# Trying to calculate final value of pension fund



## flossie (11 May 2011)

Hi,

I am trying to figure out how much will be in my pension pot when I retire. I have looked at my literature, but i believe that projected value is based on contributions continuing at today's rate.

I am 28, employer pays 8% (€458) and I pay 7% (€402) per month. At the moment, I intend to continue contributing maximum value possible into the fund depending on my age.

I am currently in discussions with employer to renogiate my salary package to factor in the drop of value of my contributions over the coming years due to recent Government policies. I calculated that my annual contributions, last year had a total value of around €9000 taking all relief into account).  By 2014 this should have droped to around €5300.  As i moved back to Ireland 16months ago (same job, same employer, just on a local contract), and had to leave my non-contribution final salary pension as a result, pensions have been a bit of a headache for us all.  My boss is adament that I will not be in any worse financial position than from the day I signed my contract to come over here, so I am trying to calculate everything to give HR a final overview.  I am one of 3 employees kin Ireland for the company and the only one on a contribution pension so can't get advice from my colleagues. 

Due to the recent €2.3M cap introduced, I would like to get an idea of how much my final fund will be worth, and what tax I would be obliged to pay on the balance to use as another negotiating point....

I hope this makes sense in some way - I'm trying to have a crash course in pensions over the last few weeks! I have left a message with my pension administrator to call and discuss (figure that is what they are paid to do), but appreciate the help form the boards.

Thanks i advance.....


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## Sunny (11 May 2011)

Projected values usually assume that your contributions increase each year but you will need to clarify this. There is no real way to know what your final fund because it will depend on things like contribution levels and investment returns. Everything will be informed guesswork. On those levels of contributions though, you won't need to worry about the €2.3m cap! Maybe one day you will but for the moment will be well short of it.


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## flossie (11 May 2011)

Thanks for that sunny.  I have projected value of €1.3M and I was wondering if that is based on today's contributions, or are they assuming i will increase my contriibutions every time I able to (e.g. age 30/40/50/55/60+ I will increase to max allowable).  I know the values take inflation etc into account.


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## Sunny (11 May 2011)

flossie said:


> Thanks for that sunny. I have projected value of €1.3M and I was wondering if that is based on today's contributions, or are they assuming i will increase my contriibutions every time I able to (e.g. age 30/40/50/55/60+ I will increase to max allowable). I know the values take inflation etc into account.


 
You will need to ask your pensions provider what assumptions they make. Mine assumes my contribution goes up every year (on the assumption that my salary goes up every year). So already the assumptions are wrong!


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## Skybox (11 May 2011)

Sunny said:


> Projected values usually assume that your contributions increase each year but you will need to clarify this. There is no real way to know what your final fund because it will depend on things like contribution levels and investment returns. Everything will be informed guesswork. On those levels of contributions though, you won't need to worry about the €2.3m cap! Maybe one day you will but for the moment will be well short of it.



Actually, the Programme for Government wants to cut the current pension cap even further - to a max of €60,000 per annum or total €1.2 million.  

IMO - all bets are off when it comes to pensions.  It is becoming harder to plan and save via a pension mechanism as the government are changing they rules substantially.  I am speaking as a layperson - not a pension expert.  In our case,  husband's pension will exceed a €1.2 million cap, and possibly the €2.3 cap (he can't stop contributions and can't stop the fund from growing.)

I would think you really need to speak to a pensions expert who has been keeping up to date with recent and threatened changes to pensions.



> *Pension fund threshold could be slashed even further.
> March 14, 2011*
> 
> Emma Kennedy , The Sunday Business Post writes.
> ...


I can't post links on this site - just google the title of the above article and you will find the full text


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## flossie (11 May 2011)

Thanks Skybox - still waiting for the administrator to return my call from yesterday to discuss this through and will try to get a face to face meeting to ensure that i understand everything.


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## Baracuda (12 May 2011)

The questions that you are asking is very hard to answer as final salary schemes are actuarial reviewed every 3 years. The review would take into account the value of assets, inflation rates, investment returns, salary inflation and annuity rates. Final salary schemes have different revenue funding rules where as PRSA's have funding rules based on your age ie under 30; 15% of salary  30 to 39; 20% of salary and so on. Final Salary schemes are usually refered to in the industry as Defined Benefit.

A PRSA is known as a target fund scheme and as the name suggests the fund may or may not be achieved. PRSA's uses a set of predefined assumptions eg salary inflation of 5% and contribution indexation of 3 or 5% and annuity rates of 3.5% and CPI inflation of 3% etc So it is impossible to compare the two. PRSA's are contribution driven where as final salary schemes are salary % driven.

What you need to do is apply the actuarial assumptions and reviews to your pension funding rather than the set of assumptions that would be used for PRSA as you said your employer has commited to supporting your pension funding. Therefore a PRSA product is not an approipate product for you to fund your retirement planning. 

You should set up what is called a one member defined contribution scheme which you would not have to pay PRSI and USC on your employers contributions. A defined contribution scheme would also give you and your employer the scope to contribute more than the 15% that you currently can contribute based on your age and get tax relief on and your employer can give a special one off contributions for back service. I have sent you a PM so you can contact me and I can give you more info on what you can do.


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## flossie (12 May 2011)

Thanks for that Baracuda, appreciate it.  It certainly is scope for thought.....

Agh, the head spins the more i read into these things!


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## LexLuthor (17 May 2011)

flossie said:


> I am 28, employer pays 8% (€458) and I pay 7% (€402) per month. At the moment, I intend to continue contributing maximum value possible into the fund depending on my age.



AFAIK You can pay up to 15% yourself. This does not include your employers contribution... which could give you a total of 23%..


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## Baracuda (23 May 2011)

LexLuthor said:


> AFAIK You can pay up to 15% yourself. This does not include your employers contribution... which could give you a total of 23%..


Its a total of 15% inc. employer contribution if you are under 30 years of age


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