at the top rate of relief, like all the developers and bankers we hear about with 50 million pensions and stuff like that.
its not like they are charging you to put money into your pension, the tax relief is just coming down. You still get a fair whack of tax relief.
We [as a nation] cant afford all the benefits and tax relief's we had/have, WE ARE BROKE - people really need to realise that.
I really don't think you understand how private pensions work. The tax relief is not a "bonus" or a "perk". It's based on the fact that you will pay tax when you draw down the money. Now we have a situation whereby you pay tax on the money while you it put away, and then pay more tax when you draw it down again as a pensioner.
To use a very basic example. If you are currently paying tax @ 41% and hope to have a pension large enough that it also pays 41%, then everything works out fine, because the 41% relief you are getting now is just acknowledging that you are deferring the drawdown and you will pay 41% on the money (and on the interest it has accumulated) when a pensioner.
With the proposed changes (which some ultra-lefties have been begging for for years), you will only get 20% relief as you fund your pension. For every €100, you can take it as pay today, less PAYE, giving you €59. Or you can put it into your pension (which is supposed to be the sensible thing), lose €21 now (meaning only €79 makes it into your pension fund), and then pay 41% when you're 70 and want to spend it, leaving you with just €46.61 of the original €100.
In other words. Would you rather €59 today or €46.61 in 20 years time.
If this actually gets implemented, by the time I retire, the only people who could afford to retire are public sector workers and those who don't work anyway!, because this BS makes absolutely no sense.
Please note, the above example is very simple and doesn't take into account PRSI, levies, future tax changes etc and is used for illustrative purposes only! I am not regulated by the Financial Regulator:D0 -
Yes if this happens Im not putting another penny into my pension fund.
Waste of money.
I'll just save the money instead in my own account.
The whole point of having a pension is planning for retirement. You cant plan for something which is a moving target, which retirement and pensions are now.
I wouldnt believe them even if they said your pension money wouldnt be taxed on the way out. They will just move the goal posts again whenever they feel like it.0 -
I really don't think you understand how private pensions work. The tax relief is not a "bonus" or a "perk". It's based on the fact that you will pay tax when you draw down the money. Now we have a situation whereby you pay tax on the money while you it put away, and then pay more tax when you draw it down again as a pensioner.
To use a very basic example. If you are currently paying tax @ 41% and hope to have a pension large enough that it also pays 41%, then everything works out fine, because the 41% relief you are getting now is just acknowledging that you are deferring the drawdown and you will pay 41% on the money (and on the interest it has accumulated) when a pensioner.
With the proposed changes (which some ultra-lefties have been begging for for years), you will only get 20% relief as you fund your pension. For every €100, you can take it as pay today, less PAYE, giving you €59. Or you can put it into your pension (which is supposed to be the sensible thing), lose €21 now (meaning only €79 makes it into your pension fund), and then pay 41% when you're 70 and want to spend it, leaving you with just €46.61 of the original €100.
In other words. Would you rather €59 today or €46.61 in 20 years time.
If this actually gets implemented, by the time I retire, the only people who could afford to retire are public sector workers and those who don't work anyway!, because this BS makes absolutely no sense.
Please note, the above example is very simple and doesn't take into account PRSI, levies, future tax changes etc and is used for illustrative purposes only! I am not regulated by the Financial Regulator:D
You're making the assumption that someone will lob it all into an annuity. With an ARF you can draw down as much or as little as possible. People will just go back to investing in equities / deposits etc (i.e investments where you are taxed on the gains assuming profit is made) instead of lobbing every penny they've got into a pension.0 -
You're making the assumption that someone will lob it all into an annuity. With an ARF you can draw down as much or as little as possible. People will just go back to investing in equities / deposits etc (i.e investments where you are taxed on the gains assuming profit is made) instead of lobbing every penny they've got into a pension.
You never read my disclaimer:)
But I do agree, it's not the end of all types pensions etc etc. But it certainly is an attack on the most common type. The result? A lot of people are not going to put money into a pension fund when they would otherwise have. The pension bomb is only going to get worse!0 -
You never read my disclaimer:)
But I do agree, it's not the end of all types pensions etc etc. But it certainly is an attack on the most common type. The result? A lot of people are not going to put money into a pension fund when they would otherwise have. The pension bomb is only going to get worse!
In fairness given some of the pension trust deals I've seen in the past, it doesn't pain me to see the farce where a high earner can leverage up based on future contributions and rental income being made a less attractive investment.0 -
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Pensions are still an attractive proposition, people writing off the private are probably brokers who would only ever deal with someone who was a top-rate payer/contributor.
Myself, I will pour every allowable cent into mine over the next few years to avail of the rates as they decline.
You still get tax relief on contributions, tax-free growth and you can take a tax-free lump sum on retirement. There are also ways of avoiding paying significant tax on the balance drawdown.0 -
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kaiser sauze wrote: »Pensions are still an attractive proposition, people writing off the private are probably brokers who would only ever deal with someone who was a top-rate payer/contributor.
Myself, I will pour every allowable cent into mine over the next few years to avail of the rates as they decline.
You still get tax relief on contributions, tax-free growth and you can take a tax-free lump sum on retirement. There are also ways of avoiding paying significant tax on the balance drawdown.
You are missing the most important point of all.
Planning for your future requires stability.
The Irish government have now proved that planning for the future is anything but stable.
Think about all those people who made calculations on how much they should put into their pension every month. They did this based on the fact that they would have a certain tax relief, they would retire at a certain age, they would have the contributory state pension (for which they paid PRSI all their lives) to add into their calculations.
Now whats changed in the last year?
Retirement age has gone up.
Tax relief will be savaged.
Now you'll pay more tax on the way out.
There is talk about not getting the contributory state pension if you have organized your own pension. So having a pension fund will actually lose you money.
So the goal posts keep moving. You cant plan now at all.
Look at the pensionsboard.ie calculator. The assumptions are no longer valid.
Its impossible to calculate what you'll get and what it will take to get you that.
Pensions are just a MASSIVE gamble now. Might as well just save or gamble yourself in the markets. I was a big believer in pensions and paying as much as you could afford into them. I advised anyone I know to look at their private pension options as soon as they could. No more. I just dont see the sense anymore in them. Stability has left the building.0 -
Yet again the FF have seriously fcuked up with this proposal and have not thought through the implications of this proposal, they are creating a huge gap between personal pensions and Employer sponsored pensions schemes. If you are in a employer scheme, your employer can contribute to it by way of salary sacrifice and they get full tax and prsi relief on the contributions made, as this is deemed as a business cost. So if you take lets say a €500.00 pm pay cut and ask your employer to contribute this to your pension instead of salary, you will still get the full 41% tax relief and 8% prsi relief and BIK relief and income levy relief!!! Now for those that do not have a employer scheme and for the self employed, FF is wrecking retirement planning and is creating a huge disparity within pension planning. This is disgraceful and is totally unfair to an employee whose employer will not operate a employer scheme and the self employed. In my opinion FF should introduce a pensions levy and also cap max contributions to lets say €1000.00pm. They should increase imputed distributions charges for ARF’s from 3% to 7% and force pensioners to spend their pension funds instead of leaving it as an inheritance! They should also cap max pension funds to €750,000.00, this should bring in huge tax revenues. By doing this it will stop the better off hiving off income into pension funds while still making if attractive for the ordinary Joe to start a pension. If FF pensions proposal goes ahead it will cause people to rethink pension funding and will create huge problems down the road, lets not forget that if pensioners have spending power in 20-30 years time they will contribute greatly to our economy but if they don’t have a pension then they will be the greatest drain on an economy we could possibly imagine. Think again FF short term gain equals long term loss!!!0
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LevelSpirit wrote: »You are missing the most important point of all.
Planning for your future requires stability.
The Irish government have now proved that planning for the future is anything but stable.
Think about all those people who made calculations on how much they should put into their pension every month. They did this based on the fact that they would have a certain tax relief, they would retire at a certain age, they would have the contributory state pension (for which they paid PRSI all their lives) to add into their calculations.
Now whats changed in the last year?
Retirement age has gone up.
Tax relief will be savaged.
Now you'll pay more tax on the way out.
There is talk about not getting the contributory state pension if you have organized your own pension. So having a pension fund will actually lose you money.
So the goal posts keep moving. You cant plan now at all.
Look at the pensionsboard.ie calculator. The assumptions are no longer valid.
Its impossible to calculate what you'll get and what it will take to get you that.
Pensions are just a MASSIVE gamble now. Might as well just save or gamble yourself in the markets. I was a big believer in pensions and paying as much as you could afford into them. I advised anyone I know to look at their private pension options as soon as they could. No more. I just dont see the sense anymore in them. Stability has left the building.
You're right, there is uncertainty, but there is uncertainty in starting a private pension regardless.
The talk about the OAP is just that right now.
What are you talking about tax-relief will be savaged? those on 20% will still be getting the same relief, those on the top rate are going to be graduated downwards.
Anyone who believes that a savings plan would ever be better than a pension over the same long term is not going to be held in a high regard by me.
I do get it though, these are big changes, but we have to adapt and not overreact. The worst case is that talk like this would persuade people to stick it under a mattress.0 -
A pension is a savings plan. For anyone paying higher rate tax, after these measures are passed a pension is out of the question.kaiser sauze wrote: »Anyone who believes that a savings plan would ever be better than a pension over the same long term is not going to be held in a high regard by me.
The reality is that a higher rate taxpayer will be better off sticking it under their mattress, depending on the assumptions for pension growth. LevelSpirit's point about stability and certainty is also very relevant.I do get it though, these are big changes, but we have to adapt and not overreact. The worst case is that talk like this would persuade people to stick it under a mattress.0 -
A pension is a savings plan. For anyone paying higher rate tax, after these measures are passed a pension is out of the question.
...a savings plan with lots of differences to a regular savings plan that make them a much more attractive option.The reality is that a higher rate taxpayer will be better off sticking it under their mattress, depending on the assumptions for pension growth.
This is never true, I'm glad noone goes to you for financial advice.LevelSpirit's point about stability and certainty is also very relevant.
...and I agreed with it.0 -
Pension's still offer a better soloution than a savings plan.
Lets assume that you are 45 years old and you save 400pm for next 20 years into a pension and you get 20% tax relief on this premium.
400pm @ 20% = Net cost 320 p.m. I have made the following assumptions that you get 95% allocation and there is a AMC of 1% with a annual growth rate of 6% p.a. Reduction in yeild is 1.5%p.a. as a result of charges.
€400pm by 20 years= €154,420.00
Tax free lump sum = € 38,605.00
Remainder = €115816.00
After tax@41% = €68,331.00
Total tax free = €106,935.00
Savings plan €320.00p.m. net 100% allocation, 1.65% AFC, annual growth rate 6% reduction in yeild 1.7%
€320pm by 20 years= €104,898 after exit tax @ 28%
In the case of a pension, this is worst case scenario of course, this assumes that tax bands and credits are not used, and entire pension fund is taken at the day of retirement. Reality is that tax bands and credits will go up over the next 20 years and the retirement fund could be taken over a number of years, therefore reducing the tax quite substantially if not all of it.
Yes by the reduction of tax/prsi relief, pensions are not going to be as good as value as they were but to say that they are a waist of time is totally untrue and those that say different really don't know what they are talking about!0 -
Thanks, good figures.After tax@41% = €68,331.00
Total tax free = €106,935.00
€320pm by 20 years= €104,898 after exit tax @ 28%
In the case of a pension, this is worst case scenario of course,
Where did you get 41% from? Top rate tax in 4 years time will be more like 55%
I don't agree also that this is a "worst case scenario". A pension is locked in the vehicle for 20 years, the alternative fund is yours to do as you wish. The government has already reduced the amount that can be taken as a tax free lump sum, similarly there are rumours that instead of lowering the tax allowance to 20% there will instead by an annual charge on the gross value of the pension. The horror scenario is one we've seen in Argentina or Hungary where the government effectively steals pensions. You are taking a 20 year gamble that your assumptions remain the same and this FF government has already shown that they are willing to ignore all previous advice and statements.
There is a value to flexibility, and this is worth a lot more than 2k over 20 years. At current tax rates a pension is a no-brainer. At 33%, it's probably still worthwhile. At 20% the downsides are strongly tilted against top rate taxpayer pensions IMO.0 -
I deal in the real world and operate with the current information that is available to hand.Thanks, good figures.
Where did you get 41% from? Top rate tax in 4 years time will be more like 55%
I don't agree also that this is a "worst case scenario". A pension is locked in the vehicle for 20 years, the alternative fund is yours to do as you wish. The government has already reduced the amount that can be taken as a tax free lump sum, similarly there are rumours that instead of lowering the tax allowance to 20% there will instead by an annual charge on the gross value of the pension. The horror scenario is one we've seen in Argentina or Hungary where the government effectively steals pensions. You are taking a 20 year gamble that your assumptions remain the same and this FF government has already shown that they are willing to ignore all previous advice and statements.
There is a value to flexibility, and this is worth a lot more than 2k over 20 years. At current tax rates a pension is a no-brainer. At 33%, it's probably still worthwhile. At 20% the downsides are strongly tilted against top rate taxpayer pensions IMO.
Firstly 41% is the current tax rate and there is no proposals to my knowledge to increase the marginal tax rate to 55% while I do think that it could be increased by 1 or 2% in the next few years. Where did you get 55%???
This is worst case scenario as I assumed that the fund was taken at retirement but only a fool would do this!!! Anyone with a brain would draw the fund down within their tax bands therefore only paying 20% tax but could actually draw down the whole fund tax free if I allowed for inflation.
The government has proposed capping the TFLS to 200K and rightly so but how many people will this actually have an impact on??? Very few and for those that it does they can well afford it. As for the rumors of a pension fund charge, yes your are right the pensions industry has lobbied the government last August/September for this instead of reducing tax relief and this would make a lot more sence as it would be levied accross the entire industry(look at my first post)
"The horror scenario is one we've seen in Argentina or Hungary where the government effectively steals pensions." Look I don't mean to be insulting but you cannot compare Ireland with these countries do so would be stupid to say the least as there is no comparison in policital or economic terms at the point when the IMF moved in. In the case of Argentina they went for a full default and look where that got them!
The problem with savings plans is that they are available whenever you want to cash them in, at least with a pension you cannot touch it until at least 60. I have received more phone calls over the years (especially in the last 2) from people that wanted to take their pension funds early because of various financial reasons and I gladly refused them, but each and every time that a retiree called they have said that they were delighted that they started their pension and that their only regret is that they did not invest more when they had the chance.
Last point; what about all the people that is currently receiving only 20% relief anyway!0 -
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The world you are dealing in is a 20 year horizon if you are selling pensions. That's why stability is important if you are locking clients into a long term vehicle and this government has removed much of that stability.I deal in the real world and operate with the current information that is available to hand.
The marginal rate (including PRSI & levies) is currently over 50% and will increase slightly under the 4 year plan. In particular, next year "The Plan provides for the elimination of employee PRSI and Health Levy relief on pension contributions in 2011."I deal in the real world and operate with the current information that is available to hand.
Firstly 41% is the current tax rate and there is no proposals to my knowledge to increase the marginal tax rate to 55%
I know what happened in Argentina and in neither of these countries did the middle class expect their pensions to be seized. Hungary in particular shows what a capricious government can do."The horror scenario is one we've seen in Argentina or Hungary where the government effectively steals pensions." Look I don't mean to be insulting but you cannot compare Ireland with these countries do so would be stupid to say the least as there is no comparison in policital or economic terms at the point when the IMF moved in. In the case of Argentina they went for a full default and look where that got them!
Obviously you have a vested interest then in selling pensions so I can understand you're feeling threatened. Nothing wrong with that, I'm a big fan of pensions under the current regime. But, the goalposts have shifted (or will shift if the 4 year plan is implemented unmodified).I have received more phone calls over the years (especially in the last 2) from people that wanted to take their pension funds early because of various financial reasons and I gladly refused them
What about them.Last point; what about all the people that is currently receiving only 20% relief anyway!0 -
If you were to look back over the years you would see that there has always been changes to pensions depending on the economic climate such as the introduction of AMRF/ARF back in '99, before this you only had one option buy an annuity...full stop. Before '03 you could not get PRSI relief on a pension. And currently you cannot get income levy relief on a pension! So to say that there is 51% tax/prsi/income levy is factually incorrect, In fact for those that earn over c. €75,000 they dont get PRSI/Health levy relief at all as they don't pay this on all income over this figure, so I am still at a loss where you got 55% from???The world you are dealing in is a 20 year horizon if you are selling pensions. That's why stability is important if you are locking clients into a long term vehicle and this government has removed much of that stability.
The marginal rate (including PRSI & levies) is currently over 50% and will increase slightly under the 4 year plan. In particular, next year "The Plan provides for the elimination of employee PRSI and Health Levy relief on pension contributions in 2011."
I know what happened in Argentina and in neither of these countries did the middle class expect their pensions to be seized. Hungary in particular shows what a capricious government can do.
Obviously you have a vested interest then in selling pensions so I can understand you're feeling threatened. Nothing wrong with that, I'm a big fan of pensions under the current regime. But, the goalposts have shifted (or will shift if the 4 year plan is implemented unmodified).
What about them.
Yes I certainly have a vested interest in pensions and will continue to recommend to the private pensions sector to take out a pension for the reasons I have demonstrated before, yes I will meet a certain part of the population that buys in to the sensationalist views that you have, but I thankfully know that the vast majority of people are logical when it comes to this area, whether they have the luxury of affording same after the proposed cuts... who knows?
As for you comments about Argintina... yes, fully agree with you but as I said we dont live there so we dont have to worry about what happened there.
These proposed cuts are going to cost me thousands every year but I am not going to stop or reduce my payments as I need a comfortably retirement...don't you too
As for the comment about 20% tax payers... Thats just an ignorant comment. In fact I think anyone who is looking at this forum should lose there respect for your views with comments like that...Pure ignorance!!!0 -
You're being deliberately obtuse now. The majority of higher rate taxpayers who currently contribute to a pension are not hitting the PRSI ceiling, although that will probably be removed anyway. So their marginal rate is over 50%.In fact for those that earn over c. €75,000 they dont get PRSI/Health levy relief at all as they don't pay this on all income over this figure, so I am still at a loss where you got 55% from???
Stop with the condescension, I am working off your own figures on this thread.yes I will meet a certain part of the population that buys in to the sensationalist views that you have,
By the way you can buy ETFs for expense ratios of .3% or less, so plug that into your figures above for the fund return and the difference becomes stark. The cheapest pension I've seen is about .75% of an annual fee.
That's a very optimistic outlook. Who knows where we will be in 20 years? Only recently the government decided that 33% tax relief was their long term plan for pensions, now that's been cut and the IMF have moved into government buildings.As for you comments about Argintina... yes, fully agree with you but as I said we dont live there so we dont have to worry about what happened there.
Again with the condescension. And again using your own figures. At current higher rates of tax, saving for a pension is a no brainer. At 33%, probably justified. At 20%, hard to justify. Very hard.These proposed cuts are going to cost me thousands every year but I am not going to stop or reduce my payments as I need a comfortably retirement...don't you too
20% tax payers will be largely unaffected by these changes, what are you ranting about. Be careful stepping down from that high horse you're on in this weather.As for the comment about 20% tax payers... Thats just an ignorant comment. In fact I think anyone who is looking at this forum should lose there respect for your views with comments like that...Pure ignorance!!!0 -
Thanks, good figures.
Where did you get 41% from? Top rate tax in 4 years time will be more like 55%
I don't agree also that this is a "worst case scenario". A pension is locked in the vehicle for 20 years, the alternative fund is yours to do as you wish. The government has already reduced the amount that can be taken as a tax free lump sum, similarly there are rumours that instead of lowering the tax allowance to 20% there will instead by an annual charge on the gross value of the pension. The horror scenario is one we've seen in Argentina or Hungary where the government effectively steals pensions. You are taking a 20 year gamble that your assumptions remain the same and this FF government has already shown that they are willing to ignore all previous advice and statements.
There is a value to flexibility, and this is worth a lot more than 2k over 20 years. At current tax rates a pension is a no-brainer. At 33%, it's probably still worthwhile. At 20% the downsides are strongly tilted against top rate taxpayer pensions IMO.
QFT
The most sense yet in this thread.0 -
Again the max tax relief available for pensions is 41% and 8% PRSI/Health levy = 49%
I delibratly used 95% allocation and 1% AMC as this is the higher charging structure for pensions and if I were to use the best on the market the fund values would be higher at retirement,thus making the case for a pension even stronger! ETF's have a Bid/Spread offer of usually between 2 and 5% plus stamp duty for trades both ways and to the best of my knowledge ETF's are not available on a regular premium basis (may stand correctted) so you cannot compare to a regular savings plan. Any way if you go down the self directed route you can buy ETF with your pension fund and get an extra 25% buying power by way of tax relief and not pay capital gains on your profits at point of sale therefore you take advantage of gross roll up of your fund.
Have to be optimistic, if not may as well throw in the towel now and think that the government will tax all assets and haircut savings!!! Don't forget that these are only proposals and the pension's board white paper is still on the playing field nothing has changed here as a result of IMF/EC intervention. As the NPRF is now being used I would think that the pensions board recommendation will be viewed a lot more seriously by a new governemnt.
I did justify the figures as I said "worst case scenario" but the vast majority will take funds tax efficently and lets not forget about inflation over the next 20 years so 154K V 104K...No brainer?
Your right 20% tax payers will be largely unaffected by proposed changes but the vast majority of people paying into pensions are 20% tax payers and this is why I took issue with your comment. It is a totaly unfair system that some get 20% relief and strugle to pay a pension and those that get 41% are probably in a better position to save for their retirement.
Now I have answered each of your points, I think we will have to agree to disagree. I do understand where you are coming from though and can confirm that the government has indicated that they are open to alternative proposals from the pensions industry on how to approach this. It is in both your and my interests to keep the 41% relief. The real issue in the pensions market is the disparity between private and company pensions where the latter is not going to be affected by the proposed changes!0 -
Fair enough. I'm surprised they didn't simply follow Gordon Brown's famous pension smash and grab UK and axe the tax relief on dividends within pensions. Brown slipped it into the budget as a footnote and no-one noticed, until pension funds figured out it cost them 5 billion a year.0
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LevelSpirit wrote: »QFT
The most sense yet in this thread.
Nope, not so.Again the max tax relief available for pensions is 41% and 8% PRSI/Health levy = 49%
I delibratly used 95% allocation and 1% AMC as this is the higher charging structure for pensions and if I were to use the best on the market the fund values would be higher at retirement,thus making the case for a pension even stronger! ETF's have a Bid/Spread offer of usually between 2 and 5% plus stamp duty for trades both ways and to the best of my knowledge ETF's are not available on a regular premium basis (may stand correctted) so you cannot compare to a regular savings plan. Any way if you go down the self directed route you can buy ETF with your pension fund and get an extra 25% buying power by way of tax relief and not pay capital gains on your profits at point of sale therefore you take advantage of gross roll up of your fund.
Have to be optimistic, if not may as well throw in the towel now and think that the government will tax all assets and haircut savings!!! Don't forget that these are only proposals and the pension's board white paper is still on the playing field nothing has changed here as a result of IMF/EC intervention. As the NPRF is now being used I would think that the pensions board recommendation will be viewed a lot more seriously by a new governemnt.
I did justify the figures as I said "worst case scenario" but the vast majority will take funds tax efficently and lets not forget about inflation over the next 20 years so 154K V 104K...No brainer?
Your right 20% tax payers will be largely unaffected by proposed changes but the vast majority of people paying into pensions are 20% tax payers and this is why I took issue with your comment. It is a totaly unfair system that some get 20% relief and strugle to pay a pension and those that get 41% are probably in a better position to save for their retirement.
Now I have answered each of your points, I think we will have to agree to disagree. I do understand where you are coming from though and can confirm that the government has indicated that they are open to alternative proposals from the pensions industry on how to approach this. It is in both your and my interests to keep the 41% relief. The real issue in the pensions market is the disparity between private and company pensions where the latter is not going to be affected by the proposed changes!
The real deal.0 -
Apart from the inherent injustice of claiming tax relief and depriving the state of needed funds ( or even worse obliging the state to get more tax from those who cannot afford to buy pensions) , pensions are not saving accounts. They may or may not increase in value over 40 years. using a rate of 6% growth or even -3% decrease is a simple lie. Why? because nobody knows how pension funds have preformed in Ireland over the last 35 years. Nobody -not even the pension board knows. I have asked them , and they do not know. All we can be certain about is that over 10 years pension funds lose money. Now take into account inflation and purchasing power and the benefits of pension funds to pensioners becomes very doubtful. Mind you pension funds are very good for banks . Think very carefully before committing to any pension fund.0
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Cant actually get you the figures for a 35 year pension but have the figures here for a pension that is inforce since 1979 albeit a single premium invested into a managed fund. 1250.4% return after all charges deducted with 9 years left to retirement. Have not allowed for inflation (over 35 years) as I do not have the figures to hand. (I am sure someone out there has them though and might post them!). 10 year return was 7.43%. This of course is against a back drop of a headline inflation figure of 2.4%pa over the last 10 years so have to agree that this pension fund has lost money over this 10 year period in real terms. Not making excuess but we have to remember we are still going through the worst financial crisis since the great depression.Apart from the inherent injustice of claiming tax relief and depriving the state of needed funds ( or even worse obliging the state to get more tax from those who cannot afford to buy pensions) , pensions are not saving accounts. They may or may not increase in value over 40 years. using a rate of 6% growth or even -3% decrease is a simple lie. Why? because nobody knows how pension funds have preformed in Ireland over the last 35 years. Nobody -not even the pension board knows. I have asked them , and they do not know. All we can be certain about is that over 10 years pension funds lose money. Now take into account inflation and purchasing power and the benefits of pension funds to pensioners becomes very doubtful. Mind you pension funds are very good for banks . Think very carefully before committing to any pension fund.
Looked at another pension that invested in a low risk fund 10 years ago (capital guaranteed), again a single premium but this time the 10 year returns were 36.8%, retirement date 20/12/10. So made 10.3% in real terms. Nearly all pension's have a deposit account option, and to be fair if you opted for this you would have lost money in real terms as it is only in the last few years that banks started to offer rates that actually beat inflation
Moral of the story, chose carefully what type of risk you are prepared to take with your pension fund based on your expected retirement date
The information is out there if you know where to look. I think that it would be reasonable to assume that the pensions board would be able to provide some type of indication of returns based on low, med and high risk funds0 -
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Thanks for the 30 year return. Pension/life companies are inclined to suggest that the returns are better during the life of the policy but when it matures - miraculously values fall. (personal experience of endowment policy where returns were exaggerated right up until when it was cashed in -- financial regulator thought it was all OK and completely above board as values go up and down) .
It will be interesting to see the actual return on the 20th Dec for that 10 year policy.
I have to disagree about availability of information - long term information is not available to consumers in a manner that can be digested easily. This is an indictment of the entire pension industry and the pension board in particular. When information is hidden there is usually a damn good reason -- Any body out there who has a defined contribution pension that has matured anytime in the last 5 years who has got good value ?? - Single premium policies are not really normal pension policies as most people understand them.
By the way the price of a pint of Guinness in 1979 was 0.70 and wages about 104 euros per week.0
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