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Terrible pension rates?
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Join Date:Posts: 17395
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Peregrinus wrote: »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?
Having to make a choice doesn't mean he can't complain about the options.Henry Ford III wrote: »How do you know that your new foreign pension pot won't be similarly plundered in the future?
You don't know that it won't, but you can make an educated guess. The fact that it happened so easily in the past here means that future similar banana republic-style stunts are very likely to happen again.
There are nations where a grab like this would be almost unimaginable - in Ireland the threshold has been crossed, and it was politically very easy to do so. In a crisis, it will happen again.0 -
coylemj wrote:I quoted a 3% return on investment above, the Zurich Balance fund which is a managed fund that has a sizeable equity element has achieved an annualised return of 6.9% over the last 20 years, a period which includes two major market crashes. If that ROI was achieved in your case with with €300 p.m. contributions, it would be worth €581K at the end of 444 months.
Very good calcs however I'd still use some discounting to show this figure it today's money (inflation will "eat" into this pot so 581k in 30odd years is really xxx in today's terms)0 -
Henry Ford III wrote: »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.
I know it's not directly relevant to this thread but my beef with health insurance is that it is sold like a pension scheme. People are encouraged to get in young (when they will have few claims) and advised they will be able to draw back the benefit in older age. The government even encouraged this in recent years with the 'age rating system' and so on.
When in fact, health insurance is no more than car or house insurance - it's an annual payment and once it's gone, it's gone.0 -
Hani Kosti wrote: »Very good calcs however I'd still use some discounting to show this figure it today's money (inflation will "eat" into this pot so 581k in 30odd years is really xxx in today's terms)
Exactly.
How about someone work out how much would be in the pot in 2017 for someone who started contributing whatever the equivalent of 300pm was back in 1977, using todays yield and metrics.
Coupled with the fact that anyone under 30 won't be able to touch their pension until age 69/70 by the 2050s and it seems like a bit of a sham. The additional four years you'll be forced to work by then will offset most of the potential gains.
If you're flush with cash by all means contribute but the time value of money tells me that it's worth way more to most of you now while you're young than it will be in future after the vultures have had their way.0 -
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Join Date:Posts: 17395
Not a sham at all. Tax relief on the way in, tax free growth, a lump sum at retirement (age for which isn't stipulated by the Govt. incidentally - they only control the OAP) and taxable income thereafter. There's nothing that can match the efficiency of that.0 -
Fred starts work on Jan 1st 1982 and immediately begins paying €100 p.m. gross into a pension fund. The fund is skewed towards equities and grows at an annualised rate of 7.1%. According to Zurich, this is the 'sector average' for funds in this category since 1989. The Zurich 'Balanced' fund grew at an annualised rate of 10.4% and the Irish Life 'Pension Managed' fund grew at 7.59% over roughly the same period.
Fred retires on Dec. 31st 2016 after making 420 x €100 contributions over 35 years. The gross balance in his pension account will be then be 171K after his gross contributions of 42K. Taking tax relief at just 40% so ignoring periods when the top rate of PAYE was higher and when he got relief on (5.5%) PRSI, his net contributions would be €25,200 or lower.
Now let's say that a greedy Government was in power for the entire duration of Fred's working life and that they grabbed 1% of the gross value of his fund as a levy on Jan. 1st for every one of the 35 years. His balance would be 136K instead of 171K, for a net outlay of 25K. Even a 2% levy every year would still have left him with a pot of 109K.
If he had put €100 p.m. into a savings account at 2.5% interest then, even if we ignore DIRT, his balance after 35 years would be €66,666 for a gross (and net) outlay of €42,000.
Was avoiding that hypothetical levy really worth emigrating for?0 -
rebuttal: past performance is not indicative of future results and my pension fund running since 1995 is not getting anywhere close to 7% but I can't look at it online today to give you an exact figure.
The problem with a "Banking & Insurance & Pension" sub-forum is that it attracts people with skin in the game. You'd get a more balanced discussion of the issue in After Hours if you could just filter out the three-fiddy, yer ma and uninformed commentators.
A 171k pension fund is buying a pension of about 6.5k per annum.
I for one don't know many Freds who could have afforded to save 100 p.m. in the bleak decade that was the eighties Irish style and if they could what would that monthly payment have been worth if put toward a humble house in Ranelagh or Rathmines or God forbid Glasnevin.
Disclaimer: I am not recommending anyone invest in Irish Property other than where you need a roof over your head.0 -
rebuttal: past performance is not indicative of future results and my pension fund running since 1995 is not getting anywhere close to 7% but I can't look at it online today to give you an exact figure.
Then you have chosen either a poor fund manager or a fund that's too conservative.The problem with a "Banking & Insurance & Pension" sub-forum is that it attracts people with skin in the game. You'd get a more balanced discussion of the issue in After Hours if you could just filter out the three-fiddy, yer ma and uninformed commentators.
What you mean is that in AH you'd get more naysayers and malcontents who would agree with you, rather than people who know something about the subject.A 171k pension fund is buying a pension of about 6.5k per annum.
I for one don't know many Freds who could have afforded to save 100 p.m. in the bleak decade that was the eighties Irish style and if they could what would that monthly payment have been worth if put toward a humble house in Ranelagh or Rathmines or God forbid Glasnevin.
I used a round and flat 100 p.m. to keep it simple. The point that you continue to ignore is that no savings scheme can come anywhere near matching a pension scheme with the current tax breaks.
If you're going to nitpick about the absolute numbers then you're just reinforcing what most of us have figured out already, you have your mind made up and are not prepared to listen to anyone. Good luck with your under-performing foreign pension fund.0 -
Classic victim blaming there.Then you have chosen either a poor fund manager or a fund that's too conservative.
What you mean is that in AH you'd get more naysayers and malcontents who would agree with you, rather than people who know something about the subject.
I used a round and flat 100 p.m. to keep it simple. The point that you continue to ignore is that no savings scheme can come anywhere near matching a pension scheme with the current tax breaks.
If you're going to nitpick about the absolute numbers then you're just reinforcing what most of us have figured out already, you have your mind made up and are not prepared to listen to anyone. Good luck with your under-performing foreign pension fund.
No, not in the cash fund. In the **** one that the majority of victims of the Irish Company Private Pension schemes that private sector workers get bundled in to with minimal opportunity to switch and performance of alternatives have performed poorly too.
I'm hearing what you are saying and I've been hearing it for decades.
The industry members have got to keep selling the product they have despite how poor it is and Noonan's smash and grab didn't help at all but they've got a captive audience.
Message to all the undecided; tax breaks are not tax breaks if the Government retain the right to retrospectively revoke the tax breaks and claw back the money some time in the 40 years of your career before you retire.0 -
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Classic victim blaming there.
No, not in the cash fund. In the **** one that the majority of victims of the Irish Company Private Pension schemes that private sector workers get bundled in to with minimal opportunity to switch and performance of alternatives have performed poorly too.
I'm hearing what you are saying and I've been hearing it for decades.
The industry members have got to keep selling the product they have despite how poor it is and Noonan's smash and grab didn't help at all but they've got a captive audience.
Message to all the undecided; tax breaks are not tax breaks if the Government retain the right to retrospectively revoke the tax breaks and claw back the money some time in the 40 years of your career before you retire.
Sorry I must have missed your better alternative somewhere along the way.....0 -
All governments retain this right and many exercise it; all will do so if the fiscal situation makes it necessary. The notion that the Irish government is uniquely wicked in this regard is silly. The notion that by emigrating and taking out a pension plan in some other country you avoid this risk is flat-out wrong.Message to all the undecided; tax breaks are not tax breaks if the Government retain the right to retrospectively revoke the tax breaks and claw back the money some time in the 40 years of your career before you retire.
The notion that you avoid it by not investing in a pension plan is equally silly. Any investment vehicle, any asset class, can be taxed. The only way to avoid tax on your savings, or to avoid the risk of changes to the way your savings are taxed, is not to have any savings at all, and survive in retirement by foraging for roadkill.
Which, it seems to me, is the logical conclusion of the direction in which you are arguing, 737max. I think your problem is that you're highly sensitive to the risk of future adverse tax changes, while you attach no value at all to the advantage of current tax reliefs. That's an unbalanced way of looking at things.0 -
Following this with interest as I am working with an advisor on getting employees in my company to start up a pension.
The company contribute 100 euro a month and the government give tax relief at 40% of most employees contributions. So for someone to get 200 euro in there it costs them 60 euro from take home pay. The returns average 8% a year for last 30 years I think or close to it. And still some won't join. I think they are nuts but good luck to them in retirement by not joining. They don't unferstand compounding i think. Financial illiteracy really.
For the record I have the prospectus in front of me and here are the returns since 97. I am in myself since 07 and it's worth well in excess of what I have contributed. No levy or anything like that is going to make me give it up. I won't be taking an annuity either for the record. I expect to have a fund of 500k at least for retirement.
97 34%
98 18%
99 24%
00 -1%
01 -4%
02 -20%
03 14%
04 10%
05 22%
06 14%
07 -2%
08 -36%
09 26%
10 15%
11 -3%
12 14%
13 14%
14 13%
15 9%
16 6%
Average 8% if someone wants to do the maths.0 -
Don't second guess me. I'm out of an Irish pension provision system which screwed me over simultaneously by Noonan, investment company and uninterested company pension trustees who were only interested in doing the minimum to meet regulatory requirement but not actively seek the best performance from the investment company they chose to represent employees' interests.Peregrinus wrote: »
Which, it seems to me, is the logical conclusion of the direction in which you are arguing, 737max. I think your problem is that you're highly sensitive to the risk of future adverse tax changes, while you attach no value at all to the advantage of current tax reliefs. That's an unbalanced way of looking at things.
There are hundreds of thousands of other Irish employees who will read this thread and think that the consensus is Pensions are good and be delivered rubbish options in their own company and then live with the danger of Noonan MK II stealing a portion again. When it happens again it will as before be prompted by a global shock which drops share values and just at that point in time will the Government dip in to the fund leaving the fund with even less "value" which would have rebounded when the Global economy recovers. The smash and grab will not be done at a time when the pension fund is growing naturally by double digit figures p.a.0 -
I'm out of an Irish pension provision system which screwed me over simultaneously by Noonan, investment company and uninterested company pension trustees who were only interested in doing the minimum to meet regulatory requirement but not actively seek the best performance from the investment company they chose to represent employees' interests.
Are you saying that the Investment company should be delivering positive growth year on year for you regardless of global/local investment returns?
Are you also saying that Trustees should be reviewing each members fund choice and advising them for/against certain asset classes on an ongoing basis? That is way beyond their duty of care!
Did you take any responsibility in the investment of your fund, look at the annual statements, read the papers and stock markets and think about diversifying from your global equity fund?0 -
Are you saying that you wish me to respond to leading questions?
I'm saying what I'm saying in a forum with very obvious strong Group think.0 -
I can easily rephrase then with simple closed Yes/No questions:
Should Investment companies deliver positive growth year on year regardless of global/local investment returns?
Should Trustees of pension schemes review each members fund choice and advise them for/against certain asset classes on an ongoing basis?
Did you take any personal responsibility in the investment of your fund?
Better?
I don't think it's "Group think" I've been following this thread the last few days and the above was my first comment.
I just find it hard to understand why you'd ignore the tax free growth element/benefits of a private pension over the fact that there was previously a levy imposed. I disagreed with the levy but I'm not nieve enough to think that at any point in the future teh Government may reduce/remove/increase tax benefits currently on pensions. I find it highly unlikely that when I retire that Income tax levels will still be the same, that minimum AMRF levels will be the same as current etc etc
There are (or have been) various taxes/levies across all areas
- Levy on health premiums
- DIRT on savings
- Stamp Duty on ATM/Credit Cards
- Gross Roll Up Tax on Life Assurance
- CAT
- Inheritence
- Stamp Duty on house
- LPT
The list goes on... do you refuse to use your bank account also?0 -
737max's opinions on Irish pensions are mental and I would urge anyone reading this thread to not take any advice from his posts.
For the sake of your future and the future of your family.0 -
a Tax break that can't be safeguarded is not a tax break. All the Section 23 properties kept their tax breaks even though it was clear later that they were a bad idea because the Government knew that they'd be in for a big legal battle all the way to the supreme court or beyond if they tried to take them away.
The Government unafraid of the little citizen stole away their tax break.
people on low wages or with skills their employer needs but unrelated to finance are not equipped to manage their pension and with only a small amount going of salary going to pension per year it is a huge task for little reward.
Did I review my options. I already told you that I gave out to my trustees. Did I have the means to manoevre to minimise loss in a very limited company scheme; no.
Was I unique and singled out for unfair treatment? No, such is the lot of hundreds of thousands of people in private company pension schemes.
A good trustee would help but HR take those positions and the money men in the company just select the schemes with the lowest operational cost which allow then to discharge their legal obligations.0 -
Advice to all considering a pension:
Do you think there will be some sort of global economic crisis before retirement.
Do you think Ireland as an open economy but with very weak fundamental economy will remain unaffected
Do you think the pension fund will be raided again so that the inner circle won't loose their collective shirts.
Do you think that the pension scheme offered to you by your employer is run by competent people within your Company.
Do you have flexibility with regard to what funds you can invest in or just a hobson's choice of poor funds.
What sort of end game are you approaching. Is it the same rubbish annuity that most Employee's in DC schemes are offered.
A company pension scheme may not be for you.
A pension scheme within the grasp of the Irish Minister for Finance may not be for you.0 -
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Join Date:Posts: 17395
There are hundreds of thousands of other Irish employees who will read this thread and think that the consensus is Pensions are good and be delivered rubbish options in their own company and then live with the danger of Noonan MK II stealing a portion again. When it happens again it will as before be prompted by a global shock which drops share values and just at that point in time will the Government dip in to the fund leaving the fund with even less "value" which would have rebounded when the Global economy recovers. The smash and grab will not be done at a time when the pension fund is growing naturally by double digit figures p.a.
Is President Trump an inspiration for that claim?
Your logic and thinking are fatally flawed on the entire pensions area.0 -
how many people are working in multi-nationals.
It is easier to try to deride my comments than deal with the kernel of the issue at the heart of them which is that unless you are in a postion to avoid the long arm of the Minister for Finance and the poor DC occupational pension options available then private pensions in Ireland aren't necessarily a No-Brainer.
https://www.irishtimes.com/business/economy/one-in-five-now-employed-by-foreign-multinationals-1.24869290 -
Surprised no one is challenging this incredibly disingenuous comparison.Fred starts work on Jan 1st 1982 and immediately begins paying €100 p.m. gross into a pension fund. The fund is skewed towards equities and grows at an annualised rate of 7.1%. According to Zurich, this is the 'sector average' for funds in this category since 1989. The Zurich 'Balanced' fund grew at an annualised rate of 10.4% and the Irish Life 'Pension Managed' fund grew at 7.59% over roughly the same period.
Fred retires on Dec. 31st 2016 after making 420 x €100 contributions over 35 years. The gross balance in his pension account will be then be 171K after his gross contributions of 42K. Taking tax relief at just 40% so ignoring periods when the top rate of PAYE was higher and when he got relief on (5.5%) PRSI, his net contributions would be €25,200 or lower.
Now let's say that a greedy Government was in power for the entire duration of Fred's working life and that they grabbed 1% of the gross value of his fund as a levy on Jan. 1st for every one of the 35 years. His balance would be 136K instead of 171K, for a net outlay of 25K. Even a 2% levy every year would still have left him with a pot of 109K.
If he had put €100 p.m. into a savings account at 2.5% interest then, even if we ignore DIRT, his balance after 35 years would be €66,666 for a gross (and net) outlay of €42,000.
Was avoiding that hypothetical levy really worth emigrating for?
If your money is in a pension, it could be locked away for up to 50 years, often invested in very poor quality and overpriced funds. If you keep your money outside of the system, you can invest it however you like and access it any time and totally sidestep the greedy fee taking pension industry.0 -
Did I review my options. I already told you that I gave out to my trustees. Did I have the means to manoevre to minimise loss in a very limited company scheme; no.
If its the case that there was only a single choice of investment mandated by the Trustees then you'd probably have recourse for poor performance against them. I'd find it hard to believe that even if they had only a single investment fund that they'd have elected for a high risk equity fund! That'd be terribly negligent.
If they provided a range of funds through an investment company, then you should have had the opportunity to select various risk level appropriate investments.
You also seem to be hung up on annuities - they are not the only option available. ARF's are also available to DC schemes. But you are correct in that current Annuity rates are woeful and do not represent a prudent investment - and that's regarldess of how the fund performed to maturity0 -
If its the case that there was only a single choice of investment mandated by the Trustees then you'd probably have recourse for poor performance against them. I'd find it hard to believe that even if they had only a single investment fund that they'd have elected for a high risk equity fund! That'd be terribly negligent.
If they provided a range of funds through an investment company, then you should have had the opportunity to select various risk level appropriate investments.
You also seem to be hung up on annuities - they are not the only option available. ARF's are also available to DC schemes. But you are correct in that current Annuity rates are woeful and do not represent a prudent investment - and that's regarldess of how the fund performed to maturity
when one of the risk levels is a global equity fund with 20% exposure to Ireland what do think the oversight on the scheme was. I had to independently investigate the actual scheme to find this out as none of this information was offered to employees. It was a global equity scheme, diversified across industries and regions but 20% of it in Irish banks and developers.0 -
Huge, huge assumption that todays conditions will still apply in 30-40 years time.Henry Ford III wrote: »Not a sham at all. Tax relief on the way in, tax free growth, a lump sum at retirement (age for which isn't stipulated by the Govt. incidentally - they only control the OAP) and taxable income thereafter. There's nothing that can match the efficiency of that.
By the time the pension crisis hits, there is going to be a massive political will to level the playing field between the haves and the have nots. The volume of have nots will be so great that the government will simply have to do something. I suspect what we'll see is some sort of equalisation scheme where the people with big pension pots are forced into contributing to people like me who will have nothing (at least on paper). Also, I think everything under the sun is going to be means tested, pension holders wont get an OAP, free tv licence, allowances, or medical cards.0 -
It's funny how quoted returns from funds never seem to come close to what people actually see.Did I review my options. I already told you that I gave out to my trustees. Did I have the means to manoevre to minimise loss in a very limited company scheme; no.
If its the case that there was only a single choice of investment mandated by the Trustees then you'd probably have recourse for poor performance against them. I'd find it hard to believe that even if they had only a single investment fund that they'd have elected for a high risk equity fund! That'd be terribly negligent.
If they provided a range of funds through an investment company, then you should have had the opportunity to select various risk level appropriate investments.
You also seem to be hung up on annuities - they are not the only option available. ARF's are also available to DC schemes. But you are correct in that current Annuity rates are woeful and do not represent a prudent investment - and that's regarldess of how the fund performed to maturity
My employer pays into my pension and the returns I have seen of about 4% are nowhere near the claimed performance (just over 7%) despite me being 100% equity (which they recommended). I suspect the pension manager is trousering the remainder in fees.0 -
Bubbaclaus wrote: »737max's opinions on Irish pensions are mental and I would urge anyone reading this thread to not take any advice from his posts.
For the sake of your future and the future of your family.
It does raise questions though.
How much do people know about their own pension and the various providers taking their own cut from it.
Bmwguy quoted figures above. Interest rates have been at record lows so growth fugures have to be affected.
If the fund is someway based on shares is it vulnerable to a big tech crash?
I'd especially like to know what effect it would have if you cashed out (had to) in one of those bad years how bad would it affect your drawdown?
There seems to be quite a bit of luck involved in the whole thing.0 -
Huge, huge assumption that todays conditions will still apply in 30-40 years time.
By the time the pension crisis hits, there is going to be a massive political will to level the playing field between the haves and the have nots. The volume of have nots will be so great that the government will simply have to do something. I suspect what we'll see is some sort of equalisation scheme where the people with big pension pots are forced into contributing to people like me who will have nothing (at least on paper). Also, I think everything under the sun is going to be means tested, pension holders wont get an OAP, free tv licence, allowances, or medical cards.
Correct. And I say that as someone currently maximising my contributions. In my opinion, it's worth doing so, but do it with your eyes open. If you do it, plan/look for an opportunity down the line - perhaps moving abroad - to liberate your fund.0 -
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Join Date:Posts: 17395
Huge, huge assumption that todays conditions will still apply in 30-40 years time.
By the time the pension crisis hits, there is going to be a massive political will to level the playing field between the haves and the have nots. The volume of have nots will be so great that the government will simply have to do something. I suspect what we'll see is some sort of equalisation scheme where the people with big pension pots are forced into contributing to people like me who will have nothing (at least on paper). Also, I think everything under the sun is going to be means tested, pension holders wont get an OAP, free tv licence, allowances, or medical cards.
Even huger assumptions.
Pensions have been about for quite a while, and there have been good times and bad ones too. These things even out. Longer life expectancy will be an issue into the future, but the fundamentals don't change.
The current tax reliefs were brought in by the ITA 1967 (self employed), and the FA 1972 (Occupational schemes) and have remained largely intact since.
Paying OAP's is expensive and the Govt has always given generous incentives for folk to take on pension funding privately.
Whilst that in itself is expensive, the alternative is considerably costlier.
There's not a hope of wide scale pensions equalisation (taking from the wealthy and redistributing to the have nots). People would no longer fund pensions if that ever happened, so it's a non runner.
I saw a file the other day - a real live case. Customer paid just over 10 years premiums into an EPP. Premium was €150 p/w (between e'er and e'ee). Total was €650 p/m with a total €83,200 paid in on the drip. Net cost (after tax reliefs) was little more than half that.
Maturity value was marginally below €127,000. Policy was well priced and the funds used did fairly well too.
Client (long service) was able get a lump sum of 150% of his salary with a decent amount left going to provide retirement benefits.
I reckon that's a decent return, even after Baldy's infamous grab. Client is very happy with it.0
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