Reduce your mortgage before starting pension?

[South]

Re: Brendan's comments on the Last Word last night

To maintain their standard of living in retirement.

If they had a fund of €300k - they would need to survive on an income of about €10k!!

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

To maintain their standard of living in retirement.

I remain unconvinced. I don't know of any pensioners in my own circle of family, friends and practice clients who need €66,000 per year to survive. Most of those of whom I know could afford this level of annual personal expenditure, and who live very well in retirement with plenty of holidays etc, choose to withdraw much smaller sums from their pensions in order to fully avail of the over-65 tax exemption limits.

I suspect most of the "2/3rds of final salary" statistics are sales bumph from the pensions industry. To prioritise the pursuit of such a target at the expense of reducing one's mortgage to a reasonably safe level shows a rather skewed sense of financial priorities, in my book.

If they had a fund of €300k - they would need to survive on an income of about €10k!!

You misread my example. Anyone who manages to put away €300,000 between ages 40 and 50, will surely continue to make sizeable contributions beyond age 50, and most likely also for a number of years prior to then.

 

[South]

Re: Brendan's comments on the Last Word last night

I think they may be better off investing over the longer-term, what if for some reason or other the person fell ill in their 50s...bang goes any chance of making their contributions in the 50s.

What's more...the investment risk is spread over a much longer period when one contributes over a period of 30 years rather than suddenly in the last ten to fifteen years.

Defined Benefit Pension Schemes in Ireland and the UK have been designed around the target 2/3rds of salary for in excess of 50 years, so it is a very widely recognised rule of thumb rather than "Sales bumph" - obviously everyone's situation will differ...all Civil Servants in Ireland are in pension schemes based around this universally accepted target of 2/3.

I was with a relative over the weekend who is paying over €30k per annum to share a room in a nursing home, so in that person's case I am quite sure a pension of 2/3 of salary would be very important.

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

I think they may be better off investing over the longer-term, what if for some reason or other the person fell ill in their 50s...bang goes any chance of making their contributions in the 50s.
...I was with a relative over the weekend who is paying over €30k per annum to share a room in a nursing home, so in that person's case I am quite sure a pension of 2/3 of salary would be very important.

Most people who fall in their 50s are unfortunately unlikely to need long-term nursing care in their old age. The average nursing home patient only lives a further 2-3 years from the date they first need such care.

Defined Benefit Pension Schemes in Ireland and the UK have been designed around the target 2/3rds of salary for in excess of 50 years, so it is a very widely recognised rule of thumb - obviously everyone's situation will differ...all Civil Servants in Ireland are in pension schemes based around this universally accepted target of 2/3.

Which is presumably not unconnected to the suspicion amongst economists and financial experts that such schemes are financially unsustainable for both the State exchequer and for private sector employers - so much so that Defined Benefit Schemes are now largely a thing of the past in the private sector. If this model is unsustainable for British Airways, the ESB & Bank of Ireland, why not so for the mortgage-strapped Jo Public?

 

[South]

Re: Brendan's comments on the Last Word last night

Most people who fall in their 50s are unfortunately unlikely to need long-term nursing care in their old age. The average nursing home patient only lives a further 2-3 years from the date they first need such care.




Which is presumably not unconnected to the suspicion amongst economists and financial experts that such schemes are financially unsustainable for both the State exchequer and for private sector employers. - So much so that Defined Benefit Schemes are now largely a thing of the past in the private sector.

• I would not like to save for retirement banking on the prospect of dying quickly once I retire!!
• None of these commentators have ever once mentioned - your notion - that it is because these people are over-saving for retirement These economists are merely pointing out that due to increasing longevity, these pensions are expensive for companies and the exchequer ALSO note that over 80% of Irish occupational pension scheme assets belong to defined benefit pension schemes, they are far from a thing of the past

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

would not like to save for retirement banking on the prospect of dying quickly once I retire!!

No, neither would I. But, given a choice, I would rather have my mortgage down to a reasonable level if I did happen to fall ill in middle age.

None of these commentators have ever once mentioned - your notion - that it is because these people are over-saving for retirement

I repeat: Why would anyone (except maybe JP McManus) need €66,000 per annum in today's money to survive in retirement? At that stage in life, few people generally have mortgage commitments or family dependents.

note that over 50% of Irish occupational pension scheme assets belong to defined benefit pension schemes, they are far from a thing of the past

My point was in relation to the private sector. Defined benefit schemes ARE largely a thing of the past in the private sector - at least new ones.

 

[South]

Re: Brendan's comments on the Last Word last night

Public sector pensions are not funded schemes - they have no assets included in surveys of occupational pension scheme assets - they are funded on a pay as you go basis.

I know a number of people with pensions in excess of €100k and they do not feel that their pension income is excessive.
It allows them to have holidays, move house if they wish, maintain investments and other interests, see and help their family etc...

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

Public sector pensions are not funded schemes - they have no assets included in surveys of occupational pension scheme assets - they are funded on a pay as you go basis.

So? That doesn't mean that they are or are not sustainable. In fact it could be an explanation as to why DB pensions have survived so far in the public sector despite the fall in their popularity in the private sector

I know a number of people with pensions in excess of €100k and they do not feel that their pension income is excessive.

How many?

 

[South]

Re: Brendan's comments on the Last Word last night

• So they are not included in the survey of assets of Irish occupational pension schemes showing that over 80% are DB assets
• About 80 or 90

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

[*]So they are not included in the survey of assets of Irish occupational pension schemes showing that over 50% are DB assets

Again, so? It quite obvious that for legacy reasons, this would be the case. For example the troublesome ESB scheme, I would imagine, was set up donkeys years ago.

The real question is: what percentage of Irish occupational pension schemes set up in th e past 5-7 years are defined benefit schemes?

[*]About 80 or 90

Are they representative, in terms of income and assets, of the general population? What age on average were they when they paid off their domestic mortgages?

 

[South]

Re: Brendan's comments on the Last Word last night

A low number - that is why there have been repeated warnings from the Minister, economists and the Society of Actuaries that people are not saving enough for their retirement.

You are the first person that I have heard in a long time implying that we are saving too much, it's refreshing!

The reason companies do not set-up DB nowadays are:

• Longevity
• New acconting disclosure regulations
• Global competitiveness

One thing is for sure - it has nothing to do with whether or not 2/3rds is too large a pension - it has everything to do with increasing company profitability.

In relation to pensioners on higher pensions, they would all have contributed to their pension over a long period - and that is what I am advocating as a general rule of thumb.

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

You are the first person that I have heard in a long time implying that we are saving too much, it's refreshing!

Your capacity to spin another person's opinion in order suit your own agenda is also refreshing!...if only to amuse.

For what its worth, my opinions are not as novel as you make out. This entire thread has arose from statements from Brendan where he made points that are not a million miles away from what I am saying.

In relation to pensioners on higher pensions, they would all have contributed to their pension over a long period - and that is what I am advocating as a general rule of thumb.

Yes, but are they representative, in terms of income and assets, of the general population, or (as I suspect) are they in the High Net Worth category occupied by a small percentage of Irish people?

If the latter, I am not sure if the cases of a small minority of wealthy individuals should be used as a template for financial planning for the general population.

 

[South]

Re: Brendan's comments on the Last Word last night

You said that nobody needed a pension of €67K - I said I know a lot of people on a higher pension than that and that they need it.

I never suggested that everybody needs a pension of €100k - what a crazy conclusion that would be!

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

You said that nobody needed a pension of €67K - I said I know a lot of people on a higher pension than that and that they need it.

Yes, but

are they representative, in terms of income and assets, of the general population, or (as I suspect) are they in the High Net Worth category occupied by a small percentage of Irish people?

Does anyone really need a billion dollar rocket
does anyone need a $60,000 car

Lou Reed, Strawman

 

[South]

Re: Brendan's comments on the Last Word last night

Yes, they certainly are representative of Irish pensioners requiring an income in excess of €67k.

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

I take it then that they are NOT representative, in terms of income and assets, of the general population.

 

[South]

Re: Brendan's comments on the Last Word last night

They are a good example of the benefits on not putting all the eggs in one (property) basket!!

If a 30 year old today were to take on the advice of paying off mortgage before saving...with a typical 30 year + mortgage he/she would never start a pension until the last few years before retirement, such a suggestion is not prudent.

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

They are a good example of the benefits on not putting all the eggs in one (property) basket!!

If a 30 year old today were to take on the advice of paying off mortgage before saving...

Did anyone suggest this?
I didn't. Brendan (afaik) didn't either.

 

[South]

Re: Brendan's comments on the Last Word last night

Is that not the premise of this thread (please see first post)?

 

[ubiquitous]

Re: Brendan's comments on the Last Word last night

First post on this thread...

Brendan recommends that before worrying about a pension you should get your mortgage 'down'.

You said

If a 30 year old today were to take on the advice of paying off mortgage before saving...with a typical 30 year + mortgage he/she would never start a pension until the last few years before retirement

There is a big difference...