Terrible pension rates?

Peregrinus

jamesthepeach wrote: »

Ok then.
We will tell them all that a pension is a great thing to do, but at any time the govt can raid it, but hey you would do worse in other investment vehicles.
And just because the govt robbed it and refused to do something to prevent them doing so again, they probably won't take too much.

Yep. I think they'll all be convinced.

Well, if you want to describe the imposition of a tax obligation as "robbery", go ahead.

But stop pretending that a constitutional amendment can fix the problem. No constitutional amendment can stop you saying what you like.

And stop pretending that this is the government's fault. When people get substantial tax reliefs some of which are later clawed back in a time of economic crisis and you describe this as "robbery", that's something you do, not something the government does.

If you go around whipping up panic about the levy without setting the detriment of the levy against the benefits of the tax reliefs, stop pretending that you are trying to help people or that you care about their welfare, because that's plainly not the case.

beauf

Peregrinus wrote: »

...think clearly about what they want and what is the best strategy for getting it....

What is your suggestion to protect an income for retirement?

jamesthepeach

beauf wrote: »

What is your suggestion to protect an income for retirement?

That is the nub of it.
Long term savings have been exposed as being unsafe.
To plan for your future you need to be sure that won't happen again.
I don't think either the govt or a lot of people get this.
It's their view that people should just suck it up and move on. Well people's minds.dont work like that. So they will remember clearly that they put money on where they thought it was safe, but the very people who were supposed to make it safe went in and took it.

Peregrinus

beauf wrote: »

What is your suggestion to protect an income for retirement?

The levy notwithstanding, pension plans will still have performed better than alternative savings vehicles.

If you're concerned about political risk, then the standard advice is to diversify. Put part of your savings in to a pension plan, and part into some other savings vehicle. You'll obviously forgo the tax relief on the part you don't put into your pension plan, but you'll ensure that if there is a further levy on pension plans, some at least of your savings will avoid it. (Plus, you'll ensure that if, instead of levying pension plans, the government levies the other savings vehicle, the part of your savings that's in the pension plan will avoid it.)

The truth is that you can't eliminate political risk; what you can do is try and assess it, and put it in perspective. In general the government has a strong interest in not disincentivising retirement savings (since, if they do, retirees become dependent on the state) which is why most governments offer tax breaks of one kind or another for retirement savings. The same factors which encourage governments to do that discourage them from clawing it all back through levies and the like, so you might reckon that the political risk of future levies being so great as to negate the tax advantages of pension plans is very small.

beauf

I expect a pension crisis much like the housing crisis is now. We will snooze all the way till mid disaster. Then people will say no one could predict it, and people should look after themselves.

Thus far, we want to demolish inheritance (unless your a farmer), raid pensions of public and private, and leave the health service in heap, and make pensioners Landlords. (while discourage current Landlords) I'm not entirely sure what people should diversify into. YouTube for Seniors maybe.

So no suggestions then...

Lickin2me

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jamesthepeach

beauf wrote: »

I expect a pension crisis much like the housing crisis is now. We will snooze all the way till mid disaster. Then people will say no one could predict it, and people should look after themselves.

Thus far, we want to demolish inheritance (unless your a farmer), raid pensions of public and private, and leave the health service in heap, and make pensioners Landlords. (while discourage current Landlords) I'm not entirely sure what people should diversify into. YouTube for Seniors maybe.

So no suggestions then...

Not to mention slowly raise the retirement age to 125.

Nermal

Peregrinus wrote: »

You're never going to get a constitutional amendment to identify a certain savings mechanism and decree that it shall for ever be exempt from a particular kind of taxation.

Why can't we?

Peregrinus

Nermal wrote: »

Why can't we?

Because it would be pointless and easily evaded by the creation of a different kind of of savings vehicle for retirement savings.

For example, the Personal Retirment Savings Account was created by statute about fifteen or twenty years ago. If there were a constitutional amendment to provide that PRSAs were to be forever free of tax, or of a certain kind of tax, a government wishing to tax retirement savings could close PRSAs and legislate for a new vehicle called, say, an Individual Pension Savings Plan, and tax that. Or, if the Constitution forbad levies on PRSAs, they could impose some other tax on them that wasn't a levy. Or, instead of taxing funds held in PRSAs they could impose a new tax on funds contributed to a PRSAs, or on benefits paid out of PRSAs.

Basically, the Constitution is not a good place for micromanaging tax policy. That's not what it's for. Any attempts to use it for that purpose will end in tears.

BarryD2

Re OP, I'm self employed and opened a standard PRSA maybe about 10 years ago. I've no employer paying in matching amounts. I get tax relief on contributions, though IIRC additional taxes like USC and PRSI are calculated including the contribution. I too was very unimpressed when Noonan raided pension savings and keep this in mind for future canvassers at election times.

Last time I looked the notional value of my policy is about 40% greater than my sum of contributions. I don't expect that it will make a massive contribution after I retire but I'm happy as things stand that it will more than meet what I've put in. If I die in the interim, my understanding is that the value of it will pass to my spouse.

Look at it another way, it's better value than private health insurance. There you pay on an annual basis, building up your years till when you may need it. But if you can't afford your health policy for a year or so, then 'poof' - all the value of it vanishes into thin air. At least a pension scheme stays put if you can't afford to contribute each year.

coylemj

Nermal wrote: »

Why can't we?

Because it would only apply to a subset of the population - people with private pensions which is an ever dwindling number. So you'd never get near to a critical mass lobbying for a referendum to happen.

Even the right to own private property is qualified in the Constitution (to enable compulsory purchase orders for essential public projects) so an attempt to insert a provision to armour-plate private pensions is doomed to fail.

And even if a referendum did happen, people in the public service would see it as exposing them to having their pensions unilaterally reduced in a future crisis with no option for a corresponding raid on private pensions so if they knew what was good for them, they would vote against it.

Henry Ford III

BarryD2 wrote: »

Re OP, I'm self employed and opened a standard PRSA maybe about 10 years ago. I've no employer paying in matching amounts. I get tax relief on contributions, though IIRC additional taxes like USC and PRSI are calculated including the contribution. I too was very unimpressed when Noonan raided pension savings and keep this in mind for future canvassers at election times.

Last time I looked the notional value of my policy is about 40% greater than my sum of contributions. I don't expect that it will make a massive contribution after I retire but I'm happy as things stand that it will more than meet what I've put in. If I die in the interim, my understanding is that the value of it will pass to my spouse.

Look at it another way, it's better value than private health insurance. There you pay on an annual basis, building up your years till when you may need it. But if you can't afford your health policy for a year or so, then 'poof' - all the value of it vanishes into thin air. At least a pension scheme stays put if you can't afford to contribute each year.

Factor in the tax relief on the contributions and it becomes better again.

"Noonan's grab" was horrible, cynical and only levied on pensions because he wouldn't have gotten away with a levy on deposits and also pensions are longer term and some/most would have had a chance to recover before drawdown.

I wouldn't equate a pension to heath insurance. The former is an effective cash accumulator which can do good things for you at retirement. The other is insurance plain and simple.

Nermal

Peregrinus wrote: »

If there were a constitutional amendment to provide that PRSAs were to be forever free of tax, or of a certain kind of tax, a government wishing to tax retirement savings could close PRSAs and legislate for a new vehicle called, say, an Individual Pension Savings Plan, and tax that. Or, if the Constitution forbad levies on PRSAs, they could impose some other tax on them that wasn't a levy. Or, instead of taxing funds held in PRSAs they could impose a new tax on funds contributed to a PRSAs, or on benefits paid out of PRSAs.

I don't know... this type of jesuitical chicanery is looked at dimly by judges. I am not convinced it's impossible to frame something that would work. Obviously, it might not pass.

It's just terribly obvious that we will have a pension crisis, and that private pension funds will be raided again to fix it.

Tigerandahalf

I don't see why pension funds shouldn't be open to taxation. As pointed out many wealthy people are not paying their share of tax by allowing them to avoid it by investing in pension funds.

This money is being lost from public spending. Many ordinary workers do not have an employer who contributes to a pension for them.

I also wonder how employers are funding these contributions. Are they claiming tax relief on it?
Just like they can claim against redundancy payments.

Peregrinus

Tigerandahalf wrote: »

I also wonder how employers are funding these contributions. Are they claiming tax relief on it?
Just like they can claim against redundancy payments.

From an employer's point of view, wages, pension contributions and redundancy payments are all just different forms of remuneration paid to workers, and they are all deductible as an expense in computing the profits of the business.

Nermal wrote: »

I don't know... this type of jesuitical chicanery is looked at dimly by judges. I am not convinced it's impossible to frame something that would work. Obviously, it might not pass.

It's just terribly obvious that we will have a pension crisis, and that private pension funds will be raided again to fix it.

I think the key problem is this; in times of economic crisis, or crisis in the public finances, it's inevitable that taxes will be raised somewhere. And there's a certain political/moral case for raising them in the area where, up to now, tax reliefs/deductions have been most generous. And that's pensions.

So, while it's painful to have your pension fund levied, it's not suprising in the circumstances. And there's a certain crude justice in it; the levy bears most on people with the most in their pension funds, and they are the people who have benefited the most in the past from the tax reliefs associated with pension funds.

If you want to reduce the political risk of future taxation on pension funds, I don't think a constitutional referendum is the way to go. I think a better strategy would be to limit/refocus the tax reliefs associated with pension funds, so that they mainly go to the lower paid, to those with modest pension savings, etc, etc. Then the incentives to look to pension funds first of all when taxes need to be raised would be much less.

737max

I'm going to take what steps are necessary to protect myself in my old age.
If someone like you has the choice then I will direct my excess cash to buying good durable products like a roof over my head, a solid car and sturdy shoes because I must assume that you or someone like you will be lining up to steal my pension fund from me and having the bare faced cheek to say that it is only fair because shur didn't we do them the service of not taxing them earlier and that acting retrospectively is fair game. It is sharp practice to mislead people in to thinking they were saving to guard their independence in old age when Government never has an intention of allowing them to retain their pension fund.
people approaching retirement age at the time of Noonans decision who were already suffering the worst effects of the Irish depression would then have the double whammy of having their pension fund garnished with no opportunity to make up the shortfall.

That over 2k taken from me could have been worth over 5k or more by the time I retire.

Henry Ford III

A solid car or sturdy shoes won't be worth much for sure. Yes the "Noonan Grab" was terrible but it doesn't render the entire notion of pension investment unattractive.

Squatter

737max wrote: »

That over 2k taken from me could have been worth over 5k or more by the time I retire.

Or, if you had invested some or all of it in the Irish banks, it could have been worth SFA! That said, perhaps Noonan should have been more selective and only raided the pension funds of people who were at least (say) 10 years from retirement age.

For me, reading claims that people are unwilling to start a pension fund due to their fears about the possibility of a future levy (one that is unlikely to recur in my humble opinion) is a perfect example of flawed logic. Ultimately, the only person that they're hurting by taking such a 'principled' decision is themselves!

Haz619

Haz619 wrote: »

................... I would have to live till about 105 to only see the money that has gone in. Anyone else found this?

Thanks

You should be able to take all but €63500 of the fund quite soon after retirement if that rocks your boat.

737max

Squatter wrote: »

Or, if you had invested some or all of it in the Irish banks, it could have been worth SFA! That said, perhaps Noonan should have been more selective and only raided the pension funds of people who were at least (say) 10 years from retirement age.

For me, reading claims that people are unwilling to start a pension fund due to their fears about the possibility of a future levy (one that is unlikely to recur in my humble opinion) is a perfect example of flawed logic. Ultimately, the only person that they're hurting by taking such a 'principled' decision is themselves!

I am in a pension scheme...just not an Irish one any more. Irish Government simply can't be trusted.
I had to give out to my pension Trustees because my Irish "Global" pension fund was over 20% invested in Ireland just before the bubble popped so yes it was invested in Irish banks and developers. The Investments, Finance and Pension areas in Ireland seem to be very incestuous and they were looking after each other than the best interests of the members of the schemes they operated.

Peregrinus

737max wrote: »

I am in a pension scheme...just not an Irish one any more. Irish Government simply can't be trusted.

Obviously, you don't get any tax deductions or reliefs in Ireland for investing in a non-Irish pension scheme. So what you're telling us is that, becuse you fear that Irish tax reliefs might be clawed back in part, you've decided to forgo all tax reliefs.

Which is fine, as long as you understand that's what you're doing, and it's what you want to do. It will probably make you poorer in retirement than you need to be, but that's your choice.

jamesthepeach

737max wrote: »

I'm going to take what steps are necessary to protect myself in my old age.
If someone like you has the choice then I will direct my excess cash to buying good durable products like a roof over my head, a solid car and sturdy shoes because I must assume that you or someone like you will be lining up to steal my pension fund from me and having the bare faced cheek to say that it is only fair because shur didn't we do them the service of not taxing them earlier and that acting retrospectively is fair game. It is sharp practice to mislead people in to thinking they were saving to guard their independence in old age when Government never has an intention of allowing them to retain their pension fund.
people approaching retirement age at the time of Noonans decision who were already suffering the worst effects of the Irish depression would then have the double whammy of having their pension fund garnished with no opportunity to make up the shortfall.

That over 2k taken from me could have been worth over 5k or more by the time I retire.

That grab number one.
What will grab number two cost you?
And however many after that.

Henry Ford III

jamesthepeach wrote: »

That grab number one.
What will grab number two cost you?
And however many after that.

Might be something and equally might be nothing.

The tax breaks are however still very significant, and deliberately avoiding them in any circumstances is flawed logically.

jamesthepeach

Henry Ford III wrote: »

Might be something and equally might be nothing.

The tax breaks are however still very significant, and deliberately avoiding them in any circumstances is flawed logically.

Yeah sure. Might be nothing. That's what people thought last time.

Henry Ford III

737max wrote: »

I am in a pension scheme...just not an Irish one any more. Irish Government simply can't be trusted.
I had to give out to my pension Trustees because my Irish "Global" pension fund was over 20% invested in Ireland just before the bubble popped so yes it was invested in Irish banks and developers. The Investments, Finance and Pension areas in Ireland seem to be very incestuous and they were looking after each other than the best interests of the members of the schemes they operated.

How did you qualify for a non Irish pension scheme?

Peregrinus

jamesthepeach wrote: »

That grab number one.
What will grab number two cost you?
And however many after that.

Sure. There's always a political risk of more "grabs". But that's true whether you invest in pension plans or in something else. 737max outlines a strategy of investing in houses, cars and shoes; the cars and the shoes are wasting assets anyway and are hardly worth taxing, and of course in years to come the house could be subject to property taxes, rates, etc, etc. So this does nothing to protect him from the political risk of grabs.

My suggestion is that the political risk of grabs is maximised where you choose an investment that's highly tax-favoured. If you choose an investment vehicle that is less tax-advantaged to begin with, the political risk of grabs is lower (but not nil). The drawback, of course, is that you lose out on the tax advantages, so you have to make a judgment about which matters more to you; getting the tax advantages, or minimising the political risk of adverse tax changes?

Peregrinus I admire your patience.

737max

Henry Ford III wrote: »

How did you qualify for a non Irish pension scheme?

I left the Country.

Henry Ford III

737max wrote: »

I left the Country.

Gotcha.

p.s. How do you know that your new foreign pension pot won't be similarly plundered in the future?

737max

Because the politicians have a healthy fear of their citizens.