Starting a pension at 30

robocode

Having been tied up studying (and then working as an underpaid research assistant) for most of my twenties, now that I turn 30 I'm starting to worry about not having paid into any pension plan.

I'm working in the public sector, but am ineligible for the public sector pension because I only started the job last year. I did some part time work years ago in a college so was technically public sector then, but I'm told that doesn't make me eligible.

So essentially, I'm wondering what is the best route for me to approach starting a pension now. Who do I talk to? Should I throw as much money as possible at it now to catch up on not having one since my early twenties?

xtraxtra

in the same boat myself, interested to hear any advise here!

brendane

Why wouldn't you be entitled to a public sector pension. I thought the only changes they made was that it was to be based on your average career salary rather than solely your final salary

robocode

brendane wrote: »

Why wouldn't you be entitled to a public sector pension. I thought the only changes they made was that it was to be based on your average career salary rather than solely your final salary

Something to do with new entrants to the public sector (new being those that joined after 2012 I think) being ineligible

KingBrian2

Not employed nearing my 30's so not concerned about pension at all at this early stage.

needhelpguy

I'm 30 myself and only started a pension last year. It's not too old at all. By the time me and you retire, retirement age will be 70! So there's 40 years left to save up. Compound interest is great.

EDIT: Speak to a pension advisor about setting up your own.

Konata

robocode wrote: »

Something to do with new entrants to the public sector (new being those that joined after 2012 I think) being ineligible

I joined public sector in October (1st proper job) and my salary is being deducted for pension contribution & levy every month? Where in public sector do you work? Who told you you werent eligible?

Atlantic Dawn

Main benefit to a pension is that you gain tax relief on contributions, these increase based on your age.

Age Amount which qualifies for tax relief
Under 30 years 15% of net relevant earnings
30 to 39 years 20%
40 to 49 years 25%
50 to 54 years: 30%
55 to 59 years 35%
60 and over 40%

goldenhoarde

Konata wrote: »

I joined public sector in October (1st proper job) and my salary is being deducted for pension contribution & levy every month? Where in public sector do you work? Who told you you werent eligible?

yeah check your payslip and see what deductions are being made?

Is it a full time position or a fulltime contract for X number of years?

You maybe be in a different type of scheme.

Are you in the union? if so ask them, otherwise contact payroll

A_Sober_Paddy

with the global economic unrest/uncertainty?

what is the best type of pension to look at?

Alan152

Are you just making contributions yourself or will your employer also contribute?

A_Sober_Paddy

Alan152 wrote: »

Are you just making contributions yourself or will your employer also contribute?

Just myself

robp

Participation rates are low. I'd wonder if the average 29 YO worker has a pension.

RedXIV

robp wrote: »

Participation rates are low. I'd wonder if the average 29 YO worker has a pension.

Average 29 YO worker here

Started my pension proper about 2 years ago. Have maxed it out for under 30s because it was annoying me how much I was getting taxed anyway.

OP, public sector have pension contributions automatically deducted so I'd be checking this with your payslip if possible?

Lux23

I joined the public service in 2015 and I started paying into my pension straight away? I doubt you're ineligible if you're permanent?

Drumpot

Ask family and friends if they know any reputable financial adviser or broker. It's can be cheaper using a broker because they can have more flexibility in what they can offer then if you go directly to a pension provider.

There are online discount brokers who offer you deals if you make certain choices (company - fund) and brokers who will offer you fee based options.

the big benefits of a pension are the tax relief, tax free growth and tax free lump sum at retirement. There are also death in service benefits (4times salary tax free to estate) in many pension products.

Pensions aren't perfect and I find people switch off at pension presentations but you are well ahead of the average curve by starting to save now.

You always hear from the people who have had bad experiences from pensions. But you seldom hear from people who have had good ones because they are too busy enjoying their retirement. Don't let negative people put you off doing a pension. Investigate what you are told (good or bad) and see if you can come to an objective conclusion.

Lastly, do regular (every 2 years or so) reviews of your pension. A big reason people lose so much can be because they do not know how risky their pension fund is at any given stage. Ask what the worst top-bottom loss at any given time was in the fund you are invested in. This doesn't guarantee that this will be the worse you will do but it's a decent guide. 2007 and 2008 year on year performances are good indicators of worst year!

It sounds daunting but if you get a good adviser or educate yourself enough to be confident, you can invest in a good long term strategy. Oh and charges are not always as important as fund performance. Some funds have higher management fees (like GARS) and they have easily justified them.

Good luck.

Walter H Price

Definitely not to old to make a start - average age for starting pensions is around 30... Talk to a financial advisor and start putting max amounts that you can afford in... Maybe split it 75% low risk 25% high risk - pensions are fairly stable at the moment so 5 years with 25% high risk could give a fairly decent return and your only risking a small amount, thats what our pension advisor recommended

anewme

I did not start till I was 30! Sorry I did not start earlier. Im mid 40's now.

Friends who started mid twenties have a huge pot now even if they paid a pittance in at the start while I still have some shortfall to make up.

Merowig

http://www.telegraph.co.uk/finance/personalfinance/special-reports/11837694/The-pension-freedom-mistake-that-will-halve-your-pension-pot.html

http://financialmentor.com/retirement-planning/mistakes/18212?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Financialmentorcom+%28FinancialMentor.Com%29

http://www.telegraph.co.uk/sponsored/finance/investment-library/guides/11317475/common-pension-mistakes.html

Some of the advise is tailored towards the UK/US - but the majority of it is applicable to many other countries.

Henry Ford III

You're never too old to start a pension, but it's easier if you start as early as possible.

Imagine cycling up a hill - the more distance (time) you have to make the climb (to your target) the less steep (cost) the incline will be.

p.s. It's possible in an employer sponsored arrangement to clean out the entire pension fund in tax free cash. T's and C's apply obviously.

robocode

Thanks for all the input. For those wondering why I can't get the public sector pension, I'm in a research role and the rules currently say that researchers are not admitted to the Education Sector Superannuation Scheme. I can, however, go down to the standard Personal Retirement Savings Account (PRSA) route, which I need to look into more.

dearg lady

I'm surprised you're not entitled to join the public sector pension, but you may find you are better off with a PRSA anyway. If you can I would contribute the max allowable for tax relief, you might as well!

robocode

robocode wrote: »

............Who do I talk to? Should I throw as much money as possible at it now to catch up on not having one since my early twenties?

xtraxtra wrote: »

in the same boat myself, interested to hear any advise here!

At 30 you can put 20% of your gross salary into a pension plan, that may or may not be affordable. If affordable I would advise putting in the maximum especially if you are earning in the higher rate.

Personally what I would look for is
- low management fee (circa 1%)
- no contribution charges (some plans take 3 to 5% of what you contribute there and than and also have management fees, bizarre that people sign up for that sort of plan nowadays but such is life. Ignoring inflation a 3% contribution fee on a max funded pension fed from a €60k salary amounts to €50k+ over a 30 year term if you increase contributions in line with your maximum allowed contributions and the fund grows by 6% (realistic figure) on average per annum. It's actually over 3% of the total fund which isn't unsurprising but the likes of IrishLife etc try and claim it's a tiny amount overall)
- the money to be invested in low cost ETFs from iShares & Vanguard etc
- equity based investments are sold as high risk as the stock market dips frequently and plunges relatively often (2001, 2008, now ish for example), if you take a longterm view that's not overly worrying. Could spend forever thinking/reading/studying the subject.
- most invested in Euroland
- maybe 5% or so in the US$ and UK£ in time when the Euro buys lots of that stuff, not now as we all know.
- diversification, you'd only want maybe 2% of your pot to be in any individual company (that's one of the reasons why ETFs are good)

If anyone is trying to get you to sign up to a pension with 3/5% contibution charge and an total annual management fee over 1.5% or so I'd be inclined to keep looking around.

Merowig

Augeo wrote: »

Personally what I would look for is
- low management fee (circa 1%)
- no contribution charges (some plans take 3 to 5% of what you contribute there and than and also have management fees, bizarre that people sign up for that sort of plan nowadays but such is life. Ignoring inflation a 3% contribution fee on a max funded pension fed from a €60k salary amounts to €50k+ over a 30 year term if you increase contributions in line with your maximum allowed contributions and the fund grows by 6% (realistic figure) on average per annum. It's actually over 3% of the total fund which isn't unsurprising but the likes of IrishLife etc try and claim it's a tiny amount overall)
- the money to be invested in low cost ETFs from iShares & Vanguard etc
- equity based investments are sold as high risk as the stock market dips frequently and plunges relatively often (2001, 2008, now ish for example), if you take a longterm view that's not overly worrying. Could spend forever thinking/reading/studying the subject.
- most invested in Euroland
- maybe 5% or so in the US$ and UK£ in time when the Euro buys lots of that stuff, not now as we all know.
- diversification, you'd only want maybe 2% of your pot to be in any individual company (that's one of the reasons why ETFs are good)

Could you please name a specific PRSA (with 1% fee and no contribution fee) with an ETF from Vanguard?

The only option I was able to find is with Davy - who are charging 0.75% plus overseas and custody charges per transaction (0.1% + 25 Euros) - which doesn't make it attractive for regular small contributions in comparison to a fund who just charges 1% per year.

Merowig

Merowig wrote: »

Could you please name a specific PRSA (with 1% fee and no contribution fee) with an ETF from Vanguard?

The only option I was able to find is with Davy - who are charging 0.75% plus overseas and custody charges per transaction (0.1% + 25 Euros) - which doesn't make it attractive for regular small contributions in comparison to a fund who just charges 1% per year.

Using the Davy platform seems as you mention it...........
Vanguard FTSE Developed Europe UCITS ETF (EUR)
.... no overseas charge and the custody charge is indeed €25, the annual management fee is 0.12%, to minimise the effect of the custody charge I would buy in €2500 increments. You can make small regular contributions to the account allowing them to accumulate.

I didn't detail it but managing contributions to minimise custody charges to 1% is imo far superior to paying 3%+ contribution fees.

What fund do you have in mind that just charges 1% per year?

Also purchasing the........ Vanguard FTSE 100 UCITS ETF (GBP)........ has no overseas or custody charge, I bought 8 units of them when the £ dropped in value relative to the €.

If that attracted the €25 custody fee I wouldn't have bothered.

I wouldn't think having lots of your pension in sterling is a good idea for a ROI based person though.

Can do the same for the Word Equity Vanguard ETFs listed on the LONDON STOCK EXCHANGE, no Custody charges.

Merowig

Merowig wrote: »

Could you please name a specific PRSA (with 1% fee and no contribution fee) with an ETF from Vanguard?..........

I'd go with iShares listed on the London Stock Exchange if I was a small regular contributor.
Apologies for the multi posts but it was only after answering the Vanguard question I thought of the other option.

Merowig

Augeo wrote: »

Using the Davy platform seems as you mention it...........
Vanguard FTSE Developed Europe UCITS ETF (EUR)
.... no overseas charge and the custody charge is indeed €25, the annual management fee is 0.12%, to minimise the effect of the custody charge I would buy in €2500 increments. You can make small regular contributions to the account allowing them to accumulate.

I didn't detail it but managing contributions to minimise custody charges to 1% is imo far superior to paying 3%+ contribution fees.

What fund do you have in mind that just charges 1% per year?

Any PRSA with contribution charges is for me out of the question - in my opinion its robbery.

I found through this board about http://www.labrokers.ie/pensions/


So its 0.75% + 0.12% + 25 Euro for Vanguard FTSE Developed Europe UCITS ETF (EUR) - acording to my Maths this is still a higher charge than the 1% flat charge from Zurich or Irish Life - even with buying larger increments.

As you mentioned later the Vanguard FTSE 100 UCITS ETF and the Word Equity Vanguard ETF - what are the ETF Annual Management Charges for both? (I don't have any account with Davy yet and they are not publishing that on their website directly.)

Is there a stamp duty / tax on that ones or any additional charges? http://www.davyselect.ie/binaries/content/assets/davyselect/pdfs/execution-only-fees-charges.pdf#page=8
As I have no clue if the taxes / stamp duties on Irish and UK shares are also applicable on ETFs.


I try to set up a PRSA for my fiancee - myself am sorted out for now with a very generous company DC scheme and a previous PRSA I got through the same employer
The Pension authority told me after my insistance that they will email me an overview of all PRSAs and their charges by the end of the month...

I don't know yet to which country we are going to retire to - nor for how long we are staying in Ireland (neither of us is Irish - on my list for retirement (which is still far away in the future ) are London/ Paris/Rome/Cote D'Azur/ South Germany and Romania) - so GBP could be OK

Merowig

Merowig wrote: »

.............


So its 0.75% + 0.12% + 25 Euro for Vanguard FTSE Developed Europe UCITS ETF (EUR) - acording to my Maths this is still a higher charge than the 1% flat charge from Zurich or Irish Life - even with buying larger increments.

True, so you can go with a Blackrock, iShares Euro Equity ETF

Merowig wrote: »

.............As you mentioned later the Vanguard FTSE 100 UCITS ETF and the Word Equity Vanguard ETF - what are the ETF Annual Management Charges for both? (I don't have any account with Davy yet and they are not publishing that on their website directly.)

Vanguard FTSE 100 UCITS ETF Annual Management Fee 0.09%
Vanguard FTSE All-World UCITS ETF Annual Management Fee 0.25%

Merowig wrote: »

.............Is there a stamp duty / tax on that ones or any additional charges? http://www.davyselect.ie/binaries/content/assets/davyselect/pdfs/execution-only-fees-charges.pdf#page=8
As I have no clue if the taxes / stamp duties on Irish and UK shares are also applicable on ETFs.

Nope as they are listed on the London Stock Exchange, the €25 fee is because that EFT is "abroad", ie not Ireland or the UK.

Merowig

Thanks a million for your help!

Merowig

Merowig wrote: »

...............

I found through this board about http://www.labrokers.ie/pensions/.........

The Zurich product is competitive cost wise, but it's not overly flexible. Also you are relying on

"Default Investment Strategy" that targets growth in the early years but changes to a lower risk portfolio as retirement approaches.
A more individualised profile can be designed through investing in a selection of the funds available (PDF - 93k). The funds are listed as 'Standard PRSA' (in blue)"

Like many funds they are taking the view that growth should be targetted in the early years so they'll invest the bulk in equities, see average returns or above average and than try to get out as retirement approaches.

So if you are 30 their plan is the wait until you are 50/55 to allocate funds to lower risk, great tactic if the market doesn't lose lots of value at any stage in the next 20 years.

Those LA broker folk are getting "Out of this 1% annual management charge LABrokers are paid a commission of 0.25% by Zurich." to manage a fairly crude strategy.

In the Zurich document https://www.zurichlife.ie/bgsi/servlet/DocArchServlet?docId=PN_PRSA_BR&docTag=&randint=H86F&docType=.pdf they've a case study of a 47 year old self employed dentist that they've set up with a PRSA, seems a strange strategy as he should be able to set up an Executive Pension Plan and get tax relief on PRSI and USC as well as the PAYE tax relief a PRSA offers.