Eddie Hobbs goes over the edge

hmmm

Pete_Cavan wrote: »

In 20 years time I will have a nice pension fund and will not have to worry about relying on the state for a pension. Others will be struggling on a mediocre state pension because they refused to pay into a pension fund to avoid a measly 0.6% levy and I will be saying "What kind of stupid move was that and how short sighted were they?"

The average pension fund could hope to earn perhaps 3% over inflation, taking on quite a bit of risk. Of that at least 1% will disappear in fees. Add in this .6%, and your real return for investing in equities is 1.4% which is a dangerous gamble. You also have to lock your money into the fund until you retire, and you have no idea what taxes a future government will impose - this could easily go to 2 or 3% in future budgets.

I think pensions have been a great investment up till now, with the decrease in tax relief and this levy I'm not so sure.

steve9859

hmmm wrote: »

The average pension fund could hope to earn perhaps 3% over inflation, taking on quite a bit of risk. Of that at least 1% will disappear in fees. Add in this .6%, and your real return for investing in equities is 1.4% which is a dangerous gamble. You also have to lock your money into the fund until you retire, and you have no idea what taxes a future government will impose - this could easily go to 2 or 3% in future budgets.

I think pensions have been a great investment up till now, with the decrease in tax relief and this levy I'm not so sure.

And if anyone thinks that the 0.6% is going to be removed in 2 years, you are very naive. Temporary levies normally turn out to be not so temporary! I completely agree with you, hmmm- I don't think the risk:reward dynamic im respect of pension payments makes sense any more.

beeftotheheels

steve9859 wrote: »

And if anyone thinks that the 0.6% is going to be removed in 2 years, you are very naive. Temporary levies normally turn out to be not so temporary! I completely agree with you, hmmm- I don't think the risk:reward dynamic im respect of pension payments makes sense any more.

Now calm down a second. There are three different types of tax relief we associate with pensions, one is the tax deduction on the way in, one is the tax free lump sum on the way out, and the third is the one we are all forgetting about which is the tax free status of the fund as it accumulates.

So, if instead of paying into a pension, you put your money in the bank (and ignoring the bank risk), as that money earns interest you pay tax. If the pension fund put the money on deposit the interest is not taxed as it arises. It is not taxed until it comes out as a pension the far end.

If instead of investing in a pension you invest in a life policy/ investment fund whatever, you will be subject to tax as the fund accumulates under the gross roll-up rules.

So yes, this is a tax on pensions, and under normal conditions would be considered a retrograde step. But it is a small tax compared to the taxes on other investments, using hmmm's numbers of a fund earning 3% above inflation then the tax equates to less than 20% of income which is lower than the tax you would pay on other forms of investments.

Pensions still make sense. Reducing the marginal tax rate deduction as the IMF are proposing would have a much larger effect on the tax efficiencies of investing in a pension for higher rate tax payers.

hmmm

beeftotheheels wrote: »

Pensions still make sense. Reducing the marginal tax rate deduction as the IMF are proposing would have a much larger effect on the tax efficiencies of investing in a pension for higher rate tax payers.

I agree, but the uncertainty that this introduces also has to be factored in. If you're going to lock your money into a pension for 20 or 30 years, you need to have some certainty that your calculations will not suddenly be called into question by an arbitrary government decision. There is a value to flexibility.

beeftotheheels

hmmm wrote: »

I agree, but the uncertainty that this introduces also has to be factored in. If you're going to lock your money into a pension for 20 or 30 years, you need to have some certainty that your calculations will not suddenly be called into question by an arbitrary government decision. There is a value to flexibility.

Undoubtedly true!

I just got the impression from other posters on this thread and others on the same topic (including in the taxation forum where they really should know better) that they thought the initial impact was more negative than it is and justified stopping saving in pensions so I was just saying that for now pensions still seem to make sense from a tax point of view.

I am not so sure that they will after the next budget if you're a higher rate tax payer.

And I have to say that I am not sure that we are living in a time when we have any degree of certainty about all that much.

p.s. I seem to be suffering from an excessive fear of groupthink and need for informed debate at the moment

hmmm

One thing I don't understand is why the government does not allow people to access part of their pensions tax free as a once off or temporary measure. Say, 10,000 euro a year for the next 4 years.

It would put billions into the economy and help a considerable number in difficulty. The tax effect would be zero in the short to medium term (tax would normally be paid only when the pension is drawn down at retirement). It would also bring investment back into the country from foreign investment funds.

invinciblePRSTV

Laminations wrote: »

But then again I was also a FG supporter last election (and still am) though not a member and I'm in favour of this. That's directed at you invinciblePRSTV we are not all me feiners

Am only jossing Laminations. Tbf to FG as well it has to be said that this proposal was first proposed in last Decembers budget, with tax reliefs on pensions being described as "overgenerous", so it's not a FG policy really.

beeftotheheels

hmmm wrote: »

One thing I don't understand is why the government does not allow people to access part of their pensions tax free as a once off or temporary measure. Say, 10,000 euro a year for the next 4 years.

It would put billions into the economy and help a considerable number in difficulty. The tax effect would be zero in the short to medium term (tax would normally be paid only when the pension is drawn down at retirement). It would also bring investment back into the country from foreign investment funds.

Now that is actually a very valid point and one I had not thought about.

If we take the position that pensions are sacrosanct and about saving for the future then it is easy to justify the bar. But if we're into claiming exceptional circumstances and tapping the pension funds for tax then the rules have changed.

While I can see some benefit to restricting it (don't let me draw down my pension to buy €500 shoes or a €400 handbag) I think that the moral case for protecting pensions has been weakened, so drawing down to fund setting up a new business, or drawing down to prevent going into arrears on a mortgage should be considered.

Might be difficult to draft the rules, but I think at this stage I would support it provided that we could ensure that the money withdrawn was "invested" rather than simply blown (which I know also could stimulate the economy, but I can see the rationale behind not allowing you blow your pension fund on depreciating luxuries).

From a policy perspective we'd probably want to ensure that it wasn't drawn down tax free to be invested with a foreign bank either, but the idea certainly has merit. Borrowing from tomorrow to fund growth today in the hope that tomorrow will pay for itself due to that growth (being the rationale behind the levy).

Raskolnikov

Laminations wrote: »

Everyone has to contribute....apart from those who, using tax reliefs, squirrelled away money. It's 0.5%, it won't reduce anyone to penury. The younger generation have been forced to take more of the pain than those who have accumulated wealth with the aid of government subsidies. AFAIK this will apply to the Fingletons of Ireland as well as the Joes and Josephines?

It won't apply to Fingleton, Drumm, Quinlan, Dunne and all the other bankers/developers who have left Ireland because there is a provision in the legislation that prevents non-residents from having to pay the levy.

doomed

Eddie's angry leprechaun act is as stale as last years bread.

Raskolnikov

Am I the only one who isn't laughing at the jibes against Eddie Hobbs?

ArtSmart

Raskolnikov wrote: »

Am I the only one who isn't laughing at the jibes against Eddie Hobbs?

yes.

Raskolnikov

ArtSmart wrote: »

yes.

Alright, I guess Irish people would rather Eddie not try to stick up for private sector pension holders.

beeftotheheels

Raskolnikov wrote: »

Alright, I guess Irish people would rather Eddie not try to stick up for private sector pension holders.

Eddie "Brendan investment" Hobbs???

Raskolnikov

beeftotheheels wrote: »

Eddie "Brendan investment" Hobbs???

What has that got to do with anything? It's not like he put a gun to anyone's head and took their savings (which is incidently what the Irish government might as well be doing).

beeftotheheels

Raskolnikov wrote: »

What has that got to do with anything? It's not like he put a gun to anyone's head and took their savings (which is incidently what the Irish government might as well be doing).

By the time that he was involved in the launch of Brendan Investments most of us involved in the world of Finance knew that we were on a highway to nothing.

Which leaves me with the conclusion that either

a) He was too thick to understand what the rest of us knew; or
b) his self interest outweighed his obligation to the people he tried to approach via the media

In either case I see no basis for listening to a word that man says.

Raskolnikov

beeftotheheels wrote: »

By the time that he was involved in the launch of Brendan Investments most of us involved in the world of Finance knew that we were on a highway to nothing.

Which leaves me with the conclusion that either

a) He was too thick to understand what the rest of us knew; or
b) his self interest outweighed his obligation to the people he tried to approach via the media

In either case I see no basis for listening to a word that man says.

So you disagree with him and approve of this measure? Or are you trying to say that people opposed to this should just shut up? Eddie Hobbs is one of the few people who have spoke with a strong conviction about how unfair this is. I don't care for Eddie, but I am not going to cut off my nose to spite my face.

beeftotheheels

Raskolnikov wrote: »

So you disagree with him and approve of this measure?

Yup! That's about the sum of it. Unlike Eddie I never believed in a soft landing, refused to buy a property because I thought that they were over priced, my savings are now at risk sitting as (some of them) they do in an Irish bank, my pension is now being hit by this levy.

But I want to believe in the future, I want us to have a future (as a nation). So, taking this into account, there is no benefit to anyone of me sitting by and saying "I told you it was all going to go wrong, don't come crying at me". There is a benefit to me shouldering a share of the burden in the hope that we as a nation may survive this.

But crucially, I never suggested that anyone should invest in property, certainly not after the boom had passed. Eddie did. When informed wisdom suggested that he was wrong. So he has credibility issues.

bhur

OAAIMMMM EDDDY HOBBS

lmimmfn

last i heard of Eddie Hobbes he was telling me how many euros that was and that it would stretch from here to the moon. I just thought WTF it depends where i am on planet earth for that to matter and whats with the moon analagy? could have used anything like, 3euro for every man/woman and child in the country, but nope, wayyyyy more scientific if you throw in some outer space $hit apparently lol.

Also anytime he said "to the tune of....." i just wanted to beat him over the head with a shovel.

Oh, is his magazine still going? lol

beeftotheheels

beeftotheheels wrote: »

By the time that he was involved in the launch of Brendan Investments most of us involved in the world of Finance knew that we were on a highway to nothing.

Which leaves me with the conclusion that either

a) He was too thick to understand what the rest of us knew; or
b) his self interest outweighed his obligation to the people he tried to approach via the media

In either case I see no basis for listening to a word that man says.

I found his "editorial" giving out about the pension raid on his consumer show last night nauseating.
I pay a licence too and I don't pay it for people to use a programme I pay for to give a one sided opinion...just like that

Riskymove

Blured wrote: »

Doesnt look that way

http://www.independent.ie/national-news/new-jobs-strategy-targets-building-of-schools-homes-2641141.html

"The pension levy will not be applied to the pensions of either serving or retired public sector workers"

they are referring to the occupational pensions (which PS now poay two levies on already)

as I have now said a few times, if a PS has a private pension fund they will pay the levy

Tora Bora

waster81 wrote: »

The pension industry could easily cut their fees and there would be no impact at all

If the did what they are paid to do in the first place "manage the fund to make a decent return", then I don't think the levy would have any negative impact wort speaking of.
Fact is the average fund, performs poorly, in both good times and bad.
Looses value in stock market down turns, and make pithy returns in good times.

Maybe, another debate will arise out of all of this!!

Fund manager performance and remuneration and charges levied by the industry.
Maybe Michael Noonan, should move to shake up this industry, in terms of restricting what they can charge for the service they provide and publish a high profile performance league table on an annual basis.
The performance of the bankers has been shown for what is was.
Fund managers can't crow about their own performance:(

HivemindXX

Tora Bora wrote: »

If the did what they are paid to do in the first place "manage the fund to make a decent return", then I don't think the levy would have any negative impact wort speaking of.
Fact is the average fund, performs poorly, in both good times and bad.
Looses value in stock market down turns, and make pithy returns in good times.

This is what I've been led to believe. Pension funds perform poorly and make large profits for the fund managers. Since there are very significant tax incentives to pay in to a pension fund people will still do so allowing the pension fund managers to continue taking large fees for poor performance.

Is this a true picture or not? (not a rhetorical question, I actually want to know)

swordofislam

Raskolnikov wrote: »

What has that got to do with anything? It's not like he put a gun to anyone's head and took their savings (which is incidently what the Irish government might as well be doing).

As a citzen of a state deriving a large part of its revenue from transaction taxes on a bubble YOU should have seen this coming. This is a welcome step; it shows balls. We are all going to have to share the pain. FF are gone it won't be just the poor that suffer.

Riskymove

From Irish times

Taoiseach Enda Kenny will consider a call by Independent TD Shane Ross to investigate what the former senator described as the “goldmine”, “gravy train” and “swamp” of pension fund managers.

Speaking in the Dáil this morning, Mr Ross said that “in view of the fact that there is a whole industry looting pensions and benefiting from this” the Government should put a cap
on the fees pension fund managers charge and then put “a 50 per cent tax on these people which would have certainly produced a figure very close to the €470 million which they’ve come up with as a jobs creation fund”.

Mr Ross criticised the Government plan to put a 0.6 per cent levy on pension funds for four years with the aim of raising €1.88 billion in total over that period to fund its jobs initiative.

The Independent TD described the pensions industry as a “goldmine, a gravy train for a large number of people”. But he said “the Government has hit the contributors and the victims” of fund managers, rather “than tackling those who are milking the pensions’ industry itself”.

Mr Ross said “this is a swamp of hidden fees, upfront fees and riches for people who actually do not deliver to the people they’re milking” but who earn from €250 million to €500 million a year from Irish pensions.

The Taoiseach said there “may well be some merit” in Mr Ross’s proposal.

“The Government took its decision in this case to impose the levy in this way for a temporary period and has pointed out the reasons why that was done and the opportunities that are going to spring from it.”

Mr Kenny added: “The question that you ask about alternatives to what the Government actually did is certainly a matter than can be considered by the finance committee” and in the Dail in the run up to the 2012 Budget.

He told Mr Ross: “You make a valid point about elements of swamps being associated with some of these industries and I will transfer you require to the Minister for Finance. I do believe this is a matter that should be looked at.”

The Taoiseach said that obviously “the costs associated from an administration point of view by the pensions’ industry could certainly be reduced to something approaching those costs that apply in the UK which are a fraction of what they are here”.

Nijmegen

Good of our government, with all its resources to investigate how to do this, to come up the day after and say 'Ah, actually, that's a good idea...' when it's suggested by a lone TD that they might consider taking at least some of their new tax from fund manager bonuses and fees, rather than all from the depositers.

Unless I'm mistaken, the government in the recent past went to a lot of effort - including the pension board telling us all we need one - to promote private pensions, as a way to ensure people have a better standard of living in retirement and don't rely so much on the state.

They are now raiding these pension funds as a quick grab operation.

Anyone who thinks they'd not touch regular deposits is now, as the old joke about second marriages goes, is allowing hope to triumph over experience.

touts

Nijmegen wrote: »

Good of our government, with all its resources to investigate how to do this, to come up the day after and say 'Ah, actually, that's a good idea...' when it's suggested by a lone TD that they might consider taking at least some of their new tax from fund manager bonuses and fees, rather than all from the depositers.

Unless I'm mistaken, the government in the recent past went to a lot of effort - including the pension board telling us all we need one - to promote private pensions, as a way to ensure people have a better standard of living in retirement and don't rely so much on the state.

They are now raiding these pension funds as a quick grab operation.

Anyone who thinks they'd not touch regular deposits is now, as the old joke about second marriages goes, is allowing hope to triumph over experience.

And that worked out very well for them yesterday. I would expect the regular deposits to be raided in the next budget. Get your money out of the country ASAP.

Sums up the problems really

https://web.actuaries.ie/sites/default/files/story/2011/05/110510%20Pension%20Fund%20Levy.pdf

Frank Black

There's no doubt that a line has been crossed with this raid on peoples pensions.

Idiotic posters on this thread like invinciblePRSTV and his ilk can waffle all they like about it being a claw-back of tax relief but the same argument could be used to raid peoples savings accounts - "sure we should have been taxing you at 45% instead of 41% so we're taking some of the money back".

I understand that the government need to raise money from imaginative sources to fund this "jobs initiative" and as a tax-payer I'm will to contribute what's fair - but this completely undermines trust in the government and in a worst case will lead to a flight of capital from the country if people think their savings are fair game.