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Why are people obsessed with getting a pension
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This thread has me baffled! I completely agree with the OP. I am in my 20s and I simply cannot understand why it it makes sense to pay into a pension at my age. I can understand if you are in your 50s or 40s or at a stretch late 30s but 20s! I can't understand it.
I am forced by my employer to pay into a private pension scheme (it comes to about 1200 a year) and I'm fairly sure the company matches my contribution. And I completely understand that this is tax exempt. But I would rather take the tax hit and take €600 now than to pi$$ 2400 down a 40 year away hole! What if I become unemployed in the next year? What if I catch a lucky break at some point in my 50s in which case I will be cursing all those years I struggled in my 20s all while paying money into a pension hole! What if I die before I reach pension age? Fat lot of good the money would be to me then. I want my money now while I'm young and stupid and more in need of the money than ever!
Also, do people not understand how inflation works? €600 now, I can assure you is worth a lot more than €2400 will be in 40 years time. Very silly investment to make in your 20s.0 -
This thread has me baffled! I completely agree with the OP. I am in my 20s and I simply cannot understand why it it makes sense to pay into a pension at my age. I can understand if you are in your 50s or 40s or at a stretch late 30s but 20s! I can't understand it.
I am forced by my employer to pay into a private pension scheme (it comes to about 1200 a year) and I'm fairly sure the company matches my contribution. And I completely understand that this is tax exempt. But I would rather take the tax hit and take €600 now than to pi$$ 2400 down a 40 year away hole! What if I become unemployed in the next year? What if I catch a lucky break at some point in my 50s in which case I will be cursing all those years I struggled in my 20s all while paying money into a pension hole! What if I die before I reach pension age? Fat lot of good the money would be to me then. I want my money now while I'm young and stupid and more in need of the money than ever!
Also, do people not understand how inflation works? €600 now, I can assure you is worth a lot more than €2400 will be in 40 years time. Very silly investment to make in your 20s.
You are missing the pretty obvious point that our 2400 is invested for 40 years and will probably be worth many multiple of that.
Do you understand how investments works?
The government is literally giving you a loan of free money that you can invest with for the next 45 years and then just have to give them back a portion of the original loan, while effectively getting to keep 80% of any profits you made from their loan...whats not to like?
BTW, since you are against a pension, whats your plan to survive when you hit 67+ and cant find work?
I'm reliably informed that due to inflation, that €600 that you saved now will be worthless come retirement...0 -
Anyone who isn't a total arsehole gives a toss about ethics. A statement so obvious it borders on being a truism.You are suddenly obsessed with ethics...can you eat ethics? Do ethics keep your house warm? Do cars run on ethics?
Speaking of magic money...where does the cash come for this public pension pot and additional social supports?
Let me guess, its from those poor sods who go out and work every day in those unethical jobs that you so despise?
TL;DR
I'm alright as someone else will pay for me.
and you have the temerity to talk about ethics!
Nobody believes the false dichotomy of: Subservience to the finance industry vs Being paupers. That's a load of bollocks.
We've got governments and safety nets there for a reason - and we either protect them, or we end up dependent on an exploitative private and financial industry which takes increasing control over more and more aspects of our lives.
Governments have zero problems funding public pensions provided through government spending - the 'pensions crisis' is manufactured nonsense, spun largely by free-market-fetishist parties and finance, to gut the public pension and create dependence on private pensions.0 -
The discussion isn't about the current state pension, it's about the governments general ability to provide a public pension - which includes public pensions provided in different structures to the current one - it's been covered (far too much...) at length earlier."provide"
You are still avoiding the question...who "provides" this state pension?
Where does the money come from?
From my PRSI, thats where.
A public pension provided by government spending, is not paid for 1:1 through taxation - as that's not how government finances work - governments almost never run a balanced budget, and it's even more rare for them to run a surplus.0 -
You are suddenly obsessed with ethics...can you eat ethics? Do ethics keep your house warm? Do cars run on ethics?
God this gets worse, do you really expect people to earn their money / income unethically ?
Any clown can earn a fortune unethically if they want to go down that path.
Are you some dodgy wanna be county councillor / party hack or something ?0 -
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Who cares if it's worth many multiples of that? You won't have access to this as a lump sum. You can only chip away at it until you die. It depresses me to think of all the people who paid into a pension all their life to then die in their 50s, 60s or even early 70s. Now, I do understand that often there is an option to take a large amount as an initial lump sum, and then take a hit on the annual payments. But this still makes no sense to me.You are missing the pretty obvious point that our 2400 is invested for 40 years and will probably be worth many multiple of that.
Do you understand how investments works?
I'll get a state pension and have my own savingsBTW, since you are against a pension, whats your plan to survive when you hit 67+ and cant find work?
I never said I would save it. If I spent it now it would be worth a lot more than 2400 will be in 40 years.I'm reliably informed that due to inflation, that €600 that you saved now will be worthless come retirement...0 -
I'll get a state pension and have my own savings
It’s funny how you plan on saving but not in a pension scheme
What you’re saying is ‘I’ll need money when I’m older but I don’t want my savings helped by my employer or the state and I don’t want them to try and grow either’
Your choice to do so. Best of luck0 -
You are the one who has decided that the pension industry is unethical (with an alarming lack of facts to back it up I might add)Anyone who isn't a total arsehole gives a toss about ethics. A statement so obvious it borders on being a truism.
Nobody believes the false dichotomy of: Subservience to the finance industry vs Being paupers. That's a load of bollocks.
We've got governments and safety nets there for a reason - and we either protect them, or we end up dependent on an exploitative private and financial industry which takes increasing control over more and more aspects of our lives.
Governments have zero problems funding public pensions provided through government spending - the 'pensions crisis' is manufactured nonsense, spun largely by free-market-fetishist parties and finance, to gut the public pension and create dependence on private pensions.
Why do you think people with pensions are subservient to the finance industry? The finance industry is whats helped my pension double in value over the last 5 years. If I hid it away under my mattress it would be worth significantly less than what I stared with. Please explain how this is unethical, subservient or not the most sensible thing to do with ones money to provide for their future?
BTW, you can choose from a huge range of pensions, from investing in Irish startups to windfarms...but I guess these are also unethical?
TBH I'm getting an awful tinfoil hat vibe from your posts...happy for you to provide some evidence to prove me wrong.
All fantastic, but yet still avoiding answering the question of *where* this money will come from?The discussion isn't about the current state pension, it's about the governments general ability to provide a public pension - which includes public pensions provided in different structures to the current one - it's been covered (far too much...) at length earlier.
A public pension provided by government spending, is not paid for 1:1 through taxation - as that's not how government finances work - governments almost never run a balanced budget, and it's even more rare for them to run a surplus.
False.Who cares if it's worth many multiples of that? You won't have access to this as a lump sum.
You can withdraw €200,000 tax free, the next €300,000 at 20% and anything over €500,000 at your marginal rate.
Take what "hit"?You can only chip away at it until you die. It depresses me to think of all the people who paid into a pension all their life to then die in their 50s, 60s or even early 70s. Now, I do understand that often there is an option to take a large amount as an initial lump sum, and then take a hit on the annual payments. But this still makes no sense to me.
I dont think you understand how pensions work at all.
In the past you had to buy an annuity, you dont anymore. You can move your money to an AMRF and withdraw up to 4% each year or an ARF where you have to withdraw 4% between 60 and 70 and 5% when over 70.
If your pension pot is worth €1,000,000 you can have a salary of €40,000 - €50,000.
Obviously you have to pay income taxc, PRSI, USC etc on anything you take out.
But basically you decide how much you want access to.
How on earth do you think your savings will perform better than the 50% free money the government will give you for 45 years?I'll get a state pension and have my own savings
You literally just said "have my own savings"?I never said I would save it. If I spent it now it would be worth a lot more than 2400 will be in 40 years.
I'm not sure how you can have your own savings and yet not save...
Using a US example, $10,000 now is equivalent to $2,400 40 years ago and as I am about to demonstrate, the pension will still beat it.
Anyway, I suggest you research the difference between compound interest and regular old interest.
Regular old interest on your €2,400 at say 4% will give you about €6,000 "profit" over 45 years...kinda meah.
Compound interest will turn that same €2,400 @ the same 4% for the same 45 years into about €12,000 "profit"...less meah.
Then, lets go mad and say that you continue to contribute that same €2,400 every year...holy cow...your "profit" is no €314,000.
But I guess you can do much better yourself with your €600?
(Assuming the exact same conditions, your yearly €600 savings will be worth €80,000 before inflation.
Lose the run of yourself completely and put that €2,400 into your pension every month (at an actual "cost" of €1,200 to you)
Stone the crows! Its worth well over €3.5 MILLION now.
http://www.moneychimp.com/calculator/compound_interest_calculator.htm
Try some numbers and see just how silly your attitude to pensions is.
If you actually believe that bankers and financial institutions are all unethical and evil then I guess you probably dont belong in an advanced society such as ours.God this gets worse, do you really expect people to earn their money / income unethically ?
Any clown can earn a fortune unethically if they want to go down that path.
Are you some dodgy wanna be county councillor / party hack or something ?0 -
So with paying out for a sky high cost of living, high taxes to bail out the financial snakes debts, supporting a family and trying to get a deposit together for a house (again sky high prices), the government now want to force us to pay out more money to financial highway men. Except this time it's to fund companies which are destroying the planet :rolleyes: Yeah, that makes sense.
We need to be in the streets protesting against this.0 -
Robert_Beach wrote: »So with paying out for a sky high cost of living, high taxes to bail out the financial snakes debts, supporting a family and trying to get a deposit together for a house (again sky high prices), the government now want to force us to pay out more money to financial highway men. Except this time it's to fund companies which are destroying the planet :rolleyes: Yeah, that makes sense.
We need to be in the streets protesting against this.
They government's plan does not force anyone to pay into this so there is no need for you to protest on the streets.0 -
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Just to dispel some of the misguided beliefs of some:
- Self directed pensions allow you to have more control over where your pension funds are invested. Some even use their funds to purchase rental properties. Investing in “unethical companies” is no excuse not to have a pension.
- Most (if not all) defined contribution pensions facilitate you taking a tax free lump sum and the balance you can drawdown as income. I saw somebody say that they don’t want to have to drawdown bits of their pension, theoretically you can draw all your pension down immediately (once you need AMRF guidelines that anybody who receives full state pension meets). It’s taxed as income so most people choose to draw it down Over a longer period of time.
There is no logical financial argument against saving into a pension other then you just aren’t interested in it. I have clients like that but when I get to sit down and show the figures they are shocked.
I had one client who asked me to show them what they needed to do to payoff their mortgage at 58. I showed him that and what he could put in a Pension and he was gobsmacked. He went all in on the Pension, I didn’t have to persuade him as figures don’t lie.
It’s clear people are letting their feelings on pensions and the industry drive their decision. It’s ironic that this is possibly one of the biggest reasons people lose money on investments, they make emotive decisions instead of making logical cold hard decisions based on probability.
On the balance of probability, when you have a person saving the same net amount (so they may be able to put in double) of income into a pension versus a person saving after tax income into the same investment , the pension will most likely always return more. In fact I can’t think of any circumstance where a pension wouldn’t return more. The caveat of course is access to investment when you are retiring but you got tax relief and tax free growth, so I can’t see how even having to pay income tax on a portion of it makes any difference.0 -
Just to dispel some of the misguided beliefs of some:
- Self directed pensions allow you to have more control over where your pension funds are invested. Some even use their funds to purchase rental properties. Investing in “unethical companies” is no excuse not to have a pension.
As I read it, the government are gonna select certain companies offering certain funds for the new changes coming in. There may be a token ethical offering here or there, but we both know that 90%+ of people will end up with something clogged with the likes of Exxon Mobil, BP etc.
Better off paying off your mortgage. At least you aren't contributing towards war, climate criminals and are limiting your exposure to financial crooks.
Pensions are a scam.0 -
Some very foolish mindsets and attitudes on this thread.
Kinda scary to see.0 -
To answer your question regarding ethics, you need to tell me where you put your pension: What pension firm, and which of their funds?You are the one who has decided that the pension industry is unethical (with an alarming lack of facts to back it up I might add)
Why do you think people with pensions are subservient to the finance industry? The finance industry is whats helped my pension double in value over the last 5 years. If I hid it away under my mattress it would be worth significantly less than what I stared with. Please explain how this is unethical, subservient or not the most sensible thing to do with ones money to provide for their future?
BTW, you can choose from a huge range of pensions, from investing in Irish startups to windfarms...but I guess these are also unethical?
TBH I'm getting an awful tinfoil hat vibe from your posts...happy for you to provide some evidence to prove me wrong.
All fantastic, but yet still avoiding answering the question of *where* this money will come from?
There's a pretty good chance that they are either investing in unethical companies/industries - or that there's a lack of adequate transparency or control over the funds. Fair bet that you're going to withhold this information, or pretend that you invest in 'ethical' funds, after you just spent the last pages rubbishing the idea of ethical concerns - to try and suit your arguments...
You don't appear to have any ethiical objections to e.g. investing in fossil fuel firms etc., from what you've said thus far: Just because it makes you money, doesn't turn an unethical investment into an ethical one - as that's not how ethics work...
You ask me to answer questions - and as a rhetorical tactic, you ignore when I do answer them, and ask me to answer the same quetsions over and over again. You selectively ignore both parts of what I say, and what parts of bfa1509 has said, as a rhetorical tactic.
These are precisely the types of rhetorical tactics you get from finance/Libertarian shills.0 -
These financial snakes prey on people's ignorance. "Oh you want ethical fund? Sure no problem!"Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
https://www.ft.com/content/fbdb36d0-a293-11e9-974c-ad1c6ab5efd1
A $500m exchange-traded fund run by Vanguard that claims to “specifically exclude” fossil fuel stocks invests in a host of companies in the oil and gas industry, amplifying concerns that investors could be misled by socially and environmentally focused products.
According to its website, Vanguard’s ESG US Stock ETF “specifically excludes stocks of companies in the following industries: adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling, and nuclear power”.
But as of May 31, 1.4 per cent of the fund’s assets were invested in oil and gas companies, including oil services company Schlumberger, pipeline company Kinder Morgan and crude oil refiner Marathon Petroleum.
https://www.ft.com/content/fbdb36d0-a293-11e9-974c-ad1c6ab5efd10 -
Rental properties aren't an unambiguously ethical investment - right now the finance industry is raping the arse out of the public by manipulating the entire rental/property market, in league with a finance-friendly/free-market-fetishist government, to maximize rents!Just to dispel some of the misguided beliefs of some:
- Self directed pensions allow you to have more control over where your pension funds are invested. Some even use their funds to purchase rental properties. Investing in “unethical companies” is no excuse not to have a pension.
- Most (if not all) defined contribution pensions facilitate you taking a tax free lump sum and the balance you can drawdown as income. I saw somebody say that they don’t want to have to drawdown bits of their pension, theoretically you can draw all your pension down immediately (once you need AMRF guidelines that anybody who receives full state pension meets). It’s taxed as income so most people choose to draw it down Over a longer period of time.
There is no logical financial argument against saving into a pension other then you just aren’t interested in it. I have clients like that but when I get to sit down and show the figures they are shocked.
I had one client who asked me to show them what they needed to do to payoff their mortgage at 58. I showed him that and what he could put in a Pension and he was gobsmacked. He went all in on the Pension, I didn’t have to persuade him as figures don’t lie.
It’s clear people are letting their feelings on pensions and the industry drive their decision. It’s ironic that this is possibly one of the biggest reasons people lose money on investments, they make emotive decisions instead of making logical cold hard decisions based on probability.
Tell us the percentage of people in suppposd 'ethical' pension funds, versus ones whiich do not advertise themselves this way? The rate of return of such funds compared to the rest of the pension industry? Lets see some of these ethical funds listed, too?
Straight away, lets take the Nest funds - first result on Google for ethical pensions: These guys invest in monopolistic/exploitative tech firms like Amazon/Microsoft - fraudulent financial firms like JP Morgan - companies which have engage in exploitative/socially-harmful actions in the third world like Nestle - privacy destroying firms like Facebook.
Finding a pension fund which is truly ethical, is a fucking minefield. Then you have to consider whether the company offerring the pensions itself is ethical: If they are offering people investments into unethical companies, and if the pension firm knows full well about the unethical practices of a company, that makes the pension firm itself unethical to deal with - even if they are offering you control to select the firms invested in.
It is a minefield. It's almost impossible to find a truly ethical pension fund and firm.
You guys are promoting pension figures, without differentiating ethical investments from unethical ones - so you guys are peddling figures and rates of return, based on unethical investments.
That's not right. That either gives people misleading figures - or encourages them to ignore ethical concerns in their investments.
People need to be making logical cold hard decisions about ethics - that's way more important than money.0 -
I assume anyone without a pension just setup a self managed PRSA with say Davy and then opt-out of any new scheme? This way you reatain 100% control on how your pension is invested?
(this is what I do)0 -
Yea fuck ethics, so long as we're making money, right?Squall Leonhart wrote: »Some very foolish mindsets and attitudes on this thread.
Kinda scary to see.0 -
Maybe a different scenario these days, but when I bought my house towards the end of the 80's I was advised to take out a pension at the same time.
The result is now, that I've got no mortgage, and a decent sum to look forward.
You do not notice the years passing... to me 1989 did not seem that long ago.0 -
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Just to dispel some of the misguided beliefs of some:
- Self directed pensions allow you to have more control over where your pension funds are invested. Some even use their funds to purchase rental properties. Investing in “unethical companies” is no excuse not to have a pension.
- Most (if not all) defined contribution pensions facilitate you taking a tax free lump sum and the balance you can drawdown as income. I saw somebody say that they don’t want to have to drawdown bits of their pension, theoretically you can draw all your pension down immediately (once you need AMRF guidelines that anybody who receives full state pension meets). It’s taxed as income so most people choose to draw it down Over a longer period of time.
There is no logical financial argument against saving into a pension other then you just aren’t interested in it. I have clients like that but when I get to sit down and show the figures they are shocked.
I had one client who asked me to show them what they needed to do to payoff their mortgage at 58. I showed him that and what he could put in a Pension and he was gobsmacked. He went all in on the Pension, I didn’t have to persuade him as figures don’t lie.
It’s clear people are letting their feelings on pensions and the industry drive their decision. It’s ironic that this is possibly one of the biggest reasons people lose money on investments, they make emotive decisions instead of making logical cold hard decisions based on probability.
On the balance of probability, when you have a person saving the same net amount (so they may be able to put in double) of income into a pension versus a person saving after tax income into the same investment , the pension will most likely always return more. In fact I can’t think of any circumstance where a pension wouldn’t return more. The caveat of course is access to investment when you are retiring but you got tax relief and tax free growth, so I can’t see how even having to pay income tax on a portion of it makes any difference.
Not knocking pensions but: a) Paying down a mortgage early can save a considerable amount of money, and b) Some people are happy to have a smaller pot on retirement that they can have total control over and use as they see fit, rather than a larger pot that is doled out to them. I know you haven't said so, but some people on this thread seem to consider anyone who doesn't have a pension to be a moron. As a self-employed person I never had a consistent income and for that reason I was wary of locking away my savings in a pension. However, I did save wisely and prepare for retirement and I am now financially secure without having a pension. I think it really comes down to the type of person you are and the type of employment you have.0 -
Rental properties aren't an unambiguously ethical investment - right now the finance industry is raping the arse out of the public by manipulating the entire rental/property market, in league with a finance-friendly/free-market-fetishist government, to maximize rents!
Tell us the percentage of people in suppposd 'ethical' pension funds, versus ones whiich do not advertise themselves this way? The rate of return of such funds compared to the rest of the pension industry? Lets see some of these ethical funds listed, too?
Straight away, lets take the Nest funds - first result on Google for ethical pensions: These guys invest in monopolistic/exploitative tech firms like Amazon/Microsoft - fraudulent financial firms like JP Morgan - companies which have engage in exploitative/socially-harmful actions in the third world like Nestle - privacy destroying firms like Facebook.
Finding a pension fund which is truly ethical, is a fucking minefield. Then you have to consider whether the company offerring the pensions itself is ethical: If they are offering people investments into unethical companies, and if the pension firm knows full well about the unethical practices of a company, that makes the pension firm itself unethical to deal with - even if they are offering you control to select the firms invested in.
It is a minefield. It's almost impossible to find a truly ethical pension fund and firm.
You guys are promoting pension figures, without differentiating ethical investments from unethical ones - so you guys are peddling figures and rates of return, based on unethical investments.
That's not right. That either gives people misleading figures - or encourages them to ignore ethical concerns in their investments.
People need to be making logical cold hard decisions about ethics - that's way more important than money.
As a matter of interest, how are you typing these posts? I hope it's not on a device that's made from parts derived from unethical mining operations or made in an unethical factory. I also hope you don't drive, use public transport or eat.
Everyone's ethics are different so the whole concept of an ethical pension fund is nonsense. Even if you directly buy shares today in an unethical company, let's use Nestle as an example, you're not actually handing the company any money. You're just giving money to someone else who previously owned those shares. The company got the money when the shares were originally issued.
Investing "ethically" might make you feel good but it's achieving nothing unless you apply these rules to all other aspects of your life which is virtually impossible.0 -
Just for fun... picked the first ethical fund offered by Davy - http://www.davyassetmanagement.com/funds/davy-ucits/davy-esg-equity-fund.html
Looked at the factsheet, picked the only company from the top ten holdings that I don't know and google them.
Mondelez_Internationalwiki wrote:In November 2018, an investigation by Greenpeace International found that palm oil suppliers to Mondelez International cleared over 70,000 hectares of rainforest from 2015 to 2017.0 -
"Basically pay a broker/pension provider thousands of pounds of fees over 40 odd years so you have an income to live off for say 10-15 years if you are lucky to live that long. Never mind the fact that your expenditure will have plummeted (no mortgage, kids grown up, beery weekends and hols with the lads a distant memory as is frivolous and expensive shopping habits."
Of course you need to provide for yourself for your life but like hell I will rely on the State or some slippery pension salesman on commission. I will make my own investments.0 -
Not knocking pensions but: a) Paying down a mortgage early can save a considerable amount of money, and b) Some people are happy to have a smaller pot on retirement that they can have total control over and use as they see fit, rather than a larger pot that is doled out to them. I know you haven't said so, but some people on this thread seem to consider anyone who doesn't have a pension to be a moron. As a self-employed pension I never had a consistent income and for that reason I was wary of locking away my savings in a pension. However, I did save wisely and prepare for retirement and I am now financially secure without having a pension. I think it really comes down to the type of person you are and the type of employment you have.
I understand your concerns, I’m self employed aswell and my income fluctuates severely. I also get why locking away funds can be a deciding factor with some people.
I wouldn’t say it’s moronic to not have a pension but it’s easily the most tax efficient way to save for retirement. Any Savings in interest on a mortgage would be far outweighed by the tax relief and fund performance that most people enjoy in a pension.
As a self employed person you had the choice to either payoff your mortgage earlier or lumping up to Double that amount into a pension. An employer contribution for a self employed person is worth so much more (no usc, prsi etc).
I have one very client who wanted to do that but after seeing the alternative he saw the benefit. Instead of paying 800e extra off his mortgage for 20 years he could throw an extra 1600 into a pension. Without any investment gains that’s 384k in a pension versus having no mortgage. If he dies before he draws it down the entire fund goes to his estate tax free, so his family gets the full benefit of tax free income that would of been worth half if drawn down as income. At 60 he can drawdown that pension use the tax free lump sum to payoff his mortgage and still have circa 290 in his pension. It just makes financial sense when you crunch the numbers.
I don’t understand what you mean by Having control over your finances instead of it being doled out to you. At retirement most pensions allow you take a lump sum tax free and anybody with the full state pension can drawdown the full balance of their pension if they want, there is no restriction on what you can take out of it.0 -
Who cares if it's worth many multiples of that? You won't have access to this as a lump sum. You can only chip away at it until you die. It depresses me to think of all the people who paid into a pension all their life to then die in their 50s, 60s or even early 70s.
If you die in service, the pension pays outs benefits to your spouse and children, or to your estate.0 -
So basically, your view is that matters of ethical concerns in general, are just 'nonsense', right? That if a person can't be perfect ethically, they need not bother with ethical concerns at all?FernandoTorres wrote: »As a matter of interest, how are you typing these posts? I hope it's not on a device that's made from parts derived from unethical mining operations or made in an unethical factory. I also hope you don't drive, use public transport or eat.
Everyone's ethics are different so the whole concept of an ethical pension fund is nonsense. Even if you directly buy shares today in an unethical company, let's use Nestle as an example, you're not actually handing the company any money. You're just giving money to someone else who previously owned those shares. The company got the money when the shares were originally issued.
Investing "ethically" might make you feel good but it's achieving nothing unless you apply these rules to all other aspects of your life which is virtually impossible.
I think I can just dismiss that, as nonseense. People, governments and firms/industries will always be held up to ethical scrutiny - as they should be.
Creating demand for shares bolsters the share price of companies.0 -
Apologies, I should have been clearer, I meant slapping a lump sum off a mortgage, which is how I had interpreted your post. That's very interesting about being able to drawdown the balance of your pension, I wasn't aware of that. Is it fairly new and does it apply to everyone?I understand your concerns, I’m self employed aswell and my income fluctuates severely. I also get why locking away funds can be a deciding factor with some people.
I wouldn’t say it’s moronic to not have a pension but it’s easily the most tax efficient way to save for retirement. Any Savings in interest on a mortgage would be far outweighed by the tax relief and fund performance that most people enjoy in a pension.
As a self employed person you had the choice to either payoff your mortgage earlier or lumping up to Double that amount into a pension. An employer contribution for a self employed person is worth so much more (no usc, prsi etc).
I have one very client who wanted to do that but after seeing the alternative he saw the benefit. Instead of paying 800e extra off his mortgage for 20 years he could throw an extra 1600 into a pension. Without any investment gains that’s 384k in a pension versus having no mortgage. If he dies before he draws it down the entire fund goes to his estate tax free, so his family gets the full benefit of tax free income that would of been worth half if drawn down as income. At 60 he can drawdown that pension use the tax free lump sum to payoff his mortgage and still have circa 290 in his pension. It just makes financial sense when you crunch the numbers.
I don’t understand what you mean by Having control over your finances instead of it being doled out to you. At retirement most pensions allow you take a lump sum tax free and anybody with the full state pension can drawdown the full balance of their pension if they want, there is no restriction on what you can take out of it.0 -
I just want to say that there is some decent and informative stuff in this thread so thanks to those posters.
I will continue to ignore the "ethical" nonsense clogging up the thread. While I avoid nestle and coca cola and do my fair share to help the world i still need a bloody pension.
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Apologies, I should have been clearer, I meant slapping a lump sum off a mortgage, which is how I had interpreted your post. That's very interesting about being able to drawdown the balance of your pension, I wasn't aware of that. Is it fairly new and does it apply to everyone?
Originally you got a tax free lump sum and had to use the balance to purchase an annuity (pension for life). But the government brought out an alternative route (couldn’t tell you when exactly) where people can choose to not lock their pension fund into a guaranteed income with a pension company (annuity).
In essence when you have taken your tax free lump sum out of your pension you can put the balance into another pension vehicle called an ARF (once you receive full state pension). In this ARF , think of it like funds in your company that you haven’t drawn down yet and only when you draw down funds are they taxed as income. You can choose to drawdown the entire balance as taxable cash (and not take out an ARF) if you like but most people only take a set amount or percentage amount monthly/annually. Some people do it in a manner where they don’t pay much tax on the taxable portion. (Particular couples who have higher tax brackets at retirement then individuals).
A self employed person with a lot of cash in their company could potentially transfer it into a pension and not draw it down immediately. This would not be subject to any income related taxes or other taxes for leaving funds/profits in a company account. A good accountant should be able to point people in the right direction on this.
There’s even simple ways you can use a pension to just get a massive tax free lump sum. Theoretically if you had over 20 years service In your company (Ltd company, not sole trader) and let’s say your salary was even 50k, you could potentially throw 75k (1.5 X salary) of company money into a pension and draw it all down tax free straight away (if over 60). That 75k would be worth a lot more in your hand from a pension then drawndown directly from company.0
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