Pension

Greenlights16

Hold onto the property?

Bass Reeves

Greenlights16 wrote: »

Hold onto the property?

That is what I would do is it City or rural based

Midlands2007

Hi, only now in a position to start a pension at 49. Thinking of going with managed cash fund risk level 1, 0% exposure..100% allocation, 1% management annual fee. Can afford 400pm. Could I lose much on this or should I get back what I put in less management fees? Will have 40% tax relief so understand the saving there. Don't know much about pensions but won't set me up for years but at least it will be something maybe in the early retirement years. Am I missing anything?

Bass Reeves

Midlands2007 wrote: »

Hi, only now in a position to start a pension at 49. Thinking of going with managed cash fund risk level 1, 0% exposure..100% allocation, 1% management annual fee. Can afford 400pm. Could I lose much on this or should I get back what I put in less management fees? Will have 40% tax relief so understand the saving there. Don't know much about pensions but won't set me up for years but at least it will be something maybe in the early retirement years. Am I missing anything?

When do you think you will be retiring/ accessing the money. Is the 400 before or after tax. As well what ever you contribute will it be at the higher tax rate. You can contribute up to 25% of your income from 45-50 and 30% from 50-55 if I remember right. You can also make a lump sum contribution for 2020 if it suits

Midlands2007

Bass Reeves wrote: »

When do you think you will be retiring/ accessing the money

With prsa would access at 60 if out of work. Hopefully still working up to 65 and would access then. Just want something to fall back on and would be a way of saving especially with the 40% tax relief..

The J Stands for Jay

Midlands2007 wrote: »

Hi, only now in a position to start a pension at 49. Thinking of going with managed cash fund risk level 1, 0% exposure..100% allocation, 1% management annual fee. Can afford 400pm. Could I lose much on this or should I get back what I put in less management fees? Will have 40% tax relief so understand the saving there. Don't know much about pensions but won't set me up for years but at least it will be something maybe in the early retirement years. Am I missing anything?

By 0% exposure, I presume you mean some sort of cash fund. You'll be losing value on this, both with the management fees, and the potential for negative returns. You'll still be ahead due to the tax relief, but you can't fund a retirement without investing.

dublin49

McGaggs wrote: »

What if your tenant stops paying rent and doesn't leave? What if the apartment block needs remedial work to fix the fire hazards, and you need to stump up €40k? What about the 40% tax on the rent?

Everything you say is correct.But Property is a good investment as it allows you draw down a pension and not only keep your capital but in general it increases above inflation.Occasionally landlords have a bad experience but so do members of Pension funds ,that are under funded,suffer fraud etc etc and don't forget the government have established the precedent of raiding pension funds now and don't be surprised if they do it again.Every form of pension /savings have attached risk but property definitely has a bigger upside,

Bass Reeves

Midlands2007 wrote: »

With prsa would access at 60 if out of work. Hopefully still working up to 65 and would access then. Just want something to fall back on and would be a way of saving especially with the 40% tax relief..

If you are hoping to work until 65 that is 16 years. I think the risk levels are rated 1-5. I go at least level 3 for next 10 years.at 400/month you will contribute 76k over the next 16 years. After tax it will have cost you 46k. On cash only find it might only be worth 70-72k or less after fees and negative bond rates. With a 4%/year return from now to 65 it would reach about 105k. That on an equally payment in over the next 16 years.

lawred2

Padre_Pio wrote: »

I maxed mine to benefit from the tax relief.
10% from me, 10% from employer.

Haven't put any more in after that.
Better to put it into shares.

I thought employer contributions didn't count towards your own personal limit?

Padre_Pio

lawred2 wrote: »

I thought employer contributions didn't count towards your own personal limit?

Revenue.ie says otherwise. I have it linked above.

I'd love to be corrected though, I'd put more in.

The J Stands for Jay

dublin49 wrote: »

Everything you say is correct.But Property is a good investment as it allows you draw down a pension and not only keep your capital but in general it increases above inflation.Occasionally landlords have a bad experience but so do members of Pension funds ,that are under funded,suffer fraud etc etc and don't forget the government have established the precedent of raiding pension funds now and don't be surprised if they do it again.Every form of pension /savings have attached risk but property definitely has a bigger upside,

You're forgetting the property tax when you talk about raising of pensions.

Under funding on irrelevant to everyone except older people with their defined benefit pensions (which are a thing of the past). The risk of fraud affecting a pension is much less than the risk of a dodgy tenant. Not forgetting that property is a depreciating asset with a finite lifespan, requiring maintenance expenditure to keep it on a state capable of producing an income.

Someone looking to put away €400 is not in a position to buy a property without a loan. The repayments are not an allowable expense for tax (only the interest is allowable), meaning that, rather than producing an income, it may require additional funds to pay the costs.

The J Stands for Jay

Padre_Pio wrote: »

Revenue.ie says otherwise. I have it linked above.

I'd love to be corrected though, I'd put more in.

Doesn't count for occupational pension schemes. Does count for PRSAs.

AndrewJRenko

dublin49 wrote: »

Everything you say is correct.But Property is a good investment as it allows you draw down a pension and not only keep your capital but in general it increases above inflation.Occasionally landlords have a bad experience but so do members of Pension funds ,that are under funded,suffer fraud etc etc and don't forget the government have established the precedent of raiding pension funds now and don't be surprised if they do it again.Every form of pension /savings have attached risk but property definitely has a bigger upside,

Under funded pension funds refers to defined benefit schemes, which are largely unavailable.

Fraud? I can't recall of a case of fraud affecting ordinary pension fund investments, can you?

Pensions are no more or less liable to be taxed (raided) than property.

dublin49

McGaggs wrote: »

You're forgetting the property tax when you talk about raising of pensions.

Under funding on irrelevant to everyone except older people with their defined benefit pensions (which are a thing of the past). The risk of fraud affecting a pension is much less than the risk of a dodgy tenant. Not forgetting that property is a depreciating asset with a finite lifespan, requiring maintenance expenditure to keep it on a state capable of producing an income.

Someone looking to put away €400 is not in a position to buy a property without a loan. The repayments are not an allowable expense for tax (only the interest is allowable), meaning that, rather than producing an income, it may require additional funds to pay the costs.

No I know the tax rate ,but if a punter has the state pension and buy an annuity
pension with his life savings of say 250K they too will pay tax on the private pension,the pension will die with themselves or their spouse while a property bought for 250K will probably nett at least the same as the annuity and will also be there for their heirs with additional value with a bit of luck.Usual caveats apply and landlording does not suit everybody.

Cute Hoor

dublin49 wrote: »

No I know the tax rate ,but if a punter has the state pension and buy an annuity
pension with his life savings of say 250K they too will pay tax on the private pension,the pension will die with themselves or their spouse while a property bought for 250K will probably nett at least the same as the annuity and will also be there for their heirs with additional value with a bit of luck.Usual caveats apply and landlording does not suit everybody.

The pension will not necessarily die with them, if you have invested in an ARF it doesn't.

dublin49

Cute Hoor wrote: »

The pension will not necessarily die with them, if you have invested in an ARF it doesn't.

True,but it wil lreduce year on year ,where potentially a property will increase year on year,property crashes accepted.

Cute Hoor

dublin49 wrote: »

True,but it wil lreduce year on year ,where potentially a property will increase year on year,property crashes accepted.

No, an ARF will increase year on year (depending on how much you are taking out), financial crashes excepted.

dublin49

Cute Hoor wrote: »

No, an ARF will increase year on year (depending on how much you are taking out), financial crashes excepted.

my understanding of an Arf is you dictate the level of withdrawal but the minimum is something like 4%.I would have thought an ARF was a pension vechicle to allow larger withdrawals than an Annuity Pension would allow, is it not a pension pot of Money you can draw down once you have 12K per annum from some other source.

Cute Hoor

dublin49 wrote: »

my understanding of an Arf is you dictate the level of withdrawal but the minimum is something like 4%.I would have thought an ARF was a pension vechicle to allow larger withdrawals than an Annuity Pension would allow, is it not a pension pot of Money you can draw down once you have 12K per annum from some other source.

Yea you dictate the level of withdrawal, there is an artificial minimum of 4% (you would be taxed on that anyway so makes sense to withdraw at least that per annum), after that it's up to you what you want to withdraw per annum.

dublin49

yeah was looking at that option to bridge us to our state pension in a few years time,At least now its only for one year instead of two,

Midlands2007

Bass Reeves wrote: »

If you are hoping to work until 65 that is 16 years. I think the risk levels are rated 1-5. I go at least level 3 for next 10 years.at 400/month you will contribute 76k over the next 16 years. After tax it will have cost you 46k. On cash only find it might only be worth 70-72k or less after fees and negative bond rates. With a 4%/year return from now to 65 it would reach about 105k. That on an equally payment in over the next 16 years.

Thank you. That gives me a better idea of how it all could go. If I could also lose a lot more on a level 3 if it did not make 4% return, would I be more sure of having my 76k by going level 2? Do not want much risk as so late starting a pension. Or is it a case of nobody knows and I could end up with 4% which would be great or could end up with say less than I put in?

dublin49

Midlands2007 wrote: »

Thank you. That gives me a better idea of how it all could go. If I could also lose a lot more on a level 3 if it did not make 4% return, would I be more sure of having my 76k by going level 2? Do not want much risk as so late starting a pension. Or is it a case of nobody knows and I could end up with 4% which would be great or could end up with say less than I put in?

I would be loath to go with anything other than low risk or you pot can take an almighty hit,the main attraction of work pensions are the tax relief and your employer contributions,these experts are gambling with your nest egg and have little or no skin in the game.Grab a few k worth of shares yourself and lock them away for a few decades and hopefully one of the them will come good

Bobeagleburger

Speak to an adviser. I wouldn't go low risk tbh, I won't be moving into low risk until late 50s. Even then it'll just be gradual until retirement age.

Speak to a professional.

The J Stands for Jay

dublin49 wrote: »

No I know the tax rate ,but if a punter has the state pension and buy an annuity
pension with his life savings of say 250K they too will pay tax on the private pension,the pension will die with themselves or their spouse while a property bought for 250K will probably nett at least the same as the annuity and will also be there for their heirs with additional value with a bit of luck.Usual caveats apply and landlording does not suit everybody.

There's hardly any punters buying annuities these days.

The J Stands for Jay

Midlands2007 wrote: »

Thank you. That gives me a better idea of how it all could go. If I could also lose a lot more on a level 3 if it did not make 4% return, would I be more sure of having my 76k by going level 2? Do not want much risk as so late starting a pension. Or is it a case of nobody knows and I could end up with 4% which would be great or could end up with say less than I put in?

There is a risk that you could get less than you put in, but at 0% exposure you'd definitely get less than you put in.

2012paddy2012

Bitconfused wrote: »

Thanks for the replies

So the contribution to the pension is not taxable? I presume if i set this up its just a monthly deduction that my employer matches? What happens if i leave the job is it transferred somewhere?

Just from very recent experience - my advice - take your time - I had a prsa most effective tax wise for many years -
I always thought when I retired I get it all back with bells on - you need to appreciate that depending on job etc there are revenue limits - you can only take out a certain amount - then options for ARF - and other policies to utilise the funds you cannot access - Age limitations etc - I basically returned everything I made over a couple of decades as drip feeding for years to come didn't suit me and I was annoyed - despite having done a bit of background as you are now at the time - get good advice - from an independent broker - save you a lot of hassle down the road

AndrewJRenko

2012paddy2012 wrote: »

Just from very recent experience - my advice - take your time - I had a prsa most effective tax wise for many years -
I always thought when I retired I get it all back with bells on - you need to appreciate that depending on job etc there are revenue limits - you can only take out a certain amount - then options for ARF - and other policies to utilise the funds you cannot access - Age limitations etc - I basically returned everything I made over a couple of decades as drip feeding for years to come didn't suit me and I was annoyed - despite having done a bit of background as you are now at the time - get good advice - from an independent broker - save you a lot of hassle down the road

What do you mean by "basically returned everything"? Were you over the Revenue limits or what?

2012paddy2012

AndrewJRenko wrote: »

What do you mean by "basically returned everything"? Were you over the Revenue limits or what?

In my case I saved for nearly 20 years in a prsa- I asked the broker at the start - can I get this out basically in a lump sum when I retire - he indicated yes but there may be other options

Well i could take a small amount between the revenue limits and superannuation limits etc etc - then go for another prsa or an ARF OTHER options - that would further tie up the money - it’s when you retire you want a few Bob not another 10 years out the road - I cashed mine In - no other option - returned near 50 percent - prsa usc all the gains made on tax relief etc -
I was in government work - all I’m saying is get proper advice from an independent accredited broker

The J Stands for Jay

2012paddy2012 wrote: »

In my case I saved for nearly 20 years in a prsa- I asked the broker at the start - can I get this out basically in a lump sum when I retire - he indicated yes but there may be other options

Well i could take a small amount between the revenue limits and superannuation limits etc etc - then go for another prsa or an ARF OTHER options - that would further tie up the money - it’s when you retire you want a few Bob not another 10 years out the road - I cashed mine In - no other option - returned near 50 percent - prsa usc all the gains made on tax relief etc -
I was in government work - all I’m saying is get proper advice from an independent accredited broker

There's advisors out there that work with various civil servants pension schemes, and they don't have a clue how anything else in pensions works. They believe that the whole PRSA AVC can be taken as a lump sum, but Ga6il to realise that the lump sum paid by the civil service pension uses up just about all of the maximum amount allowed.

Padre_Pio

McGaggs wrote: »

Doesn't count for occupational pension schemes. Does count for PRSAs.

You are correct! Checked it today, my occupational pension lets me put in 20% (I'm just over 30) and employer 10% income tax free.