2008 financial crisis cut pensions in half

FernandoTorres

I think the confusion comes from the fact that the word "pensions" in Ireland covers multiple different products that cover both the phase while you're accumulating (while working) as well as the retirement phase.



In Australia they call the accummulation stage "superannuation" and the income that you receive when you're retired is your "pension". Makes things a bit easier I think!


Anyway, to the point of your neighbour seeing a reduction in his retirement income. The only way that could happen while he was in receipt of it would be if he was in a company defined benefit scheme that wound up in deficit. It's pretty rare that existing pensioners would see a decrease but it can happen where the company gets into extreme financial difficulty. Another reason why defined benefit plans are not as great as they're made out to be.

Henry Ford III

FernandoTorres wrote: »

Anyway, to the point of your neighbour seeing a reduction in his retirement income. The only way that could happen while he was in receipt of it would be if he was in a company defined benefit scheme that wound up in deficit. It's pretty rare that existing pensioners would see a decrease but it can happen where the company gets into extreme financial difficulty. Another reason why defined benefit plans are not as great as they're made out to be.

Not the only way.

Many people use ARF investment funds to provide post retirement income and these can go up and down in value.

Furthermore deemed distribution rules mean a fairly aggressive investment strategy will be needed to maintain capital values which could be passed on to a spouse or the next generation.

FernandoTorres

Henry Ford III wrote: »

Not the only way.

Many people use ARF investment funds to provide post retirement income and these can go up and down in value.

Furthermore deemed distribution rules mean a fairly aggressive investment strategy will be needed to maintain capital values which could be passed on to a spouse or the next generation.

The ARF account value can go up and down but the amount of pension payment would not be cut in half without the person requesting it which seems to be the case as described.

JeffKenna

The big issue to retirement funds hasn't been the overall value of the fund decreasing but the annuity rates falling. I for one would prefer to have a retirment fund with an overall value of 100,000 with a guaranteed 15% annuity rate as opposed to an overall value of 200,000 with a 5% annuity.

Oral Surgeon

Aron Jealous Loop wrote: »

/QUOTE]

Dodge

Aron Jealous Loop wrote: »

So, my neighbour that had to go back to work after the 2008 crisis being on a pension full time cause he couldn't make ends meet - what was that, was he spoofing me or what?

The shortest answer is, he probably was.

He *might* have had other investments go poorly that he called ‘his pension’ (informally) that were no longer performing well enough for his needs

Start saving for your own retirement needs OP.

The J Stands for Jay

Aron Jealous Loop wrote: »

Umm, I mean, Irish life - they operate through AIB at the moment.

They're not the banking division but, technically, you still go into the bank to speak with the pensions dude.

What you're posting makes no sense.
First off, I'm a pensions blank slate.
Secondly, your mate above described the process of pension'ing as investments which can lose value during economic down time, thus ones receipt of cash is reduced.

So, my neighbour that had to go back to work after the 2008 crisis being on a pension full time cause he couldn't make ends meet - what was that, was he spoofing me or what?

You don't need to go to the bank to speak to an Irish Life pension dude.

When you pay into a pension, it's invested with the intention of increasing in value so that when you want to retire you have a big ball of cash to keep you going. You then need to do something with it to give you an income. You get some of it as a lump sum to do with as you wish. The rest had to be used to give you a retirement income. Up until about 20 years ago, you had to buy an annuity. This is what people would usually think of when they hear the word pension. You hand over your find to a pension company, and they give you a monthly pension for the rest of your life. If this is what your neighbor has, they couldn't have had a reduction.

The other option, as pointed out below, is the approved retirement fund. It's still invested, an you can take money out of it when you want. If markets went down, the amount in your find would go down too.

There's also the rare option of a with profits annuity that could reduce the payment, but I think the most it can reduce by is 10%.

To summarise, your neighbor isn't giving you the full story, or is referring to other investments or savings as a pension.

bo0li5eumx12kp

McGaggs wrote: »

You don't need to go to the bank to speak to an Irish Life pension dude.

When you pay into a pension, it's invested with the intention of increasing in value so that when you want to retire you have a big ball of cash to keep you going. You then need to do something with it to give you an income. You get some of it as a lump sum to do with as you wish. The rest had to be used to give you a retirement income. Up until about 20 years ago, you had to buy an annuity. This is what people would usually think of when they hear the word pension. You hand over your find to a pension company, and they give you a monthly pension for the rest of your life. If this is what your neighbor has, they couldn't have had a reduction.

The other option, as pointed out below, is the approved retirement fund. It's still invested, an you can take money out of it when you want. If markets went down, the amount in your find would go down too.

There's also the rare option of a with profits annuity that could reduce the payment, but I think the most it can reduce by is 10%.

To summarise, your neighbor isn't giving you the full story, or is referring to other investments or savings as a pension.

PS - when say "a find" - that means..... in this context, what exactly?

How you phrase it it sounds like, the lump sum you initially invest in a pension?
Or the monthly sum payable into your pension fund (annuity)?

And yes, annuity - yeah, that's what I'm thinking of when I think "pension".

The J Stands for Jay

Aron Jealous Loop wrote: »

PS - when say "a find" - that means..... in this context, what exactly?

How you phrase it it sounds like, the lump sum you initially invest in a pension?
Or the monthly sum payable into your pension fund (annuity)?

And yes, annuity - yeah, that's what I'm thinking of when I think "pension".

Find was a typo for fund.

You pay money into the pension fund, lump sums and monthly payments in whatever combination you want. It's invested and, all going well, is worth more than you paid into it when you need it. That's what is used at retirment to give you a tax free lump sum and buy your annuity or retirment fund.

bo0li5eumx12kp

McGaggs wrote: »

Find was a typo for fund.

You pay money into the pension fund, lump sums and monthly payments in whatever combination you want. It's invested and, all going well, is worth more than you paid into it when you need it. That's what is used at retirment to give you a tax free lump sum and buy your annuity or retirment fund.

Now we're on the same page.

It took three pages of mindless drivel to get here but, clarity is had at last.

That incarnation of a pension, that is what applies to the majority of people I'm assuming?

Some other posters seemed to be alluding to alternate investments they may refer to as a "pension" - but they're just investments with less reliability, basically outside of the above pension paradigm I'm assuming? (as in they may invest in properties with a view to selling them after retirement).

When the dude last page said he lost 13% on his pension due to this pandemic, he was referring to the typical pension you've outlined?
Or something else?

Cause what you're saying is basically, you pay in, and when retirement comes your payback is rock solid - financial crash or no, that won't be affected.

Oral Surgeon

Aron Jealous Loop wrote: »

Now we're on the same page.

It took three pages of mindless drivel to get here but, clarity is had at last.

That incarnation of a pension, that is what applies to the majority of people I'm assuming?

Some other posters seemed to be alluding to alternate investments they may refer to as a "pension" - but they're just investments with less reliability, basically outside of the above pension paradigm I'm assuming? (as in they may invest in properties with a view to selling them after retirement).

When the dude last page said he lost 13% on his pension due to this pandemic, he was referring to the typical pension you've outlined?
Or something else?

Cause what you're saying is basically, you pay in, and when retirement comes your payback is rock solid - financial crash or no, that won't be affected.

Dodge

Aron Jealous Loop wrote: »

It took three pages of mindless drivel to get here but, clarity is had at last.

Only one person posting drivel from what I read...

Jim2007

Aron Jealous Loop wrote: »

It took three pages of mindless drivel to get here but, clarity is had at last.

You started posting drivel, you alone have continued to post drivel

Aron Jealous Loop wrote: »

Cause what you're saying is basically, you pay in, and when retirement comes your payback is rock solid - financial crash or no, that won't be affected.

And no you still don't get it.

Henry Ford III

Hold on for a sec.

I think there is confusion between pension funds (which are active investments) and the payments coming out of pension schemes (annuities) which are purchased with the maturity proceeds of the same pension funds.

Throw in some additional potential confusion when d.b. schemes are included, and throw ARF's in on top of that and it's easy see where someone without a reasonable knowledge of the workings of pensions could be easily and wholly confused.

Most pension funds are d.c. and the risk of funds performing poorly, or shorter term volatility, sits with the individual.

At maturity there are only 3 ways of taking benefits:-

1/. Tax free cash. 25% of the kitty or potentially higher if salary and service calculations allow.
2/. Annuity. This is what most people recognise as a "pension". It's a fixed payment for life from an insurance company in return for a single premium. It'll never go down. It is guaranteed. Various options are available which cost more. With ultra low interest rates annuities are expensive.
3/. ARF's. A complex area but in simple terms they are a post retirement investment designed to produce income. Risk applies so the
"income" payments can vary up and down, as can the capital value. They have certain advantages, but aren't for everyone.

As always get independent professional advice and be prepared to pay for it too.

There are too may willing amateurs here and elsewhere who are only too happy to offer free but useless advise, and to take that and base your financial health on it can be potentially horrendous.

Would you ask a mechanic for advice on chest pain?

bo0li5eumx12kp

Henry Ford III wrote: »

Hold on for a sec.

I think there is confusion between pension funds (which are active investments) and the payments coming out of pension schemes (annuities) which are purchased with the maturity proceeds of the same pension funds.

Throw in some additional potential confusion when d.b. schemes are included, and throw ARF's in on top of that and it's easy see where someone without a reasonable knowledge of the workings of pensions could be easily and wholly confused.

Most pension funds are d.c. and the risk of funds performing poorly, or shorter term volatility, sits with the individual.

At maturity there are only 3 ways of taking benefits:-

1/. Tax free cash. 25% of the kitty or potentially higher if salary and service calculations allow.
2/. Annuity. This is what most people recognise as a "pension". It's a fixed payment for life from an insurance company in return for a single premium. It'll never go down. It is guaranteed. Various options are available which cost more. With ultra low interest rates annuities are expensive.
3/. ARF's. A complex area but in simple terms they are a post retirement investment designed to produce income. Risk applies so the
"income" payments can vary up and down, as can the capital value. They have certain advantages, but aren't for everyone.

As always get independent professional advice and be prepared to pay for it too.

There are too may willing amateurs here and elsewhere who are only too happy to offer free but useless advise, and to take that and base your financial health on it can be potentially horrendous.

Would you ask a mechanic for advice on chest pain?